The gig economy and worker status: the contract and the reality
Individuals working in the gig economy are often described as self-employed. Businesses argue that this reflects the flexibility of their working arrangements, but the quid pro quo is that such individuals have fewer employment rights. Recently individuals working for Uber, Citysprint and Addison Lee have successfully asserted that they are workers and therefore entitled to the minimum wage, paid holiday and other employment rights. Those holiday pay claims may be more substantial than previously accounted for as identified in our article on holiday pay and the potential for increased claims for backpay.
Two recent cases illustrate how written contracts may help (or hinder) a business' case on employee or worker status. Contracts which do not reflect the reality of the working relationship, however ingenious they may be, are likely to be disregarded, but well-drafted contracts which do reflect the working arrangements may enable a business to defeat a claim for worker status.
Uber appealed to the Employment Appeal Tribunal (EAT) against the ruling that Uber drivers were workers. Uber argued that it was merely acting as an agent, putting drivers in touch with passengers who wanted to use the drivers' services, rather than supplying transportation services itself. It relied on its written contracts with the drivers which described Uber as an agent. It also argued that the drivers were not integrated into the business and that the control exercised by Uber over the drivers was a result of the regulatory framework for private hire operators.
The EAT rejected those arguments and upheld the ruling that the drivers were workers. It stated that the Employment Tribunal had been entitled to look behind the written contracts to assess what the relationship between Uber and the drivers really was, and was entitled to conclude that they were workers.
By contrast, Deliveroo successfully argued before the Central Arbitration Committee (CAC) that its drivers were not workers. The Independent Workers Union of Great Britain applied to the CAC to become the recognised trade union for Deliveroo drivers based in Camden. Deliveroo opposed the application on the basis that the drivers were not workers. It succeeded on the basis that the drivers were not required to carry out deliveries themselves, because their contracts with Deliveroo permitted them to appoint a substitute driver without needing prior permission from Deliveroo. The CAC was persuaded that the clause permitting a substitute rider was genuine. As an obligation of 'personal service' is a key component of worker status, this defeated the IWBG's application.
This will not be the end of the road for Uber or Deliveroo: we understand that Uber's application to the Supreme Court to appeal the EAT's decision has not been granted but that an appeal will be heard by the Court of Appeal next year, while Deliveroo faces a separate Employment Tribunal claim by a driver asserting worker status. Worker status continues to be politically contentious, with the Work and Pensions Committee and the Business Select Committee preparing draft legislation which would class individuals as workers by default unless the business can prove that they are self-employed.
In the meantime, businesses looking to engage self-employed contractors need to ensure that their contractual documentation treads the fine line between clever drafting and legal fiction.
If you would like more information on how the points raised could impact you, please contact Jane Amphlett.