We comment on some of the more interesting recommendations arising out of the Taylor Review of Modern Working Practices. The review is a comprehensive look at the world of employment and we cannot cover all of its proposals in one article. However, we examine some of the key suggestions and potential impacts on employment law.

Background

Most HR professionals will be familiar with the recent cases relating to whether people working in the so-called 'gig economy', such as Uber drivers, are workers, employees or genuinely self-employed. These cases, the increased use of flexible resource by businesses, and the growth of self-employed work have led to concerns that employment law may need to adapt to keep pace with new business models. Accordingly, the Government decided in October 2016 to launch a review of modern working practices. The review was chaired by Matthew Taylor, the Chief Executive of the Royal Society of Arts (the Taylor Review).

The report of the Taylor Review was published on 11 July 2017. It contains a series of recommendations which, if they were all implemented, would lead to a significant shake-up of the employment law landscape. Potentially the Taylor Review could lead to the balance being shifted in favour of workers in a number of areas of employment regulation, while also retaining the idea that having a flexible labour market can be a force for good. Of course, how many of the proposals made in the review are implemented by the Government remains to be seen, particularly in these uncertain political times.

We set out below some of the key recommendations made in the review. Those recommendations touch on a number of areas of employment law so it is important that all HR professionals are on top of developments following the review. In particular, a number of the proposals relate to the use of agency workers and zero hours contracts and would, if implemented, mean significant changes for users and suppliers of flexible resource.

The overall theme of the review

The Taylor Review recognises that the UK labour market has performed very well in recent years in terms of creating jobs. However, it also recognises that not all of the jobs that have been created give employees/workers fulfilment or the opportunity for development. It notes that there are a significant number of people in insecure work, such as those working on zero hours contracts and those working in the gig economy. The Taylor Review suggests that the Government should now be focussing on increasing the quality of work, not just the number of people in the workforce.

Recommendations

Much of the publicity about the Taylor Review has focussed on employment status and potential changes to the definitions of employee and worker. While these are important and we address them below, we thought it would be helpful to also comment on some of the other interesting recommendations.

Agency workers

The recommendations would have a significant impact on businesses that use a lot of temporary agency workers. In particular the Taylor Review recommends that:

  • Such workers should have the right to request a permanent contract after 12 months. The hirer would need to give the request reasonable consideration; and
  • The 'Swedish derogation' should be abolished. This is an exception to the Agency Workers Regulations 2010, which provides that agency workers do not need to receive equal pay to comparable permanent employees if they are on a contract that gives them pay between assignments.

We are aware of businesses that engage all of their temporary workers on 'Swedish derogation' contracts and also of cases where agency workers work for the same organisation for several years. Accordingly, businesses that make significant use of temporary workers (and employment businesses engaged in providing them) will want to keep a close eye on developments in relation to these recommendations.

Tribunal fees and enforcement

The report recommends that employees should be able to submit claims to the employment tribunal (ET) to determine their employment status without having to pay a fee to do so. This would make it much easier for those who are treated as self-employed but believe they are employees or workers to have their rights determined by an ET. It also recommends shifting the burden of proof so it is up to a business to prove someone was not a worker/employee, rather than the other way around.

Another interesting recommendation is that there could be penalties or increased use of costs orders where an employer loses a case on similar facts to cases that have already been decided by an ET. The suggestion is that this would incentivise compliance.

The report is also critical of the difficulty that low paid workers in atypical working arrangements have in exercising their rights to paid holiday (or even knowing they have such a right). It therefore suggests that, for low paid workers, the right to paid annual leave should be enforced by HMRC rather than such workers having to resort to ET claims.

Zero hours contracts

The Taylor Review recognises that zero hours and short hours contracts can be positive in the flexibility they give to both workers and businesses. However, it also believes that workers on such contracts should be given increased rights. Its recommendations therefore include:

  • The Low Pay Commission should be tasked with setting an increased rate above the minimum wage, which should be paid to people when they are working non-guaranteed hours.
  • Workers on zero hours contracts should have a right to request guaranteed hours contracts after 12 months.
  • Methods of calculating continuity of service should be reviewed to make it easier for workers on flexible contracts who have gaps in employment/engagements to establish that they are entitled to statutory employment protections.

Statutory sick pay/sick leave 

In order to avoid rights to SSP being an incentive for employers not to take on workers with long term health conditions, the review recommends that SSP should be reformed so that it is accrued based on length of service in a similar way to holiday pay. Alongside this, it recommends expanding eligibility requirements so that all workers are entitled to SSP.

The report also recommends a legal right to return from sick leave, which would operate in the same way as the right to return from maternity leave, and would be conditional on engagement with the Fit for Work service.

The 'gig' economy and reform of employment status

The review recognises that the ET system has generally done a good job of policing the dividing line between employment and self-employment. However, the difficulty is that if individuals want to establish their rights they have to bring a claim to do so and many will be put off by cost or will not realise that they potentially have rights as employees or workers due to the complexity of the case law. It therefore suggests that the tests developed through case law should be clearly set out in legislation to make it easier for both businesses and individuals to determine employment status.

It also recommends that changes should be made to the current definition of 'worker' to give statutory employment protections to a wider class of people, including those in the gig economy. It would achieve this by relabelling workers who do not have the full rights of employees as 'dependent contractors' and reducing the importance of personal service when determining whether or not someone is self-employed. Essentially, the proposal is that a genuine right to supply a substitute for a worker's own labour would not prevent him or her from being a dependent contractor and that, instead, the focus should be on the amount of control a business has over a worker's activities.

There is also a suggestion that all workers (rather than just employees) should have a right to a written statement of their terms, which, amongst other matters, would address whether they were an employee or a dependent contractor.

Comment 

The Taylor Review's recommendations could, if implemented, result in a significant increase in rights for people in insecure employment and it will be interesting to see how much of it is implemented by the Government. On the other hand, the trade union movement appears to be of the view that its recommendations do not go far enough.

What is clear is that there are likely to be some changes to employment law over the next few years and that HR professionals will need to keep a close eye on developments. Given that the report's recommendations go far beyond merely dealing with 'gig economy' issues, all HR professionals will need to monitor what happens next.

We will cover any legislative proposals in our briefings as and when we know about them. However, the real challenge in implementing the report's recommendations will be avoiding scope for abuse and avoiding unintended consequences for contractors who genuinely want to be treated as self-employed. Many employment lawyers might argue that the law already does a good job of protecting workers, as has been shown by the judgments in the Uber, CitySprint and Pimlico Plumbers cases amongst others. The difficulty is in the fact that employees need to bring ET claims to enforce their rights. Therefore, unless the changes to enforcement mechanisms recommended by the report are brought into effect and there are changes to the ET fees regime, the impact of the proposals may be limited.