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The Taylor Review: a new right to request fixed hours?

Zero-hours contracts remain controversial and, last month, fast food chain, McDonald’s, confirmed that it will offer its workforce of 115,000 a choice as to whether to work fixed hours or remain on their zero-hours contracts. McDonald’s had previously trialled this arrangement and they found that only around 20% of staff chose to move to fixed hours, with the majority preferring the flexibility of the zero-hours arrangement.

There has been speculation that, inspired by the McDonald’s arrangement, Matthew Taylor’s highly anticipated review on the gig economy is likely to recommend a new right for workers on zero hours contracts to secure a guaranteed number of hours. It is expected that the right will be structured in a similar way to the right to request flexible working, with the employer maintaining the right to refuse the request for specific statutory reasons only.

The Labour party has pledged to ban zero hours contracts completely but the McDonald’s experience suggests that there may still be a place for them in the modern working environment.

The Taylor Review: a new right to request fixed hours?

The gig economy: “Free-riding on the welfare state”

Due to the calling of a snap general election, the Work and Pensions Committee has curtailed its inquiry and has now published its report on the gig economy and its use of self-employment. The report is somewhat damning of companies that utilise the gig economy model. The report concludes that:

“Self-employment is neither inherently good nor bad. It can represent entrepreneurial zeal and a highly desirable culture of self-reliance. It can also be deeply negative, allowing companies to evade responsibility for their workers’ wellbeing and increase their profits. It is incumbent on Government to close loopholes that incentivise this behaviour.”

The main points that the report raises are:

1. Welfare safety net

Employee status and its corresponding rights help to protect (1) individuals from personal hardship and (2) the welfare state from incurring costs in relation to such individuals. On the other hand, self-employed individuals do not have such rights and therefore neither they nor the welfare state are protected. The report argues that self-employed status is being used to deprive individuals of their rights in the name of “flexibility”, and in doing so companies are refusing to contribute to society by protecting those individuals and by contributing substantially less by way of National Insurance contributions (NICs). This is a vicious circle as NICs then bring in less revenue to the welfare pot but there is a larger demand for support as a result of such pseudo-self-employment.

2. NICs

Our welfare state is founded on the principle that everyone contributes. In the past, self-employed individuals received less support than employees, which is why their NICs were substantially lower. However, the reality today is that access to the services that NICs fund is substantially the same for both the employed and the self-employed. The report therefore recommends that the new government consider how it can equalise NICs to ensure that the welfare pot is sufficiently funded.

3. Low levels of retirement saving by the self-employed should be tackled

The report argues that the current framework does not do enough to encourage self-employed people to save for retirement, which, in turn, increases the likelihood that they will need to depend on the welfare state in the future. This could lead to a welfare state crisis whereby there are not enough funds to meet demand. The report suggests looking at tax reforms to encourage greater contributions to pensions by the self-employed.

4. Assumption of worker status

The report recommends that the default position should be an assumption of worker status. The onus would then be on employers to provide basic rights and benefits (for example, national minimum wage and paid holiday). If they wanted to argue that individuals were self-employed the burden of proof would rest with them rather than the individuals.

5. Encouraging real self-employment

Job centres focus on getting individuals into employment (rather than self-employment). The report suggests that whilst employment may be suitable for most individuals, more support should be available for helping people launch (or re-launch) self-employed careers. This would avoid stifling genuine entrepreneurs and viable new businesses.

It will be interesting to see how the findings of this report and the findings of the upcoming Taylor review of modern working practices compare. However there seems to be increasing pressure on government to ensure that gig economy workers are afforded at least basic rights. This, along with a growing body of case law from the employment tribunal that is critical of the gig economy model, means that employers utilising such a model should start to look at ways to address these problems before they are forced to.

To read the report in full click here.

The gig economy: “Free-riding on the welfare state”

The zero-hours contract debate: is the end in sight?

It was reported yesterday that McDonald’s is set to offer employment contracts containing fixed hours to its 115,000 employees employed under zero-hours contracts. This follows a trial offer across 23 restaurants, following which 20% of employees at those restaurants elected to switch to contracts containing fixed working hours.

McDonald’s 115,000 zero-hours employees represent a significant proportion of the 905,000 that the Office of National Statistics reported last month were employed on zero-hours contracts for their main job between October and December 2016. This, therefore, is a significant move. It remains to be seen how many of the 115,000 will in fact take up the offer of fixed hours. However, the 20% figure from the trial suggests that the debate over zero-hours contracts is not over yet – it is notable that 80% of those included in the trial elected to stay on zero-hours contracts (although we do not know how the terms otherwise compared).

