Working in the gig economy
The working world has been changing for some time now, with companies in a range of sectors increasingly adopting business models based on the use of freelancers and short-term contracts rather than permanent full-time employment. The phrase that has been coined to describe this trend is the gig economy. It is a way of working that has been adopted for a long time in the construction, media and IT industries and which is increasingly being used by software platforms such as Uber, Deliveroo and AirBnB.
By asking people to work for you on a self-employed basis it is possible for a business to dramatically cut its operating costs. However, as Uber have been discovering since they first found themselves in front of the employment tribunal, careful attention is needed to ensure that the label you give a person truly reflects their status. If businesses fail to do this, it could end up costing them a lot of money.
In this article, we look at the issues surrounding the gig economy and consider the implications of the Uber litigation.
The importance of employment status in the gig economy
An individual’s employment rights will depend on their status, as defined in employment legislation. At one end of the spectrum you have employees, who are entitled to benefit from the full set of rights afforded by the law. At the other end of the spectrum you have self-employed contractors, who are given very few legal rights. There is then a third category of worker who exists somewhere in between the two extremes.
Someone who falls into the category of ‘worker’ will not be protected against unfair dismissal and will have no right to a redundancy payment. However, they will have the right to be paid the national living wage, to take statutory breaks, to have paid annual leave, to benefit from enrolment in a pension and to benefit from whistle-blowing and wages protection.
Working out which category an individual falls into is no easy task because it depends on the specific features of the relationship. You can give someone a label but if the reality of what they are expected to do on a daily basis does not match that label, or the job description set out in their contract, it is likely to be challenged if a problem arises and the matter ends up before an employment tribunal.
What happened in the Uber case?
Uber alleged that their drivers were self-employed contractors offering services to passengers through Uber’s app. There were documents to support this, but these were found by the employment tribunal to be fictions and not reflective of the actual working arrangements, or Uber’s own publicity material. They were also not reflective of submissions to the London Assembly’s Transport Committee where Uber said that they paid their drivers on a commission basis and that they would potentially create tens of thousands of jobs in the UK.
The employment tribunal pointed to the ways Uber controlled its drivers, including:
setting the fares and routes;
making the offer and acceptance of trips subject to Uber’s terms;
logging a driver off the Uber app for cancelling trips;
monitoring drivers’ performance;
handling passenger complaints; and
imposing numerous obligations on drivers, such as the required condition of vehicles used.
All of these factors pointed to the drivers being workers under Uber’s control as opposed to self-employed contractors with personal autonomy. The higher courts have so far agreed with the employment tribunal’s decision.
What are the potential implications of the Uber decision?
As a result of the employment tribunal’s decision, Uber now faces having to change its contracts and working practices, runs the risk that other drivers claim workers’ rights and/or that HMRC seek employers national insurance contributions on payments they have made to drivers (of 13.8%). These liabilities could be very significant indeed, even for a business of Uber’s resources.
The UK courts have repeatedly made it clear that they will not be fooled by labels and will be equally unimpressed by documentation that sets out a business’s preferred version of its relationship with those who provide it with labour, but which does not reflect reality.
If you use self-employed contractors, you need to examine the relationship between you and them to ensure that their self-employed status will stand up to scrutiny. With the help of your solicitor, it may be possible to change working arrangements to reduce the risk of a self-employed contractor gaining worker status. However, you need to be alive to the fact that both the employment tribunal and the government, through a number of recently launched enquiries, are looking at the gig economy closely and will not allow employers to exploit perceived gaps in the employment legislation to cut costs, particularly where this is damaging to individuals.