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31/01/2017

Employment status - what does the future hold for the gig economy?

Employment status has become a hot topic in recent months, with a number of high profile cases grabbing the headlines. Graham Irons from Howes Percival, explores the recent Uber and Citysprint cases, which determined that “self employed” contractors were actually workers and the impact that this could have on the growing gig economy in the UK.

Why does employment status matter?

An individuals’ employment status is key, as it determines what employment rights they are entitled to at work.

Employees are afforded a wide range of rights, including the right to claim unfair dismissal and family related rights. In contrast, the only rights that a self employed individual has are those contained within the contract between the individual and the company and they have no protection under employment legislation.

Workers are effectively individuals whose status is in-between that of an employee and someone who is genuinely self employed.  Workers do not have as extensive rights as employees, but they are still entitled to certain statutory rights such as the right to paid annual leave, statutory sick pay and the right not to be unlawfully discriminated against.  

Unfortunately, there is no clear set of defined criteria against which an individual’s status can be determined and no one factor is conclusive.  As a result, it can be difficult to determine employment status, which often leads to confusion for employers and individuals.  It also means that there has been an increasing amount of legal cases challenging employment status, particularly in light of the introduction of a variety of modern working practices over recent years.

Rise of the Gig Economy

There has been a rise in recent years of companies who operate a business model of engaging “self employed” contractors to complete short term or temporary tasks, often using technology platforms.  This has become known as the gig economy. 

However, recently the so called “gig economy” has been placed under scrutiny.  Concerns have been raised that it is being used as a way of preventing individuals from having access to employment protections. 

The first two high profile cases challenging the employment status of the gig economy model were Aslam and others v Uber, in October 2016 and more recently, Dewhurst v CitySprint UK Ltd, which we explore further below. 

Uber decision

Two Uber drivers brought a test case in the employment tribunal, arguing that they were workers rather than self employed contractors.

For the individuals to establish worker status, a contract is needed, under which they undertake to do work personally for an employer who must not be a customer of any business operated by the individual. The tribunal found that the drivers had established these elements and were entitled to worker rights. 

Uber denied that its drivers were workers.  It claimed that it was not a taxi company and did not employ any drivers. Rather, Uber was merely an app which connected drivers with customers; they did not work for Uber but for themselves in a self-employed capacity. This idea of independent self-employed drivers was rejected. The Tribunal used the following factors, among others, in forming its decision:

  • Uber interviews and recruits drivers and subjects them to an induction process;
  • Uber asserts the power to accept or decline bookings;
  • Uber sets a route for each trip and the driver may face fare deductions if they depart from it;
  • Uber fixes the fare and the driver cannot agree a higher sum with the passenger;
  • Uber has a rating system for its drivers, which is effectively a performance management/disciplinary procedure; 
  • Uber handles refunds for passengers, sometimes without involving the driver; 
  • Uber accepts the risk of loss e.g. where a passenger soils a vehicle or for fraud. If the drivers were genuinely self-employed, they would deal with such costs; 
  • Uber handles passenger complaints; and 
  • Uber reserves the right unilaterally to amend drivers’ terms.

Uber also had very complex contractual documentation that supposedly set out the relationship between the Company, the drivers and the passengers. The Tribunal found that the language in the documents contained “fictions” and “twisted language” and did not correspond to the reality of the relationship between Uber and the drivers. As a result they disregarded it. 

CitySprint decision

The Tribunal held that a cycle courier for CitySprint was a worker, rather than being self employed. 

Ms Dewhurst, who brought the claim, works as a bike courier and normally works four days a week between 9:30 am and 6:30 pm. A typical day involves completing several deliveries with gaps between them. At the start of the day, she notifies a controller and logs into CitySprint’s tracking system. Ms Dewhurst’s whereabouts are tracked until she finishes work. This helps controllers assign jobs to couriers. Controllers and couriers contact each other via radio and mobile phones throughout the day. 

Couriers who pass a two day recruitment process sign a contract titled ‘Confirmation of Tender to Supply Courier Services’, which states that they are self employed contractors. Ms Dewhurst signed this contract and was required to acknowledge its key terms by ticking a list on a computer. 

The Tribunal examined the ‘Confirmation of Tender’ document and held that it did not reflect the true relationship between the parties. The judge described the contract as "contorted", "indecipherable" and "window-dressing". Crucially, the substitution clause was so narrow that in practice Ms Dewhurst could only use a colleague at CitySprint to replace her. The Tribunal states that the title of the contract aroused suspicion that “an army of lawyers” had been used to draft it. The Tribunal also held that the electronic list of key terms, which a courier must complete to begin work, exacerbated that suspicion and indicated an unequal bargaining position. The tribunal therefore departed from the wording of Ms Dewhurst’s contract and instead inspected the whole of the employment relationship in order to consider whether the contract represented the true agreement between the parties. The Tribunal held that:

  • Ms Dewhurst was required to log in to the Company’s tracking system when she was on circuit and to log out at the end of the day;
  • Ms Dewhurst was expected to work at certain times and remained under close instruction throughout the day (including being told to smile as part of providing a professional service!);
  • Ms Dewhurst was required to wear a uniform; and
  • Citysprint calculated Ms Dewhurst’s pay and decided when she would be paid.

Overall, the Tribunal held that in light of the above factors and the degree of control enjoyed by CitySprint during the time Ms Dewhurst was logged into the tracking system she was not working for herself, but on behalf of CitySprint and had been integrated into their business. As such, the tribunal held that Ms Dewhurst was a ‘worker’.

What does this mean for the gig economy?

It is important to remember that both the Uber and Citysprint decisions are first instance employment tribunal decisions, so they are not binding on future decisions. In addition the cases are fact sensitive. Indeed, the Tribunal noted in the Uber case that the Company could have formulated a different business model that did not involve the individuals being workers (though they gave no clues about how this model would look!) however, their current model did result in the individuals being classed as workers.

It is also likely that both Uber and Citysprint will appeal against the decisions, particularly given that Uber has approximately 40,000 drivers registered in the UK, who could all be affected by this decision.

However, the decisions do show that the Tribunal will closely scrutinise the relationship between the company, the individual and the customer when determining employment status and they are clearly willing to disregard a company’s business model and contractual framework if it does not reflect the reality of the working arrangements.

The publicity of the cases also certainly increases the chances of companies with similar business models facing claims for workers rights. In fact, it is reported that there are already at least three other employment status claims being pursued in the London Central Employment Tribunal against courier companies. 

In addition, the Government have launched a review into modern employment practices including the “gig economy”.  It is not yet known whether this review will lead to any changes in the law.

Given that further litigation on this matter is likely, organisations that use self employed contractors should keep their business models under review in order to work out whether individuals may have acquired additional employment rights as “workers”.

Please contact Graham Irons at graham.irons@howespercival.com if you would like to discuss further.

 

© Howes Percival LLP