Gig economy and employment status: three cases to watch

Gig economy and employment status: three cases to watch

Aslam & Farrar v Uber BV, Dewhurst v CitySprint UK Ltd and Pimlico Plumbers v Smith have generated a huge deal of publicity in recent months.

Despite the fact that they were described as landmark decisions – giving the impression they represented changes in employment law – they were not and did not.

But they do provide an insight into what is very much a growth area in modern working practices.

The gig economy

Uber are an app-based taxi service. CitySprint are a delivery company. Pimlico Plumbers are, unsurprisingly, plumbers.

What they have in common is that all used, and presumably still use, a business model where the people they engaged were at least notionally self-employed.

This is an increasingly common scenario and is known as the ‘gig economy’, where individuals take short-term engagements on a, supposedly, self-employed basis.

All of these cases turn on what are known as ‘status’ issues, which is to say what the relevant legal status is of the individual concerned.

It is their legal status that tells us what rights they are entitled to rely on. It might be useful to look at the broad principles.

Traditionally, an individual was either employed or self-employed and the difference was obvious. The classic illustration usually focused on the difference between a chauffeur and a taxi driver.

A taxi driver was clearly a self-employed contractor who you hoped to engage for a short-term duration to drive you somewhere.

You had no control over whether they took the job or not, and they could not force you to use them. They did lots of work for other people if they were not working for you, or if they could not do the work themselves they could send somebody else from the same taxi company.

They were clearly self-employed.

A chauffeur, on the other hand, was somebody who was employed by you to drive your car.

They had to do what you told them, they probably did not work for anybody else and when you were not using them to drive they sat around awaiting orders.

Modern employment law has then introduced a category in the middle between employed and self-employed: a worker.

A worker has some but not all the rights of an employee, and the distinction between the three categories is best illustrated by looking at what rights they do or do not have.

A worker has the right under the Working Time Regulations and other legislation to:

  • 5.6 weeks paid holiday each year
  • The right not to be forced to work more than 48 hours a week on average
  • The right to rest breaks
  • The entitlement to the National Minimum Wage
  • The protection of the whistleblowing legislation

Employees get all of the above and more. They also have the right to:

  • Claim unfair dismissal
  • Statutory notice
  • Redundancy payments
  • The protection that TUPE would bring if their employer sells the business

The truly self-employed have none of these rights.

Tribunal decision on employment status

All of these cases focused on what the status of the taxi drivers, delivery drivers and plumbers is.

It’s undoubtedly true to say that for all the publicity, and despite the fact these were widely reported as landmark decisions, they established no new principles in law at all.

Hearings like this involve looking at the established law, assessing the facts of the situation and the reality of the working relationship to decide what is the true status of the individuals.

As a result, the decisions are always quite fact specific and rarely set useful precedents.

In cases like these, the employment tribunal look at the day-to-day working arrangements. They consider it as a whole but do focus on certain particular features.

They look at the element of personal control. They look at whether work has to be given and has to be done if it’s given. And they look at whether there is the possibility of sending a substitute. (Because personal service is often seen as a crucial element of employment status.)

Aslam & Farrar v Uber BV

In the Uber case, the tribunal decided that the two individuals who had brought the claims were workers.

Obviously, Uber don’t want this to be the case because it involves extra cost for them paying for holidays and paying the National Minimum Wage to individuals when their earnings dip below that.

There’s no doubt that this case will be appealed for that reason.

Dewhurst v CitySprint UK Ltd

The Uber decision was reported at the end of last year, then in January the CitySprint decision went the same way.

Although the individual concerned was only claiming two days holiday pay, the implications for CitySprint would be the same as they were for Uber.

As in the Uber case, the tribunal looked at the reality of the working situation and at the paperwork.

In cases such as this, there is often paperwork that makes it very clear the individual is self-employed. But a tribunal never treats that as the last word on the matter.

CitySprint had their couriers sign a document called Confirmation of Tender to Supply Courier Services to CitySprint Limited. This had to be signed at their premises while someone hovered over them filling out an electronic tick list on the computer.

While many employers think the paperwork they put in place helps them, it’s often the case that the reverse is true.

If the paperwork and what it claims to say about the working relationship bears no relation to what actually happens in practice, it begins to look like a sham from the start.

In this case, the tribunal specifically said they simply assumed the tender document was the work of “an army of lawyers”.

The reality was, when the couriers were out and about during their working day they did what they were told and went where they were told.

They had no control over how much they ‘charged’ (in the way a taxi driver would, for example). They were even told they had to wear a uniform and smile.

Pimlico Plumbers v Smith

Pimlico Plumbers is an even more recent decision from the Court of Appeal.

Again, the plumbers supposedly worked on a self-employed basis but the Court of Appeal upheld the original tribunal decision that they were workers. The same type of considerations were applied about their working day.

What is notable about this case is Smith was not only self-employed for tax purposes, but also registered for VAT.

But this didn’t prevent him from being a worker for the purposes of employment legislation.

There have been other cases that make it clear you can be an employee for the purposes of the Employment Rights Act 1996 and self-employed for the purposes of tax.

It’s not going to happen often but employment tribunals and tax tribunals ask different questions based on different legislation, so it is possible.

What this means for you

With more and more bigger employers trying to force staff down the ‘self-employed contract’ route, it may be that businesses find they need to do this to compete on a level playing field.

But it’s important to go into arrangements of this type with your eyes open.

It may be the right way forward for some employers in certain industries, but it needs to be very carefully considered.

Need advice? Get in touch today

Please call Ted Flanagan today on 01482 324252.

Or email Ted here.

You can find out more about our Employment Law services here.

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