Employment status is certainly at the forefront of the Government’s agenda with the inquiry into the future world of work and the Taylor Review both in progress. There has also been a series of recent cases on employment status ranging from bike couriers to plumbers. So why is someone’s employment status so important? First, it determines their employment rights. Employees are entitled to much more employment protection than workers or self-employed contractors, including the right to claim unfair dismissal, redundancy pay and maternity/paternity leave and pay. A worker falls into the middle bracket when it comes to employment rights which are largely limited to national minimum wage, holiday pay and discrimination protection. Self-employed contractors on the other hand have very little employment protection. Secondly, employment status also has an impact on the tax treatment of an individual. Those who are not employed can potentially benefit from a more favourable tax regime.
With so many developments we thought it would be beneficial to provide you with a round-up of the latest position:
The Courts and Tribunals have been awash with employment status cases in the last few months with the outcomes mainly being that the claimants had worker status. A number of key principles have emerged.
The legal tests – personal service, control, integration
These long-established employment status indicators were considered in the case of Pimlico Plumbers (PP) Ltd and Mullins v Smith where the Court of Appeal focused on the limited right to substitute, personal service requirement and the level of integration into the business (think – branded uniform, branded van, 40 hours per week). The Court also found that the level of control exercised over the plumber was indicative of a worker relationship. This case highlights the continued relevance of case law which has been emerging over decades to considerations of employment status in the gig economy era.
The reality of the relationship
Tribunals are showing a willingness to look behind the contract and establish the reality of the relationship (following the principles of the Supreme Court in Autoclenz v Belcher). In the case of Dewhurst v CitySprint, the Employment Tribunal found that the tender document provided to couriers (an electronic tick list pointing towards self-employed status) did not reflect the reality of the situation and Ms Dewhurst was found to have worker status. The Tribunal confirmed it was necessary to look at the true relationship which involved a high level of integration and a lack of autonomy. The case of Aslam and others v Uber BV and others (which is being appealed to the Employment Appeal Tribunal) produced a similar result with the taxi drivers being found to be workers by the Employment Tribunal.
A holistic approach
The First Tier Tax Tribunal cautioned against using a checklist approach and confirmed that it is necessary to evaluate the whole picture in the case of RS Dhillon and GP Dhillon Partnership v HMRC. Taking a holistic approach has been endorsed in many of the recent cases rather than the more simplistic checklist method. That is not to say the principles behind the checklist approach are irrelevant, they still count and must be applied but it is the overall picture that has to be assessed rather that totting up the number of ticks on a checklist. Difficult for those craving certainty.
So what are the themes? Control, personal service, integration, in business on own account, substitution, autonomy and mutuality of obligation are certainly key. However, there is an additional (and rather intangible) requirement to step back and look at the whole picture.
With a record breaking 4.79 million people self-employed, the recent case law and the UK’s exit from the EU it is unsurprising the Government has commissioned not one but two reviews considering first the future world of work and additionally modern employment practices (the Taylor Review). The Department for Business, Energy and Industrial Strategy (BEIS) has recently published a two year old report to help inform the Taylor Review. The executive summary arguably confirms what many commentators are thinking – that the solutions presented are “highly complicated, would take years to deliver and could create new issues of their own”.
The inquiry into the future world of work is focusing on the definition of worker, rights of workers/agency workers/self-employed individuals, zero hours workers and potential trade union representation for those working in non-traditional employment roles. The Taylor Review will consider the rights and responsibilities of workers as well as employer freedoms and obligations.
The gig economy concept is undoubtedly gathering momentum. The traditional job model of working nine until five, Monday to Friday, for one employer (maybe two!) over a whole career is arguably something from the past. We want flexibility, we want to work when we want to work and we want autonomy. Or so we are told. With business demanding a more flexible workforce, the Government has to keep up with the commercial reality and ensure that workers are adequately protected in the new gig economy, whilst not obstructing business growth.
If you need further advice or would like us to carry out an audit of your contracts in light of current developments in employment status, please contact:
Kirsty Rogers, partner, employment
Jon Keeble, partner, employment
Helga Breen, partner, employment