Does the recent spate of employment status cases have implications for all employers, or just for the gig economy sector? Fiona Rushforth analyses the Uber, CitySprint and Pimlico Plumbers cases for indications of a shift in approach to the classifications of worker or self-employed status.
Laura Merrylees, employment law editor at XpertHR, and Fiona Rushforth, senior associate at law firm Wedlake Bell, discuss the dangers of engaging individuals on a self-employed basis.
In the past few months, a series of legal cases have been brought, and threatened, in the gig economy sector.
The three major cases heard so far – against Uber, CitySprint and Pimlico Plumbers – have involved individuals claiming the rights of workers against a company attempting to classify them as self-employed contractors.
These cases have all been decided in the workers’ favour.
Why the explosion of cases in the gig economy sector?
There are several reasons for the sudden influx of claims. There is a general trend for employers to increase the flexibility of their workforce to cut costs.
Engaging the majority of the workforce on ad hoc, self-employed contracts is cost effective and efficient for a company. It can give its contractors as little or as much work as it wishes, and end the relationship without going through any procedures and with little risk of a claim against it.
Contractors have almost no rights under employment law. In particular, unlike workers, they have no right to a minimum wage or holiday pay, and these are the main rights that are sought by claimants.
In addition to the decided claims, there are several more cases in the pipeline against companies including eCourier, Excel and Addison Lee – and threats of claims against Deliveroo, Jinn, and DPD. The claimants are delivery drivers, couriers and taxi drivers.
The delivery and taxi industries particularly lend themselves to self-employment, since the volume of work is unpredictable, and jobs are short term and distinct.
Workers allege that the way that they are paid, for example a lump sum per delivery job, leads to very low pay – considerably below the minimum wage for workers.
Another reason for the succession of cases is that unions are backing them to reverse what they see as an abusive employment practice. The success of the initial claims has created the momentum for new claims.
Why did the workers succeed in their claims?
In the decided cases, the workers’ victories came down to two main issues – the companies have too much “control” over the way they work and require them to perform the work personally, rather than providing a substitute.
Although employment tribunals use a number of tests to decide whether an individual is a worker or self-employed, the “control” and “substitution” tests are two of the most important.
In both Uber and CitySprint, the employment tribunal decided that the contracts between the company and its drivers and couriers bore little resemblance to the way they work in practice.
The tribunal therefore largely disregarded the contracts and looked instead at the reality of the working relationship.
Employment status: key cases
In Uber, the company claimed that it is merely a technology platform, linking 30,000 drivers operating their own independent businesses.
The tribunal declared that this argument is “faintly ridiculous”. The level of control exerted by Uber over the drivers was key to the tribunal’s decision.
In CitySprint, the tribunal found a high degree of control and concluded that, in reality, CitySprint couriers have “very little autonomy to determine the manner in which their services are performed and no chance at all to dictate its terms”.
Despite there being more factors pointing towards self-employment in Pimlico Plumbers than in Uber and CitySprint, the tribunal held the claimant to be a worker.
The Court of Appeal held that the level of control exercised by the company over the claimant is incompatible with genuine self-employed status.
Considering the arrangement as a whole, the Court decided that the tribunal had been entitled to regard the claimant as an “integral part” of the company’s operations and “subordinate” to the company.
All three cases considered the question of substitution when determining whether or not the claimants were obliged to provide their services to the company personally.
In both Uber and CitySprint, it was clear that substitution is not a realistic possibility. There was no express contractual term allowing the claimant in Pimlico Plumbers to substitute.
The Court of Appeal held that the claimant was under an obligation to provide his services personally.
How do these decisions apply to the wider economy?
Employment status: recent developments
Some aspects of these claims are specific to the gig economy sector.
Could the decisions in Uber and CitySprint be partly led by the courts’ desire to protect the rights of very low-paid workers and recognise their lack of bargaining power in negotiating their contracts?
This is not true of Pimlico Plumbers, which involved a skilled and well-paid worker. The findings on control and substitution are generally applicable to all such cases.
In all three cases, allowing a partial right to substitute did not support the companies’ arguments that the individuals were contractors.
In practice, most companies will consider it too risky to allow an unrestricted right to substitute, as contractors often provide services directly to their customers.
Most employers will insist on the right to approve the substitute, or, at the very least, to insist on a minimum level of qualifications.
Similarly, companies that engage individuals who provide services directly to their clients will want to exercise some control to ensure that this is done in a way that is in keeping with its brand and standards.
Employers will need to keep control to a minimum, both in the contract and in reality, to protect against a finding of worker status.
The courts appear to be increasingly critical of arrangements that disguise workers as self-employed individuals.
Against this background, it may be that, ultimately, employers will be vulnerable to a finding that their contractors are workers where they require their contractors to meet their standards and perform the work required of them, whether this is reflected in the contractual documentation or in the day-to-day working arrangements.
Companies must consider carefully their contractor arrangements in the light of this trend, and decide if, and how, these should be amended to protect themselves from claims of worker status.