It would have been difficult to miss the headlines over the last few months giving rights to workers engaged on a self-employed basis. This really kicked off back in November with London Central Employment Tribunal finding that Uber drivers were actually “workers” and not self-employed. More recently an apparently self-employed plumber has also been classed as a “worker.”
Perhaps the most high profile of the recent cases has been the Uber driver case. Uber enables customers use a smartphone app to order a taxi and pay the fare electronically. Its drivers are treated as if they are self-employed.
In this case, a group of Uber drivers, brought an employment tribunal claim alleging that they should be considered as workers and receive national minimum wage and holiday pay. Uber denied this and said it was simply a “technology platform” that enabled self-employed drivers to be connected with passengers.
In this case there was much debate about the wording of the contractual agreement between Uber and the drivers. Ultimately the tribunal decided that the “twisted language” in the contracts did not correspond with the reality of the situation and therefore disregarded it. Instead the tribunal chose to focus on the reality of the situation. It found that although drivers supplied their own vehicles, were not required to wear a uniform and chose when to go “on duty”, they were actually workers rather than genuinely self-employed. The tribunal considered that the notion that Uber in London alone was a collection of 30,000 small businesses linked by a common platform was “faintly ridiculous”.
The tribunal noted the reality of the situation in that Uber:
- interviewed and recruited drivers
- controlled key information as to the passenger’s identity and intended destination and did not share this with drivers
- required drivers to accept and/or not to cancel trips and logged off drivers who breach this requirement
- imposed conditions on drivers including setting the default route for each trip and made deductions from the driver’s fare if they departed from it
- fixed the fare and the driver was not able to agree a higher sum with the passenger and
- accepted the risk of loss, for example where a passenger soils a vehicle or in the case of fraud, which if the drivers were genuinely in business on their own account would fall on them.
Unsurprisingly Uber have appealed this first instance decision, so this may not be the end of this story.
Another recent case that has caught the media’s attention is the Court of Appeal case involving Mr Smith and Pimlico Plumbers. In an industry where tradesmen such as plumbers, builders, electricians have been considered to be self-employed for years, this case follows the Uber rationale but in “old school” circumstances.
Pimlico engaged Mr Smith as a plumber for approximately five and a half years. Pimlico later terminated the relationship approximately four months after Mr Smith suffered a heart attack. He issued proceedings in the employment tribunal claiming unfair dismissal, wrongful dismissal, entitlement to pay during medical suspension, holiday pay, unlawful deductions from wages and disability discrimination.
One of the preliminary issues was Mr Smith’s employment status and which of the above claims he could pursue.
The relevant contractual documentation described Mr Smith as an “independent contractor” and “in business on his own account”. He was under no obligation to accept work and Pimlico was not obliged to offer him any work. However, there was a separate provision stating that Mr Smith should complete a minimum of 40 hours a week. He was also subject to restrictive covenants.
Unlike the Uber drivers, Mr Smith had to wear a uniform. He also bore a significant proportion of the commercial risk by, for example, not receiving any payment if a customer failed to pay and he was responsible for procuring liability insurance. Mr Smith was registered for VAT, submitted invoices and filed tax returns on the basis that he was self-employed. It was even noted that Pimlico plumbers could swap assignments – a classic example of a genuinely self-employed status – but only between themselves which gave them less freedom.
The Court of Appeal decided Mr Smith was a worker. Not with the degree of protection of an employee, but not self-employed and without protection altogether.
Why are these cases significant?
What’s all the fuss about you may ask? Well, the GMB union, who supported the Uber drivers, have described their victory as being “the most important case for employment rights of the decade”. Whether that’s true remains to be seen, but whether an individual is an employee, worker or self-employed contractor is important for a number of reasons in employment law.
Certain important legal rights, such as the right not to be unfairly dismissed for example, only apply if an individual is an employee. However, increasingly statutory rights are also being granted to individuals who traditionally were considered to be self-employed by finding that they are actually “workers”. This is significant as the genuinely self-employed do not have any employment rights. Whilst workers have fewer rights than employees, they do have some important rights such as:
- 5.6 weeks’ paid annual leave each year
- a maximum 48 hour average working week, and rest breaks
- the national minimum wage (and the national living wage)
- protection of the whistleblowing legislation.
It is a worrying time for many employers who engage self-employed contractors, but particularly employers in the so called “gig economy” where these types of contractor arrangement are most prevalent. In particular, the possibility of having to back pay holiday pay to those individuals who are able to establish themselves as workers can be a large burden for a company who would not have set aside any budget to deal with this.
What does the future hold?
These cases and the new employment practices being developed as a result of innovative technology and entrepreneurial thinking certainly raises a number of interesting questions as to how this area of law may develop. We can expect to see cases on this topic keep on coming. In fact, trade union Unite has already said that it was setting up a new unit to pursue cases of bogus self-employment.
Some individuals don’t actually want the extra rights that worker or employee status afford and quite like the flexibility of gig economy opportunities to allow them to create extra incomes on an informal basis.
This issue is also being considered by the government and the Department for Business, Innovation and Skills has also published its Employment Status Review examines the future of employment status and possible reforms but without making any recommendations. The executive summary acknowledges that this is a highly complicated area and that it will take years to deliver a new system.
For now though, it is clear that the arrangements between the business, the individual and the customer could be closely scrutinised with the result that you end up with in a different position that you intended. We recommend that you take expert legal advice to ensure you understand the most likely label that will be given to your employment arrangements and ensure you have the best documentation in place that you possibly can.