What is clear (and has been for some time now) is that, disregarding the benefits of zero-hours contracts for employers, whilst many employees prefer the certainty and security of contracts containing fixed hours, many value the flexibility of a zero-hours working arrangement. It seems McDonald’s has now found a way of putting this debate to bed within their organisation, by giving staff the ability to choose between the two, but otherwise it remains on-going. Research by the Trade Union Congress, also released yesterday, has found that the number of employees in the UK in insecure employment (including, but not limited to, zero-hours contracts) continues to grow.

Perhaps the solution McDonald’s has found would help address the debate elsewhere. It may be that the answer is not to ban zero-hours contracts but to change the law so that all employees who would otherwise be given zero-hours contracts, are offered the choice of a zero-hours arrangement, or a fixed hours arrangement on comparable terms. This is certainly something that larger employers, at least, may want to consider. For now though, the debate looks set to rumble on.

The zero-hours contract debate: is the end in sight?

Matthew Taylor’s report on the gig economy – emergent themes

Matthew Taylor, former head of Blair’s Number 10 Policy Unit, is due to publish a report on the gig economy this summer. A number of themes have emerged from his interviews and discussions with the press to date.

His report will look at the following issues:

  • Security, pay and rights
  • Progression and training
  • Balance of rights and responsibility
  • Representation
  • Opportunities for under-represented groups
  • New business models

The report will emphasise that it is not just quantity of work that matters but also the quality of work. Mr Taylor wants to ensure there are greater opportunities for progression and fulfilment in the self-employed and worker economy. He wants to strengthen employee voice in the workplace.

His research will recognise that employers want clearer rules on how to determine self-employed, worker and employee status. To that end, it is likely to foreground the idea of the “dependent contractor” (a term currently used in Canadian law) as an indicator of worker status.

His investigations look into a diversity of self-employment roles, and will take account of differences between, for example, the construction and healthcare industries.

Finally the report will also disclose the extent to which tax treatment and social security rights are a big influence on employment trends. We can assume that Matthew Taylor saw the now cancelled tax reforms to self-employed workers as a step in the right direction. Although he cannot make recommendations on tax, he is likely to want to nudge tax treatment in an employee-friendly direction as well as recommend a strengthening of pension entitlements for those working in the gig economy.

Matthew Taylor’s report on the gig economy – emergent themes

Uber and the Gig Economy – is the law keeping up?

After a preliminary hearing spanning seven days (including reading the five-volume bundle and time for deliberation), an Employment Tribunal has handed down its much anticipated ruling that Uber drivers are workers rather than independent contractors. The drivers can, therefore, benefit from statutory protections, such as 5.6 weeks’ paid annual leave each year, a maximum 48 hour average working week (in the absence of an opt-out), rest breaks, the National Minimum Wage, potentially the National Living Wage, and the protection of the whistleblowing legislation.

The Tribunal examined in detail Uber’s business model but rejected Uber’s assertion that it is a provider of technology services rather than transportation services. Passengers can order a taxi via Uber’s smartphone app and Uber’s drivers can then decide (with the extent of the autonomy of such decision one of the factors questioned in this case) whether to drive that passenger to their requested destination and, if they do, the route to be taken. The passenger pays the fare to Uber by credit or debit card, Uber takes a 25 per cent service fee, and pays the balance of fares to the driver on a weekly basis.

The Tribunal looked at various aspects of the arrangement as it operates in reality, rather than as described in Uber’s contracts, to determine whether the drivers are workers as opposed to truly independent contractors. For example, the Tribunal noted the fact that, if a driver declines three trips in a row whilst logged on to the app and so ostensibly available to work, he will be forcibly logged out of the app for 10 minutes. The Tribunal also took note of the fact that Uber prohibits drivers from agreeing with the passenger a fare which is higher than that set by Uber and that Uber usually bears the cost of any cleaning necessitated by a passenger soiling a vehicle.

In summary, the Tribunal concluded that Uber is a taxi service and employs drivers to provide that service in a way which, in a number of key respects, Uber controls. Consequently, the Tribunal held that each of the drivers in this case fell squarely within the statutory definition of a worker as an individual who works under a contract to personally perform services for another party to the contract (Uber) which is not a customer of a business undertaking carried on by the individual. However, we note that this contract did not actually exist (in the sense that no such express agreement had been put in place) but had to be inferred by the Tribunal from the facts as found by it. It may be that the scope for doing so will be one of the grounds on which Uber appeals against the Tribunal’s judgment.

The Tribunal went on to find that, whilst the drivers are under no obligation to switch on the app through which their instructions are received and there is no prohibition against dormant drivers, once the app is switched on, the driver is in the territory where he is licensed to operate and he is able and willing to accept assignments, he is then on working time until one of those conditions ceases to apply.

