B2B or not B2B – the ‘Gig Economy’ explosion and employment rights
A recent Employment Tribunal that ruled a London bicycle courier was a worker rather than self-employed is the latest in a string of rulings on the so-called ‘gig economy’. This concept has become more and more of a talking point, both in the media and political circles, raising important questions about employment rights and whether contracts properly reflect the reality of modern working life for many.
So what is the ‘gig economy’? The term describes a labour market in which businesses use short-term contracts of different kinds to maintain a workforce performing short-term jobs or ‘gigs’. In simple terms, a person is engaged on the basis of working individual assignments (such as each taxi run with Uber or courier delivery) and is paid according to each job. The recent explosion of this phenomenon is in large part down to technological advancements enabling companies to talk directly, but remotely, with both customers and staff.
This is attractive for companies like Deliveroo and Uber whose customer base is tech-savvy but inherently unpredictable in its demands. By maintaining a large workforce that is flexible enough to meet fluctuating demand, the model delivers – but only if it can avoid the high costs associated with directly employing large numbers of employees nationwide. For those doing the work, they can (in theory) take advantage of the flexible working hours or decline jobs they can’t fit in with their other commitments. Proponents argue this makes for greater control of workload, pay and working hours.
This type of relationship shares many, but not all, of the characteristics of a self-employed contractor, which is why these recent cases have come to the attention of Employment Tribunals (ETs). These ET judgments are now clarifying our understanding by looking at a modern, evolving labour market through the judicial lens, applying well-established tests but to a new world of work.
The reasons these cases have become so pivotal is because employment status determines the application of important legal rights and responsibilities. Uber, Deliveroo and now City Sprint have all faced claims from individuals retained by them who have been found to be workers and not just self-employed contractors, often contrary to what was stated in their carefully worded contracts. This means they have the right to things like holiday pay and to be paid the National Minimum Wage.
Arguments over employment status have been around for many years in the UK and it can be a confusing area of law. Legal status is a fundamental aspect of the working relationship and getting it wrong can result in unforeseen costs for the unsuspecting or naively optimistic ‘employer’ and potential exposure to legal claims.
A truly self-employed contractor has no employment rights but is protected by laws designed to ensure health and safety at work and prevent unlawful discrimination. A contractor in this sense is little more than a commercial entity, engaged in a business-to-business transaction. They perform a contract for services, rather than being a party to a contract of service.
A worker does provide a more personal service in a legal relationship which carries with it many more rights and responsibilities. They are obliged to work contracted hours as required, but have the protection of the Working Time Regulations and so cannot be forced to work more than the statutory weekly maximum 48 hours, unless they choose to opt out. They are also entitled to rest breaks and at least the minimum level of paid holidays each year. They also have the protection of the Equality Act, making discrimination unlawful if it arises from a protected characteristic.
Taking things a step further, an employee has all of the above rights but enjoys what is known as full employment protection. This adds the right not to be unfairly dismissed after two years’ service and the right to be compensated if they are made redundant.
Why were the recent run of claimants before the ET found to be workers? In both the Uber and City Sprint cases the individuals were, on the facts of the case, found to lack any real autonomy over the work they did and were very much under the control of the companies which retained them. The companies allocated jobs and tracked what they were doing through apps, GPS and radios. In City Sprint the couriers also wore uniforms, which meant they appeared to be clearly identified with that business rather than being an independent business contractor. In reality, turning down a particular ‘gig’ proved highly problematic, if not impossible in both cases. Individuals could also be subjected to performance management and basic discipline. Overall, the essential nature of these working relationships were found to be far more akin to employment than B2B.
As a business, understanding whether you employ someone and on what basis, is vital. It determines your overheads, your tax position and exposure to legal risk. It may also determine, fundamentally, whether you can turn a profit. In the Uber case, the contracts with drivers were unequivocally worded, even labouring the employment status point, seeking to put beyond doubt the drivers were self-employed. But the ET cast this aside to see the reality beneath. So never assume that a clever lawyer will draft you out of trouble and be realistic about the obligations your working relationships will create.
Pam Loch, Managing Partner, Loch Employment Law and Chris Phillips, Partner of Loch Employment Law.