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Think your staff are self-employed? It may be time to think again...

Napthens - December 8th 2016

In what is probably the most talked-about case of the year, taxi drivers have secured a landmark victory against Uber by successfully arguing that they are not self-employed, and instead are entitled to basic workers’ rights.

GMB, the union for professional drivers, brought two test cases to the Central London Employment Tribunal in July 2016, with the decision being handed down on 28 October 2016.  The decision will have major implications for the gig economy stalwart, which has around 30,000 drivers on its books in London and across England and Wales.

What is a ‘worker’?

Section 230 of the Employment Rights Act 1996 (ERA) provides the following definition:

(3) In this Act “worker” (except in the phrases “shop worker” and “betting worker”) means an individual who has entered into or works under (or, where the employment has ceased, worked under) –

(a) a contract of employment; or

(b) any other contract, whether express or 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;

and any reference to a worker’s contract shall be construed accordingly.

The definitions are the same in the Working Time Regulations 1998 and the National Minimum Wage Act 1998.

In the Uber case, the focus is on section 230(3)(b) (‘limb (b)’), which has come under much scrutiny over the years.  However, it is generally accepted that the intention of the regulation was to create an intermediate class of worker, who does not qualify for as much protection as an employee but whom, on the other hand, cannot be regarded as carrying on a business.

Whilst written contracts will be the starting point for considering what the working relationship is between the parties, this is certainly not the be all and end all.  Often, Employment Judges will look behind the wording of a contract, to ascertain what the true agreement was between the parties.

There is, of course, no ‘one size fits all’ answer to this common problem, and every case needs to be taken on its own facts, with consideration being given to many aspects of the role being performed by the individual.

The 2002 case of Byrne Brothers (Formwork) Ltd –v- Baird & others set out helpful guidance to identify a worker:

  • Personal service. Does the individual undertake to perform the work or services personally, or could they appoint a substitute?
  • Business undertaking. Is the individual carrying out a business, of which the company is a customer or client?  Relevant factors to take into consideration here would be the degree of control exercised by the ‘employer’, the exclusivity of its arrangement, the duration of the agreement, the method of payment, which party supplies the equipment to be used, and the level of risk undertaken by the individual performing the services.
  • Mutuality of obligation. Is the ‘employer’ obliged to provide work to the individual, and is the individual obliged to accept it?

Employment Judge Snelson considered these criteria in the Uber case and found, on eleven separate points, that the drivers in this instance fell under the limb (b) definition stating (at paragraph 90 of his Judgment), “the notion that Uber in London is a mosaic of 30,000 small businesses linked by a common ‘platform’ is to our minds faintly ridiculous”.

What does this mean?

Those individuals who are genuinely self-employed have no employment rights.  However, a ‘worker’, whilst not entitled to the full array of employment rights which an employee has, is afforded some employment protection.

In particular, workers are entitled to (amongst other things):

  • 5.6 weeks' paid annual leave each year
  • A maximum 48 hour average working week, and rest breaks
  • The national minimum wage (and the national living wage)
  • Protection of the whistleblowing legislation
  • Protection from discrimination under the Equality Act 2010
  • Protection from unlawful deduction of wages
  • Right to pension contribution from employer under the auto-enrolment scheme (provided they meet the definition of ‘jobholder’ for those purposes)
  • Right to statutory sick pay (providing they meet the qualifying criteria)

What next?

This decision is very likely to be appealed by Uber (and potentially this could continue to be appealed up as far as the Supreme Court).  However, it is likely that we will now start to see businesses which provide such gig economy work facing claims that their ‘contractors’ are, in fact, workers.

It should however be noted that this is a non-binding Tribunal decision and therefore is only persuasive case law at this stage. Nonetheless, businesses which hire individuals on the understanding that they are self-employed should consider whether they could in fact fall within the definition of a worker, and be alive to the potential claims those individuals could bring.

Interestingly, however, Employment Judge Snelson did say (at paragraph 97) that, “none of our reasoning should be taken as doubting that [Uber] could have devised a business model not involving them employing drivers.  We find only that the model which they chose fails to achieve that aim”.  All may not, therefore, be lost.