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  • 10 October 2017

Gig economy: a testing ground for flexible working

In many ways, the ‘gig economy’ has become the testing ground for new ideas about flexible working patterns, which might become the model for Generation Z. For those seeking work, it is all about working as and when you want to do so; without commitment; on an irregular basis, to fit work around other priorities. For those recruiting, it is all about tapping into an otherwise under-utilised workforce, limiting the commitment in respect of the provision of work.

Whilst this looks at first sight to be a methodology to suit all parties, some employers have seen it as an opportunity to engage a workforce on the cheap, adding to their competitive advantage by operating outside the ambit of ordinary employment laws. Although these employers are not using a true gig economy model, they have dominated a debate which has become mixed up with the political debate around low pay and ‘precarious employment’. The discussion has been brought to a head in the recent report into modern working practices and we now await the Government’s response to the Taylor Report’s proposals.

Employment Tribunals have been busy handling complaints from those working for several gig economy businesses, complaining that they are being denied their rights. Specifically, they do not contend that they are employees, entitled to the full protection of employment law. Rather, they contend that they ought properly to be classified as ‘workers’ and as such they would be entitled to the lower platform of rights that goes with that status – the minimum wage, holiday pay and automatic enrolment into a pension scheme in particular.

In a string of cases, the workers have won. This is perhaps because those coordinating the claims have aimed their fire at the softest targets, where the employers have essentially departed from a true gig economy pattern of working to one which is much more akin to orthodox full-time engagement. Many of these cases concern cab or courier companies, including Addison Lee and CitySprint. The most prominent of these cases was against Uber, a decision which has now gone to appeal. With hindsight, it is interesting to reflect on how great a part this litigation had to play in the regulator’s decision not to renew Uber’s operating license in London, by reason of Uber’s lack of corporate responsibility.

Pivotal in the legal analysis of these cases is the requirement in the statutory definition of the term ‘worker’ that services are delivered personally. This has resulted in a call by Matthew Taylor for this legislative requirement to be removed. Meanwhile, employers have sought to exploit a number of ways to use this requirement to frustrate claims from would-be workers to assert their rights. In particular, employers have enabled the substitution of one individual by another so as to take the individual outside the statutory definition. The courts and tribunals have pushed back against this simple loophole, most notably in the case of Autoclenz Ltd v. Belcher, in which the Supreme Court looked at whether a substitution clause was used in practice or whether it should be disregarded as little more than a sham, the cosmetic inclusion of a clause in a contract to distort the true analysis of the relationship. The point was picked up by the Court of Appeal in the gig economy case of Pimlico Plumbers v. Smith. That case is due to go to the Supreme Court early next year and one senses that either the court or the legislature may well sound the death knell for the personal service get-out.

Pimlico Plumbers has become the key case in this area. The individual in question worked full-time for Pimlico Plumbers, on a self-employed basis. To the customer he looked like a Pimlico Plumber employee – he was sent by Pimlico Plumbers. He arrived in their van and wore their branded kit. Yet he used his own equipment, carried his own insurance and paid tax on a self-employed basis.

This group of cases causes a number of headaches for gig economy employers. Firstly, they have to look at their business model and ask whether it is a true gig economy business or whether what they are really trying to do is to run something akin to a conventional model with a number of tweaks so as to circumvent the traditional scope of employment law protection. Increasingly, such manoeuvring looks doomed to fail. They then need to look at the developments in the courts and potentially in Parliament and ask what changes need to be made to the business model to accommodate the emerging analysis of these relationships. Should they be caught out with claims that establish a different status for those individuals working for them, they may have to face considerable back claims for rights which have not been honoured, such as arrears of holiday pay and pension contributions. By this stage it will be too late to pass any of these costs on to the customers. Moreover, misclassifying the status of those working for them may cause mishandling of HR situations – for example, the individual concerned may have the right to claim unfair dismissal. Had the employer been aware of this, a situation might have been handled in a materially different manner.

The gig economy remains a vibrant part of the wider economy. There is a sensitivity not to kill the golden goose. Yet the latitude that employers have in terms of the rights of those working on this basis remains to be determined with any degree of finality and employers will need to tread carefully until the law becomes more clear cut.

Michael Ryley is a partner at Weightmans, where he works in the Employment, Pensions and Immigration team.