For the purposes of the National Minimum Wage Regulations, the Tribunal stated that the work carried out by drivers does not constitute “time work” or “output work”, as the driver’s entitlement to pay is not limited to when he is carrying a passenger and does not depend on him completing a particular number of trips. Accordingly, the work was classified as “unmeasured work”, so it is likely that the relevant rate of pay will be calculated by reference to the periods of time when the driver is logged on to the app in his licensed territory and ready to accept passengers, rather than just the time spent driving passengers to their destinations.

This decision is extremely fact specific. Furthermore, Uber has already announced its intention to appeal against it. The outcome is likely to have wide-ranging implications for the concept of the gig economy, the proponents of which claim that it benefits individuals who want the flexibility to work how, when and for whoever they please, in an increasingly interconnected and digitally virtual employment sphere.

The employment landscape is changing rapidly and the challenges to the existing statutory framework presented by the Uber case could be seen as demonstrating that the law also needs to change in order to keep up. In support of its decision, the Tribunal cited an earlier judgment which identified the underlying policy behind the definition of “worker” as the need to extend statutory protection to individuals who are vulnerable to exploitation in the same way as employees. Whilst this is clearly not a new issue, as is evidenced by some of the previous case law referred to in the Uber judgment, perhaps in light of the rise of the gig economy, such policy needs to change and the law, therefore, needs to change with it.

Uber and the Gig Economy – is the law keeping up?

Former head of Blair’s policy unit appointed to review workers’ rights

Theresa May has appointed Matthew Taylor, the former head of Tony Blair’s Number 10 policy unit, to conduct a review of workers’ rights and practices. The review comes in light of concerns over the “gig economy”,  zero-hours contracts and several high profile investigations into working practices of large companies. The aim of the review is to create a new framework of rights for workers who do not work in traditional “nine-to-five” roles. Employers should keep an eye on this review, which may mean that changes must be made to their business hiring practices in due course. We also predict a sizeable impact on self-employed contractors and freelance workers, as well as tech companies operating apps which connect contractors directly with customers. Please check our blog for more insights into this review, as and when they become available.

Former head of Blair’s policy unit appointed to review workers’ rights

I will drink to that

In 2015, brewing giant Greene King took over ownership of the Spirit Pub Company (Spirit), including its 16,000 workers, the majority of whom were, and are, engaged under zero hours contracts.

A zero hours contract is a contract for casual working, under which the employer does not guarantee to provide the worker with any work and pays the worker only for work actually carried out. The worker is expected to be available for work when or if called on by the employer although the term can be used to describe situations both where the worker is free to accept or refuse work when it is offered, and where the worker is not given such a right of refusal. Whether or not the person engaged under a zero hours contract is, in fact, a worker or an employee will depend upon the wording of the contract but also, and more importantly, how the relationship actually operates in practice.

At the time of the purchase of Spirit, Greene King had already moved all of its staff away from zero hours contracts. It now intends to do the same in relation to the Spirit staff. This means that thousands of staff at household names such as Chef & Brewer and Wacky Warehouse will, over the course of the next year, be guaranteed a minimum number of hours’ work. This follows on from similar announcements across various sectors, with the Everyman cinema chain also confirming that it will be following the example of not only Greene King but also Everyman’s rival, Curzon Cinemas, and retailer Sports Direct.

Despite ongoing criticism of the use of zero hours contracts, they continue, however, to be widely used, particularly in the hospitality sector. In fact, data published by the Office of National Statistics (ONS) on 8 September 2016 suggests that zero hours contracts are now more widely used than ever. 2.9% of the people in employment that the ONS surveyed consider themselves to be engaged under a zero hours contract, with this percentage increasing steadily since 2010.

This means that 903,000 people are currently engaged under zero hours contracts and this is not always seen as a bad thing. The chairman of pub company JD Wetherspoon has said that when offered a choice between a zero hours contract and a contract guaranteeing certain working hours, two-thirds of his staff opted to move off zero hours contracts. However, in stark contrast, McDonalds has stated that when workers in three of its north-west stores were given such an option, over 80% of the employees opted to stay on their existing flexible, zero hours contracts. It continues to be the case, it seems, that whilst zero hours contracts may give rise to uncertainty and exploitation, they may also offer the flexibility which is desirable for certain employers and employees.

I will drink to that

Disregarded business groups dismay, as the apprenticeship levy is pushed through

The Government is pushing ahead with its proposal to require large employers, to “invest in apprenticeships”. Many thought the levy plans, which were not popular with many business groups before Brexit, would be shelved following the referendum result based on economic uncertainty. However, the Department for Education’s publication of the proposals for apprenticeship funding  means that it is likely that final proposals will be confirmed in October and imposed in April 2017.

