How Will The Law Define Self-Employment In 2018?

The landscape of work is changing rapidly, of that there is no doubt.  Technology has enabled huge numbers of people to work from the comfort of their own home rather than trudge into the office five days a week.  In addition, the opportunities for self-employment have grown exponentially, providing employers and employees with flexibility unheard of ten years ago.

This societal change has led to the creation of the so-called ‘gig economy’.  This is loosely defined as a structure whereby, rather than being paid a salary and being tied to one employer, workers are self-employed and paid per job (‘gigs’).

Approximately 15% of people are self-employed in the UK; however, this does not represent the number working in the gig economy.  Many of this 15% are employers themselves.  The research website, ‘Full Fact’, estimates if you remove this group from the figures, around 12% of the population gets their work via gigs[1].

So, is this trend towards self-employment being forced on people?  Statistics refute this[2].  It seems most people who are in self-employment are working this way by choice and are happy.  However, the rise of the gig economy has caused tension between some employers and workers because, as is the case of most cultural shifts, the law lags behind changing reality by many years.

The test cases – Uber and Addison Lee

The Employment Tribunal and the Employment Appeals Tribunal this year heard two pioneer cases challenging the sometimes-murky waters of what constitutes self-employment.  In both cases, involving taxi companies, Addison Lee and Uber, the employer lost.

In Addison Lee’s case, three workers took the minicab company to the Employment Tribunal.  They all claimed they earned as little as £5 per hour as self-employed contractors.  The Tribunal ruled they should have been treated as employees and paid the minimum wage of £7.50 per hour plus holiday pay.  The Tribunal ordered the company to backpay the workers the amount they were owed.

The Tribunal reached its decision after hearing that drivers at Addison Lee had to accept jobs once logged on to the company’s booking system, comply with a dress code and a code of conduct that, among other things, stated that customers should be asked if they had a favoured route. They were also told they must not “pull away” from a job without the permission of the control base, again suggesting they were not self-employed.

Employment Judge David Pearl ruled that “the drivers were not in any realistic sense contracting with Addison Lee”, rather “they were in a subordinate position”.

In October, the Employment Appeal Tribunal added a further blow to companies employing workers on a self-employed basis when it rejected app company Uber’s appeal relating to a decision last year which held its drivers were employees, not self-employed as the company alleged.

The Employment Appeal Tribunal had to look at the wording of section 230(3)(b) of the Employment Rights Act which reads:

“(3) In this Act “worker” (except in the phrases “shop worker” and “betting worker”) means an individual who has entered into or works under (or, where the employment has ceased, worked under)—

(a) a contract of employment, or

(b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual;”

The Tribunal stated that just because the parties had used the language of self-employment did not mean that the contract did not fall within s.230(3)(b).

Ultimately, it was held that Uber and its drivers had an employer/employee relationship due to several factors:

  • all drivers faced an interview when being recruited
  • drivers are forced to accept trips and can be logged off the system if they cancel a trip
  • Uber decides the fares and the passenger and driver cannot renegotiate the rate between them
  • Uber hold insurance against risk of loss; in cases of genuine self-employment, the driver would be liable for any loss and have their own policy
  • Uber can vary a driver’s terms and conditions
  • any complaints are dealt with by Uber, including complaints about the driver themselves

What these cases mean for employers

There is little doubt that at some point, Parliament will pass legislation to protect those who straddle the grey area between self-employed and employed.  In October 2016, Prime Minister, Theresa May, ordered a review of workers’ rights in a move set to pave the way for the self-employed and temporary employees to be protected by new laws[3].

To prevent the possibility of being liable for back-payment of certain benefits, employers who are thinking of taking on a worker in a self-employed capacity would be wise to check with a legal expert that the relationship they are entering into would be viewed, in the eyes of the law, as one of a self-employed contractor doing work for your company.

As the law develops in this area we will continue to keep you up to date, so keep checking back to our weekly blogs to stay informed.

Bennett Griffin is an award-winning law firm based in West Sussex with offices in central Worthing and Ferring.  Our experienced and specialist solicitors offer a comprehensive service and will work with you in an honest, considered and practical manner.  Our employment law department is able to advise and assist you in relation to all employment matters.  Please contact us on 01903 229 999 or by email at info@bennett-griffin.co.uk for more information.

The information contained in this article is for general guidance only and is not intended to be legal advice. Professional advice should always be taken on the application of the law in any particular situation.

[1] https://fullfact.org/economy/whos-working-gig-economy/

[2] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/articles/trendsinselfemploymentintheuk/2001to2015

[3] http://www.telegraph.co.uk/news/2016/09/30/theresa-may-paves-way-for-self-employed-and-temporary-workers-to/