The gig economy and workers' rights
As flexible business models become more widespread, the law needs to be simplified to provide easier ways to determine the working status of an individual, says Chris Cook
The term ‘gig economy’ has recently been a hot topic of debate in both the legal and political worlds. There has been a rise in cases evolving out of the flexible business models adopted by it, including claims against Uber, CitySprint, and Deliveroo. The gig economy seemingly allows businesses to hire individuals on a flexible basis which avoids entitlement to certain benefits. However, following the decisions in these high-profile cases, it seems possible that 2017 could be the year the balance of employment rights tips in favour of the worker.
A person’s employment status does not always reflect exactly what it says in the written agreement. Contractual documentation stating an individual to be self-employed will not avoid the risk of the individual claiming worker status. Courts are aware of the inequality of bargaining power faced by individuals in these circumstances and the decisions in these cases will certainly be relevant to all other gig economy employment status cases currently in the spotlight.
UK employment law differentiates between the status of workers, employees, and the self-employed. These distinctions are important because each status comes with its own set of rights. Workers and employees have entitlements such as to be paid the national minimum wage, receive paid annual leave, and have rest periods in respect of their working time. Employees also have additional rights, such as the right to statutory sick pay and protection against an unfair dismissal. Self-employed contractors have no employment-related rights at all.
The drivers and couriers of Uber, Deliveroo, and CitySprint (and now a plumber working for Pimlico) complained to the tribunal that they had been working under the expectations of normal employees, but were denied the employment rights and benefits that came with such expectations.
It has become clear that the label imposed on an individual by an employer will not be the deciding factor as to what status they fall within. It is what is happening in practice that counts.
Unscrupulous businesses operating in the gig economy may deliberately refer to a self-employed status in contracts, hoping that this will put individuals off questioning their rights, but the courts are looking beyond the wording. The obvious conclusion to reach following the outcome of these cases is that employment law seems some way behind modern working practices.
There seems little doubt that the law needs to be simplified in order to provide easier ways to determine the working status of an individual.
There have since been calls for the government to guarantee the national minimum wage for gig economy workers in order to allow a ‘national standard of fair work in the gig economy’ and provide workers with an automatic entitlement to rights such as an income equivalent to the national minimum wage.
In November 2016, the Department for Business, Energy and Industrial Strategy (BEIS) launched the Taylor review, which seeks to explore how clearer information and better support might enable individuals to understand and enforce their rights. It will also examine the grey areas of freelance employment and establish a fair, flexible, and sustainable employment framework for the future.
It is uncertain whether new legislation will prove the self-employed business model will remain viable in terms of the consequences it might have for employers operating in the gig economy. Both Deliveroo and Uber have admitted that their businesses would remain viable if they were no longer allowed to rely on self-employed workers who do not receive sick pay, pensions, or a guaranteed minimum wage, and that a change in the law being considered by the government to give more workers in the so-called gig economy basic employment protections would not force their businesses to close.
It is clear that future gig economy arrangements between the business, the individual, and the customer will be closely scrutinised, and contract terms will be disregarded if these do not reflect the reality of the arrangements.
The current lack of a default legal position on employment status will no doubt see more cases like Uber and Deliveroo in the future. Employers need to be alive to this issue, and to define and structure working relationships accurately from the outset.
Chris Cook is a partner and head of employment at SA Law