The levy is designed to fund three million places for apprentices, by charging qualifying employers (those operating in the UK with a pay bill over £3 million each year) 0.5 per cent of their annual pay bill. Once employers have declared the levy to HMRC they will be able to access some of funding through their account on a new digital apprenticeship service. The latest consultation documents put flesh on the bones of the proposed funding regime. In the documents, the apprenticeship frameworks and standards are divided into 15 funding bands ranging from £1,500 to £27,000. The consultation documents cover a few more practical areas which may affect large employers, including cross-border funding and directing funds in a digital training account to another employer. They also propose that employers “co-invest” with the Government where they have insufficient training funds in their digital accounts, or they are not subject to the levy.

The previous Chancellor said that those paying the levy would “get more out than they put in”. However, an employer caught by the levy, still cannot say that the apprenticeship model does not meet the needs of its business, or opt out of the levy altogether. Employers not looking to buy apprenticeship training are instead likely to rebadge existing roles as apprenticeships to mitigate their costs.

The CBI, CIPD and British Retail Consortium have been vocal about their concerns about the levy and their feelings that businesses are being ignored. They warn that narrowing training covered and enabling employers to only reclaim off-the-job costs could result in training being cut back and quantity being put ahead of quality. They call on the Government to delay implementation to give time for full consideration and ensure that the levy is fit for purpose.

Employers wishing to share their views will need to complete the Department of Education survey (https://beisgovuk.citizenspace.com/ve/apprenticeship-funding-proposals) by 5 September, 2016.

Disregarded business groups dismay, as the apprenticeship levy is pushed through

Agency workers may have whistleblowing protection against end-users

The EAT has held that an agency worker was entitled to whistleblowing protection against an end-user as she was a “worker” under the extended definition in section 43K of the Employment Rights Act 1996.

The extended definition of “worker” applies only to the whistleblowing provisions of the ERA 1996. It was included to protect agency workers and was specifically intended to provide whistleblowing protection for health workers in England, Scotland and Wales, where the NHS has contractual arrangements in place that mean such workers do not fall within the standard definition of “worker” under section 230(3) of the ERA 1996.

Section 43K(2) of the ERA 1996 provides that in respect of an agency worker, the “employer” includes “the person who substantially determines or determined the terms on which he is or was engaged…”

Ms McTigue was employed by an agency, TMS Ltd (TMS), and was assigned to work as a nurse for the University Hospital Bristol NHS Foundation Trust (the Trust) in a sexual assault referral centre. She had a written employment contract with TMS on their standard terms. She was also subject to the Trust’s standard contract which required her to cooperate with the Trust in relation to health and safety, clinical governance and working time and also identified the supervisor under whom she would work.

Ms McTigue was removed from the assignment in December 2013 and brought whistleblowing claims against TMS and the Trust in relation to the protected disclosures she had allegedly made to the Trust and the detriment she claimed to have suffered as a result.

The Employment Tribunal ruled that it did not have jurisdiction to hear Ms McTigue’s claim as she was not a “worker” under the standard definition or the extended definition that applies to whistleblowing. Ms McTigue appealed to the EAT.

The EAT allowed the appeal. The Employment Tribunal had erred in concluding that the Trust could not have substantially determined the terms on which Ms McTigue worked for TMS, because TMS had done so. The EAT held that the definition allowed for both the end-user and the agency, or either of them, to have substantially determined the individual’s employment terms. Thus, the Employment Tribunal should have considered whether TMS and the Trust both substantially determined the terms on which Ms McTigue worked at the referral centre. The case was remitted to a fresh Employment Tribunal.

This EAT decision confirms that, depending on the extent to which the agency and end-user have both determined the terms under which the individual is engaged to work for the end-user, an agency worker may bring a whistleblowing claim against the agency, the end-user or both.

Agency workers may have whistleblowing protection against end-users

More apprenticeships in London

The week commencing 14 March 2016 is National Apprenticeship Week 2016. To mark the start of this event, seven business leaders from leading employers in the UK such as Fortnum & Mason, Deloitte and Prezzo met at the Shard and made pledges to increase the number of apprentices in their businesses. For example, Starbucks pledged to take on an extra 1,000 apprentices in its business by 2020. These pledges will assist the government with its own pledge to create 3 million apprenticeships in the UK by 2020.

These pledges came after Prudential released a survey on 14 March 2016, which suggests that 85 per cent of school leavers underestimate the amount of pay that apprentices receive, even though the average weekly wage is £257 per week. Prudential also launched its own 2016 apprenticeship programme, which will create 40 apprenticeships for young people who will be paid the National Living Wage of £7.20 an hour (significantly above the current Apprentice rate of £3.30 per hour).

This follows the publication of draft legislation introducing the apprenticeship levy, which is due to come into effect in April 2017.   Affecting only the largest employers, it is proposed that the levy will be payable by employers at the rate of 0.5% of their total gross pay bill (excluding benefits in kind), with an annual allowance of £15,000 to offset against the levy payment. This means that the levy would be payable only on a pay bill in excess of £3 million.

More apprenticeships in London