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Gig Economy; the end or a beginning?

View profile for Natalie Rawson
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The phrase ‘Gig Economy’ was coined during the financial crisis in 2009 which saw record levels of unemployment in the UK. A proportion of those affected made a living by ‘gigging’ on a flexible, ad hoc basis. Instead of receiving a regular wage they were paid per ‘gig’. The term has made another appearance as an influx of cases seek tribunals’ interpretation of self-employed and worker status. Natalie Rawson, Employment Lawyer, here reviews the most recent cases and what this means for employers in the future.

Self-employed or worker?

Worker, a creation of European law, comes between employment and self-employment, and refers to someone whose association with the business is sufficiently close that the legislators thought they should be protected.

Businesses first adopted this model mainly because this enabled them to have a ‘workforce’ unprotected by employment law. In a number of recent cases however, the courts have found in favour of workers, declaring them “workers” rather than self employed.

These decisions could have a significant impact on the economy and employment market because workers enjoy a number of statutory rights which the self-employed do not.  Workers are entitled to the national minimum wage, paid annual leave, pension contributions and depending on certain criteria, statutory sick pay, maternity pay and paternity pay. It is crucial that recruiters are aware of the legal requirements when determining employment status. They should familiarise themselves with court decisions taking note of the facts being given particular weight.

Employee and Worker Status

An employee can be identified by:

  • A Contract of Employment containing the terms outlined in section 1 of the Employment Rights Act 1998,
  • Providing his own work and skill,
  • Being ‘controlled’ by the employer as to the work to be carried out,
  • Being integrated into the employer’s business,
  • The existence of mutual obligations, (the employer provides work and the employee accepts it).

A worker can be identified by:

  • A contract containing some of the terms outlined in section 1 of the Employment Rights Act 1998,
  • Personally performing work for the employer,
  • Treating the business as their employer,
  • Continuing mutual obligations (as for an employee).

This is in contrast to the self-employed who work for themselves, are not ‘controlled’ by another and only get paid for what they do. The recipient of the work carried out is their client.

Gig economy in the Tribunal

So what have the employment tribunals given particular attention to when determining status? One of the publicised decisions was the Aslam, Farrar and Others v Uber case in October 2016. Taxi drivers were recruited on a self-employed basis and supplied their own vehicles, paid for private licences and all running costs. Uber gave drivers access to an “app” through which they obtained customers. The drivers had flexibility in the hours worked, did not wear a uniform and customers were put in touch with the driver directly via the app. This suggests that the drivers were self employed.

But on closer inspection the tribunal decided that the drivers were workers. They were not informed of the customer’s destination until the last minute and had to follow the directions provided by the app. The fare was calculated and paid to Uber. If the driver accepted a job on the app and then didn’t collect the customer he would receive a warning and be blocked from access to the app.

The tribunal said that ‘the notion [of] Uber in London [as] a mosaic of 30,000 small business linked by a common ‘’platform’’ as a means of Uber helping them ‘’grow’’ their businesses was faintly ridiculous.’ In addition, Uber’s proposition that the only contract in existence was between the driver and the passenger was absurd and pure fiction. Uber’s degree of control was sufficient for the drivers to be deemed workers. The ‘twisted language’ of the contracts was outweighed by the actual relationship between the parties.

Next to make the headlines was the case of Dewhurst v Citysprint in January 2017. Citysprint is a courier service relying on 3,200 ‘self employed’ couriers. Particular thought had gone into the wording of the contracts in an attempt to avoid the very challenges they subsequently faced. The couriers had to accept a contract which stated they were self employed and contained the following:

  • Citysprint had no obligation to provide work,
  • The courier could provide a substitute if he was unavailable,
  • He had to provide invoices before receiving payment,
  • He was not entitled to statutory benefits.

As in Uber the tribunal found that the individual was controlled by Citysprint as she was issued with a uniform, had to keep in contact via radio during a shift and could not leave early. There was a ‘loose’ disciplinary process in the event of misconduct by the courier and she was clearly working for Citysprint and not herself.

This trend continued with Pimlico Plumbers Ltd v Smith in February 2017. Smith worked on a self employed basis, was VAT registered and filed his own accounts. He was under no obligation to work on any particular day, could reject jobs and was not supervised.

But Smith worked only for Pimlico for five years and had to comply with Pimlico’s manual. He had to work at least 40 hours per week, was issued with a uniform and van and was bound by restrictive covenants. The tribunal decided that Smith was a worker.

The future for the Gig economy

It is still possible to be self employed, but in limited circumstances. The courts will look at the level of freedom, integration and the worker’s obligations. In particular, does the individual:

  • have freedom to use a substitute of their choice,
  • choose when they work,
  • give the appearance of representing the business,
  • have to comply with policies,
  • have freedom to carry out services for others?

The courts or tribunals will also consider the extent to which the contract reflects the reality of the situation. A similar case against Deliveroo is soon to be decided.

As other cases (and appeals) come before the courts and tribunals, the current view of the worker v self-employed debate may change and in any event big players will look for alternative means to avoid their “contractors” being declared their “workers”. Smaller businesses in any doubt should probably err on the side of caution and treat their individual contractors as “workers”.

If you have any questions about your workforce and their employment status, you can contact Natalie or the Employment Team on 02380 717717 or email employment@warnergoodman.co.uk.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.