Employment status was a particularly hot topic in 2016, and the so-called “gig” economy business model is on the rise. The highly publicised case brought against Uber by two of its drivers will have significant implications for businesses with large self-employed workforces, and the trend looks set to continue throughout 2017 with a similar ruling against London plumbing firm Pimlico Plumbers.

Why is employment status so important?

The rights and obligations within an employment relationship are in part determined by the individual’s employment status. Broadly, “employees” enjoy the most employment rights, “workers” enjoy some rights and those who are self-employed do not have any significant employment rights.

In the UK, the majority of employment rights are enforced by an individual making a claim against their employer in the employment tribunal. Establishing which employment status is therefore vital to understanding what employment protection an individual is entitled to.

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In both the Uber and Pimlico Plumber cases the individuals sought to establish “worker” status to enable them to bring various claims against the companies. A worker is someone who is obliged to perform work or services personally for the other party to the contract, where the other party is not a client or customer of the business operated by the individual. The tribunal will consider whether the individual is required to perform the work personally (i.e. not to substitute or subcontract it), and will also take account of the degree of control that the employer has over the individual.

The ability to decline work or to work for other companies on the other hand would be indicative of self-employed status, as would the submission of invoices, the bearing of economic risk, a large degree of autonomy and the responsibility to provide equipment and premises.

The decisions

In both cases the firms argued that the individuals were self-employed and as such not entitled to the protection of a worker. Amongst other things the firms sought to rely on their contractual documents, which pointed to self-employed status of the individuals. The tribunal did review the contracts closely in both cases but actually focused upon the way in which the contracts operated in practice.

In Uber the tribunal found the degree of control exercised over the drivers indicative of worker status. In particular, the tribunal took account of the numerous conditions imposed upon drivers (e.g. vehicle choice), the requirement for drivers to accept trips and the sanctions imposed upon those who fail to do so, and Uber’s determination of the driver’s default journey route and fare. The tribunal also took account of Uber’s determination of rebate issues, acceptance of the risk of loss and the handling of customer complaints. Having regard to all the circumstances the tribunal was satisfied of worker status.

The Employment Appeal Tribunal was also satisfied of worker status in the Pimlico case despite the individual in question filing tax returns on a self-employed basis, being VAT registered and entitled to choose when he worked and which jobs he took. The tribunal took into account the control exerted by Pimlico for example the requirement to work a minimum number of hours per week, to wear a Pimlico uniform and drive a van with a Pimlico logo on the side. The tribunal also factored in that the worker was not permitted to provide substitute and placed particular importance on the presence of restrictive covenants in the contract.

What does this mean for your organisation?

These tribunal decisions (and any subsequent appeal tribunal judgments) could have a significant impact upon a wide range of businesses. If you are a business with a large self-employed workforce, any determination of worker status could expose your business to an array of potential claims.

A review of your current arrangements with your self-employed contractors may be advisable to identify if worker status could be established based on the factors highlighted in the above cases. Although your contractual documents should be considered carefully, remember that self-employed status must be reflected in the way in which the working relationship works in practice.

The decisions do not mean that businesses are unable to have a genuinely self-employed workforce, but only if the relationship between you and your contractors is genuinely reflective of a self-employed contractor/ client arrangement.

While Uber has issued an appeal of the decision and some employers may well adopt a ‘wait and see’ approach, this issue is not going to go away any time soon. With claims pending against four other firms and an HMRC investigation into the practices of courier firm Hermes, businesses with large self-employed work forces would be well-advised to review current arrangements in any event.