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Self-employed contractors and the gig economy – keep watching this space!

Pimlico Plumbers has now been granted permission to appeal to the Supreme Court. The decision reached by the Supreme Court will be significant as the highest authority on the employment status of purportedly self-employed contractors. It is likely to have implications for the so-called "gig economy".
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Self-employed contractors and the gig economy – keep watching this space!

Another triumph for cyclists

Following in the tracks of CitySprint, Deliveroo and Excel, Addison Lee is the latest company to wrongly classify its workforce.

In a claim again supported by the Independent Workers Union of Great Britain (IWGB), an employment tribunal has held that Addison Lee wrongly classified Christopher Gascoigne as an independent courier. The judge hearing the case, Ms Joanna Wade, was the same judge who made the damming finding against CitySprint in January (see http://www.ukemploymenthub.com/citysprint-courier-delivered-employee-status-by-employment-tribunal). As in the CitySprint case, Judge Wade was critical of the construction of the contract that Addison Lee had put in place in an attempt to avoid a finding of worker status. Further, Judge Wade criticised an indemnity included in the contract against any liability Addison Lee may face based on any employment-related claim. Not only was it thought to be an attempt to frighten the worker off litigating, it also suggested that Addison Lee knew the risk it faced in portraying Mr Gascoigne as self-employed.

The IWGB has been supremely active in fighting for rights for those working in the gig economy. In another claim that it has supported against The Doctors Laboratory (see http://www.ukemploymenthub.com/gig-economy-couriers-delivering-emergency-blood-are-workers), it is asking the Central Employment Tribunal to make a finding that five couriers are in fact employees. Such status gives more rights, including the right not to be unfairly dismissed. The IWGB also awaits a decision by the Central Arbitration Committee over the employment status and union recognition case it brought against Deliveroo.

We also await the Government’s considerations of the Taylor Review (see http://www.ukemploymenthub.com/good-work-taylor-review-on-modern-working-practices). The evidence appears to be overwhelming that a contracting company should categorise any worker under its control and supervision with a new status which entitles them to holiday pay, sick pay and the minimum wage.

Mr Gascoigne’s status of worker entitles him to holiday pay and the national minimum wage. The employment tribunal will list a separate hearing to decide the amount of holiday pay owed to Mr Gascoigne.

Another triumph for cyclists

Gig economy: Couriers delivering emergency blood are workers

In March 2017, five cyclists, motorcyclists and van drivers who carry emergency blood to hospitals and samples to laboratories launched a claim challenging their self-employed status, backed by the Independent Workers Union of Great Britain (IWGB).

Last week The Doctors Laboratory (TDL) conceded that these five couriers are in fact workers, however notably did not confirm whether they would repay holiday pay owed to the workers. This concession of worker status follows a similar concession by eCourier, which recently admitted to wrongly classifying couriers as self-employed contractors rather than workers.

This is the latest development in the increasing number of gig economy employment status cases. The recent moves by eCourier and TDL in conceding worker status show the momentum that is gathering behind such cases and that companies are now seemingly prepared to pre-empt a tribunal ruling of worker status. The general secretary of IWGB, Jason Moyer-Lee, went as far as saying that it shows that “worker status is an inevitability in the gig economy”. Interestingly IWGB is going to continue its case against TDL and will argue that the couriers are in fact employees, not just workers, in an attempt to secure them the guaranteed additional benefits (such as protection against unfair dismissal) that such a classification would bring.

Gig economy: Couriers delivering emergency blood are workers

Sisters doing it for themselves?

The world of work is changing. According to a combined study by Oxford Ecomonics and the online retailer notonthehighstreet.com, female entrepreneurs are leading the way in shunning normal working hours. Many have set up their own businesses in an attempt to juggle home and work commitments. They enjoy having flexibility to juggle home and work life, without reverting to part time work and a consequent reduction in their finances. Employers are advised to think about how they can adapt to changing work habits to recruit and retain the best talent.

The full report can be found here http://www.notonthehighstreetpresscentre.com/wp-content/uploads/Noths_Report_Release_London.pdf

Sisters doing it for themselves?

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”

Speaking Deliveroo: whatever next?

Deliveroo has set out words and phrases that managers should use to describe its riders and their working practices in an attempt to fortify the company’s stance that its riders are self-employed, rather than workers. Checklists include use of terms such as “independent suppliers” instead of “staff, employee or worker”, “on boarding” instead of “hiring” and “supplier agreement” instead of “employment contract”.

The growing gig economy (click here to see our previous post) has seen a rising number of companies such as Deliveroo engaging thousands of individuals on a self-employed contractor basis, rather than workers or employees, to avoid paying holiday and sick pay.

However, Deliveroo is now facing claims that its riders are not self-employed, as working practices reveal Deliveroo couriers wear a mandatory Deliveroo-branded uniform, have formal appraisals and go through a series of interviews and online tests prior to taking on the role.

A pattern of claims is developing in the gig economy and the judges appear to be unsympathetic towards the language and terminology used by companies defending them. Therefore, it remains to be seen whether over time Deliveroo, and other companies emerging in the gig economy, will face further scrutiny from the courts on the different working practices that they adopt.

Speaking Deliveroo: whatever next?

