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Law Thoughts: Gig-enomics: Worker vs Employee

The age of the smartphone and the app-based platforms which have flourished as a result has ushered in an unprecedented flexibility in the ways in which work is done and upended traditional employment relationships in the process. This has brought the issue of employment status into stark focus because most so called ‘gig economy’ businesses view the people actually carrying out the work to be self-employed, limiting their labour costs and obligations by classing themselves as merely mediums through which clients and individual business providers are introduced. 

However, although technological advancements may have opened up a new front and further stimulated the growth of atypical and casual work, the battle lines along which arguments of employment status are fought are long trodden paths.

The starting point is s.230 Employment Rights Act 1996 (‘ERA’) which sets out the statutory definitions of an employee and a worker. An employee is someone who enters into, or works or worked under a contract of employment, whether that contract is express or implied and, if it’s express, whether it’s oral or written (s.230(1)  and 230(2) ERA).

In order to amount to an employment contract, case law has developed four fundamental requirements: the contract must be for someone to personally carry out the work in return for remuneration; the employer must have control over how the work is carried out; there must be an obligation on one party to provide work and on the other to carry it out (known as ‘mutuality of obligation’); and all other terms must be consistent with an employment contract. Such factors as who bears any financial risks and who provides the tools for the work has been deemed relevant in determining employment status.

Employees enjoy the full scope of protection under UK employment law including the right not to be unfairly dismissed, the right to statutory notice pay and maternity leave rights.

A worker is defined by s.230(3)(b) ERA as someone working under ‘any other contract…whereby the individual undertakes to do or perform personally any work or services for another party to the contract’ and that other party is not a client or customer of the individual. The key requirements of worker status are therefore personal performance of work (as is required for employees) and not being in business on your own account. Mutuality of obligation is also relevant to worker status, however this requirement is less stringent in relation to workers than employees.

Unlike employees, workers are not entitled to full employment rights (including those employee rights listed above) although they do enjoy such rights as holiday pay, sick pay and protection from unlawful deductions from wages. If someone is neither an employee nor a worker – i.e. are self employed – they will fall outside of the scope of UK labour law entirely.       

Gig economy roles clash with s.230 ERA as they classically entail an individual choosing to work when they want to by signing into an app at which point they can then accept or reject offers of work at will. Such a working relationship is patently at odds with employee status as there is no mutuality of obligation here and the individual, rather than the putative ‘employer’, has a significant amount of control. Furthermore, for apps such as Uber, the individual is also providing their own tools as they will be using their own car to work in.

The position is much more uncertain as to whether such individuals qualify as workers, however, particularly during the time when the individual is actually carrying out the work. To use the example of Uber again, if a driver was to continually reject job requests and/or had a poor user rating there are standards and consequences which are imposed and meted out by Uber. If not an employee, the debate then becomes whether this relationship is more akin to that of a worker or a self-employed individual.

This gives businesses a clear incentive to draft contractual terms which seem to suggest someone is self-employed even though in reality the situation is different. This issue reached the Supreme Court in the case of Autoclenz Limited v Belcher [2011] UKSC 41 where the court ruled that, although the contractual terms are clearly relevant and important, if the reality of the working relationship did not reflect those terms the focus when determining employment status should be on the actual working relationship. Such an approach was again followed by the Supreme Court in the case of Pimlico Plumbers Ltd v Smith [2018] UKSC 29.

Autoclenz played an important role in the Court of Appeal’s decision in Uber BV v Aslam [2018] EWCA Civ 2748 where it found that Uber drivers were workers despite complex contractual terms suggesting otherwise. Uber has appealed to the Supreme Court who will consider the claim this summer, and this judgment will have significant ramifications for employment status in the gig economy.

However this does not mean that contractual terms will simply be ignored as even an unused but genuine contractual term could undermine employee and/or worker status. For instance if a contract provided an individual with a right to substitute anyone they liked to do their work, this in and of itself would undermine the personal service requirement needed for both employee and worker status (see Express and Echo Publications Limited v Tanton [1999] IRLR 367 which was approved in Autoclenz).

Summary

In summary, therefore, if employment status is in dispute tribunals will consider the working relationship in the round – including how this operated in practice as well as the contractual terms – in order to determine whether someone is an employee, a worker or self-employed. Given the relatively fine lines between the various employment statuses (especially between worker and self-employed), and the convoluted contractual terms of gig economy businesses, it can be difficult for either party to be sure about someone’s employment status.

It is this growing lack of certainty in the face of more regular atypical working arrangements, which usually lie on the border of worker and self-employed status, that prompted the government to commission the Taylor Review. This review recognised the difficulty in clarifying gig economy employment status, suggested that the focus should be on the degree of control one party has over the other and recommended that an additional worker category of ‘independent contractor’ be created. However, there are currently no signs of the government legislating to implement any of these suggestions.

In conclusion, the issue of employment status is one that will remain at the forefront of employment law as more and more work is carried out via online platforms, smartphone applications and non-traditional forms (such as zero-hours contracts). If challenged, businesses will usually rely on their contractual terms to attempt to show that someone is self-employed. However, the broad, overarching factual assessment tribunals and courts will carry out, as well as the blurry demarcation between the fringes of each status, means that both workers and providers face a nervous wait if employment status is contested given the high stakes involved: for the provider a potentially highly expensive business altering decision and for individuals, the possibility of falling outside of employment law protection altogether.   

Posted on Feb 17th, 2020 by Lyons Davidson

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