Employment Focus

Christmas deliveries are in full swing, but with Deliveroo workers now seeking to unionise, what are the rights of individuals working within the “gig economy”?

“a way of working that is based on people having temporary jobs or doing separate pieces of work, each paid separately, rather than working for an employer” (Cambridge Dictionary).

This is just one definition of the new “gig economy” which has grown over the last few years and which has most recently attracted a significant amount of publicity. This has predominantly been because of the handing down in October this year of the judgment in the case of Aslam & Farrar v Uber BV & Others, where an employment tribunal held that the drivers engaged by the taxi firm, Uber, were ‘workers’ for the purposes of employment legislation.

The extensive reporting of this case in the media used ‘employee’ and ‘worker’ interchangeably when referring to the claimants, and you may ask what does it matter? In employment law however they are distinct statuses which have important implications concerning the different rights that are then attached to them.

What are the different employment statuses?

There are generally three types of employment status: employees; workers; and individuals engaged on a self-employed basis.

Under section 203(1) of the Employment Rights Act (ERA) 1996 an “employee” is defined as “an individual who has entered into or works (or where employment has ceased, worked) under a contract of employment”.

A “worker” is defined under section 230(3) of ERA 1996 as “an individual who has entered into or works (or, where the employment has ceased, worked under):

  • a contract of employment; or
  • any other contract, whether express of implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual”.

By contrast, a self-employed individual is someone who is running their own business and, in turn, takes responsibility for its success. They are generally contracted to provide a service for a client.

Why does it matter?

There are some core legal protections that only apply to employees, most particularly the right not to be unfairly dismissed and the right to a statutory redundancy payment (once they have completed two years’ service), as well as the right to request flexible working and the right to statutory maternity and paternity pay. There are also certain legal obligations that are implied into every employment contract, such as the obligation to maintain mutual trust and confidence. In addition the Acas Code of Practice on Disciplinary and Grievance procedures only applies to employees, and only employees will automatically transfer to the buyer in the event of a business sale.

Workers enjoy more limited protection under employment law, usually rights derived from EU legislation such as the right to a certain amount of paid holiday and the national minimum wage. They are also protected against discrimination, unlawful deduction of wages and being subjected to a detriment because they have made a protected disclosure (“whistleblowing”).

Individuals engaged on a self-employed basis receive the least protection by way of employment law, for example, they do not have the right to holiday or sick pay. Their main redress would be through the contractual terms under which they are engaged, the assumption being that they have more bargaining power to negotiate the terms of the commercial relationship, unlike in a typical employment relationship.

It is therefore important that businesses are aware of the basis upon which they are engaging individuals so that they can ensure they are providing them with what they are entitled to and know what their responsibilities are.

How do you determine someone’s employment status?

A good starting point is to consider whether someone is an “employee”. The three irreducible requirements of an employment relationship are:

  • Personal service – The requirement of an individual to provide personal service i.e. they are not entitled to send someone else to carry out their work, for example if they are ill;
  • Mutuality of obligation – An obligation on the employer to provide work and an obligation on the individual to accept the work; and
  • Control – An element of control by the employer, for example, in relation to what work is to be carried out, the way in which it shall be carried out and when.

If you have all of the above in the relationship, an individual will be an “employee”. If not, you should consider whether they may be a “worker”. For an individual to have worker status there must be personal service and mutuality of obligation and they must not be carrying on a business in their own right, providing services to a business as a customer.

Whether or not someone is in business on their own account will determine whether they are a worker or genuinely self-employed. The questions businesses should ask when considering this question include the following:

  • who provides and maintains the tools and equipment used?
  • what degree of financial risk is an individual carrying?
  • what degree of investment does an individual have in the business?
  • is an individual paid a fixed fee or salary?
  • is an individual paid when they are absent on holiday or unable to work due to sickness?

It is important to note that an individual’s tax status will not always determine their employment status.  Someone could be classed as self-employed by HMRC but then be held to be a worker by an Employment Tribunal.

Uber and the gig economy

The “gig economy” has brought new ways of working but it presents problems for the traditional employment categories mentioned above as workers working within it do not necessarily fit easily into these.

Until recently individuals working within this area have generally been classed as self-employed. In Aslam & Farrar v Uber BV & Others Uber’s position was that it offered a platform which facilitated the provision of taxi services by the individual drivers who were in business on their own account, rather than Uber being a provider of transport services itself. This was reflected in the complex contractual documentation in place between the parties, indeed the Tribunal found that the business had gone to great lengths to describe the legal relationships in such a way so as to ensure that no employment relationship existed.

The problem, as observed by the Tribunal and set out in its judgement dated 28 October 2016, was that there were a number of factors about the relationship in practice that suggested otherwise. These included the fact that numerous conditions are placed on drivers and that the company controls key information about passengers and destinations as well being the party which accepts the risk of fraud/loss rather than the individual drivers. These were just a few of the considerations that the tribunal based its assessment on. In reality it found that Uber instructs, manages and controls its drivers such that they are ‘workers’, entitled to workers’ rights.

The Uber case may only be the first case relating to the employment status of individuals working within the “gig economy” model but it has certainly shone a light on this area. Uber has stated its intention to appeal and we will therefore have to wait and see what happens in this regard. However, this case has shown that the practical arrangements between businesses, the individuals they engage and their customers will be closely scrutinised, and that all the paperwork in the world stating one type of relationship will count for nothing if the reality is completely different. Businesses within the “gig economy”, and indeed other employers, should assess their workforces regularly to ensure they properly understand their employment statuses (as far as possible) and, in turn, comply with their legal obligations. 

Going forward…

Interestingly, a team of four experts have been appointed by the government to review the ‘gig economy’ and the impact on workers. Led by Matthew Taylor, Chief Executive of The Royal Society of Art, the review is set to address questions surrounding job security, pensions, holiday and parental leave rights as well look at “employer freedoms and obligations”. It will be interesting to see what comes out of this.

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