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

A growing gig economy

In Boxer v. Excel Group Services Ltd ET/3200365/2016, Mr Boxer brought a successful claim against Excel Group Services Ltd (Excel) for one week’s holiday pay. Mr Boxer had been a cycle courier for Excel since September 2013. His contract described him as a “subcontractor” and he was registered as self-employed with HMRC. Excel did not pay Mr Boxer when he took a week’s holiday and so he decided to claim for his holiday pay.
The Employment Tribunal had to decide whether Mr Boxer was a “worker” under section 230(3)(b) of the Employment Rights Act 1996 and regulation 2(1) of the Working Time Regulations 1998 (SI 1998/1833) in order to determine whether his claim could proceed. The Employment Tribunal concluded that Mr Boxer was a worker. The key considerations for the Employment Tribunal in determining this were:

  • he signed a contract because he had no choice: there was no negotiation or tendering process;
  • he worked five days a week, nine hours a day, and had to be available during the working day;
  • while he enjoyed some flexibility in respect of time off or changing hours, this had to be by arrangement and with notice;
  • he was paid a fixed rate for his work, which was non-negotiable;
  • he did not have to bear the cost of any damage in transit or pay insurance; and
  • not only was he expected to work and in turn was entitled to expect a steady stream of jobs, he was also expected to stand by between jobs and wait for the next one.

Mr Boxer’s evidence in this case was uncontested as Excel had gone into liquidation. Nonetheless, the case is a further example of a (first instance) claim against a courier company and application of the Court of Appeal decision in Pimlico Plumbers Ltd v. Smith [2017] EWCA Civ 51. To see our previous blog post on Pimlico Plumbers Ltd v. Smith [2017] EWCA Civ 51, please click here.

A growing gig economy

Holiday: to roll over, or not to roll over – that is the question

The issue of holiday pay has been back in the ECJ, with the Court considering the case of King v The Sash Window Workshop Ltd and another.

In that case, the issue had arisen as to whether Mr King, a worker who had been mistakenly classified as self-employed, should be able to carry over holiday that he had been prevented from taking as a result of the misclassification.

The EAT held that a worker who is unable or unwilling to take holiday due to reasons beyond their control (extending beyond sickness) should be allowed to carry it over to the next leave year. The question of whether Mr King was in fact prevented from taking his leave was referred back to the Employment Tribunal.

The Court of Appeal made reference to the ECJ to answer the key issues in the case, specifically:

  1. Under the Working Time Regulations, does an individual have to take unpaid leave before being able to prove that they are entitled to pay for this?
  2. Where the worker doesn’t take leave they are entitled to, can the leave be carried over when the worker is prevented from exercising their right?
  3. If the leave does carry over, is this indefinite or for a limited period as in sickness cases?

The hearing took place on Wednesday and the judgment will be hotly anticipated, for a number of reasons. It has the potential to extend the right to carry over beyond incidences of sick leave. It is also interesting on its facts, in the context of the rise of the gig economy and the question of employment status.

One interesting point made by the European Commission was that, as the Working Time Directive is a health and safety measure, the burden of ensuring compliance should fall on the employer. As such, there is no burden on the employee to actually request carry-over. For updates on the decision, watch this space.

Holiday: to roll over, or not to roll over – that is the question

Worker status – Pimlico Plumbers case

Pimlico Plumbers engaged Mr Smith as a plumber for around five and a half years. Four months after he suffered a heart attack, Pimlico brought the engagement to an end. Mr Smith issued proceedings in the employment tribunal for unfair dismissal, wrongful dismissal, entitlement to pay during medical suspension, holiday pay, unlawful deductions from wages and disability discrimination. The tribunal listed the case for a preliminary hearing to decide whether Mr Smith was an employee and/or a worker. Mr Smith would require this status to continue the various claims.

In terms of contractual documentation between the parties, there was an agreement and a company manual. These provided that Mr Smith was an independent contractor and was under no obligation to accept work from Pimlico, and Pimlico was not obliged to offer him any work. Mr Smith was subject to restrictive covenants, had to drive a Pimlico branded van and had to wear a Pimlico uniform. Further, he had to provide his own materials and tools. He also bore a significant proportion of the commercial risk – if a customer didn’t pay, Mr Smith would not be paid. Mr Smith was registered for VAT and submitted invoices to Pimlico and filed tax returns as a self-employed contractor. While there was no express right of substitution in the contractual documentation, Mr Smith could swap assignments with his colleagues.

At the preliminary hearing, the tribunal held that Mr Smith did not have employment status but did have worker status. Both parties applied to the Employment Appeal Tribunal (EAT). The EAT rejected both appeals. Only Pimlico raised a further appeal to the Court of Appeal to dispute that Mr Smith was a worker.

The Court of Appeal dismissed the appeal and found Mr Smith was a worker. The judges provided a useful analysis of the situation. They considered the issue of personal service. They found the ability to swap assignments represented only an informal concession to the requirement to provide personal service. A limited ability to provide a substitute is not usually inconsistent with an alleged requirement to provide personal service. They then looked at whether Pimlico was a client or customer of Mr Smith. The court held the tribunal had been entitled to find that the degree of control exercised by Pimlico (alongside a minimum hours preference) was inconsistent with Pimlico being a client or customer of a business run by Mr Smith. The fact that the contractual documentation contained restrictive covenants also pointed to this finding.

The case follows hot on the heels of the Uber and CitySprint cases, and will no doubt add to the Taylor review into modern working practices. While the Pimlico case is again a fact-sensitive case, the judgment helps in giving a further practical application of the worker status statutory definition. The case will now return to the employment tribunal to decide Mr Smith’s claims that hinged on his status of worker, i.e. disability discrimination, failure to pay holiday pay, and unlawful deductions from wages. Should Pimlico appeal the decision to the Supreme Court, we will update you on our blog.

Worker status – Pimlico Plumbers case