Is your food business exposed to the use of agency and contract workers? What is their legal status? 3 key factors to consider

The UK has a ‘3-tiered’ employment status framework, broken down by employee, worker and those that are self-employed.

The growth of the gig economy has provided a renewed focus on the division between self-employed individuals (who have no employment rights) and those with the intermediate ‘worker’ status, which confers a more limited range of rights than those enjoyed by the last and most protected category, employees.

This is a fast moving area of the law and we look below at the key issues that have arisen from recent case law.

Worker or self-employed?

Unlike employees, ‘workers’ are not protected against unfair dismissal and are not entitled to statutory redundancy payments. However they share a considerable range of rights with employees including protection from discrimination, and the right to paid holidays and the national minimum wage. While there is no equivalent intermediate status under tax law, there remain strong financial incentives for businesses to classify individual contractors as self-employed where this is legally permissible.

Why Uber is uber-important

By far the most prominent of recent cases on worker status has been the decision from the Supreme Court in the Uber litigation last year. This was about a group of taxi drivers using the Uber app, who wanted to establish that that they had ‘worker’ status, rather than being ‘self-employed’, in relation to the network of companies which operate the app. After successive appeals by Uber against the employment tribunal’s decision that they were workers, the Supreme Court finally ruled that the tribunal had been entitled to reach that conclusion.

This decision is about a specialised corner of the gig economy and doesn’t say that in different circumstances a tribunal would necessarily reach the same conclusion. What is universally significant, though, is the approach the Supreme Court took when endorsing the employment tribunal’s decision. It reminded tribunals that they should assess the situation on the ground, and not place too much weight on the documentation drawn up by the employers and their lawyers. It also emphasised that they should approach employment protection legislation with its purpose in mind and stressed the importance of the provisions which state that wording in legal agreements which seeks to exclude or limit employment rights is of no effect.

Three key factors which point towards ‘worker’ status

Many relationships with casual workers operate on the assumption that these workers are self-employed. There is no one single factor which is definitive, but if the following three elements are present, the individual may well be found to be a worker if they challenge their status in the tribunal:

  1. Control: if the employer maintains a high degree of control over how the work is done, that points towards worker status. In Uber for example, drivers were supposed to follow the route dictated by the app, rather than use their own knowledge
  2. Integration: if an individual performs a function which can be regarded as integral to the employer’s business, they are more likely to be regarded as workers than those who supply add-on services that are not part of the core business
  3. Economic subordination: workers who take a degree of financial risk (for example by setting the price for a particular job, or supplying their own equipment or materials) are more likely to be found to be self-employed than those who provide labour only, particularly if this is for a single employer

Who is the employer?

The legal definition of ‘worker’ requires a legally binding contract between the individual and the person to whom their labour is supplied. That means that, at least before the Uber decision, a business using agency workers could be sure that these workers would not be able to claim that they had an employment relationship with that business, whatever their precise relationship with the agency supplying their labour.

That principle has become less clear-cut since Uber, particularly where personal service companies are concerned.  Adopting a traditional approach, individuals supplied via service companies should not become workers or employees of the end user, any more than if they had been supplied by an employment agency. That may change in future cases, particularly if the tribunal concludes that the use of a personal service company was an artificial device, designed to ensure that the individual did not secure the rights to which they would otherwise have been entitled.

Will the law get any clearer?

The necessity of applying the law on a case by case basis means it is unlikely there will be any further clarity for businesses, at least not in the short to medium term.

The Government responded to a consultation this summer about simplifying the law in this area, concluding that it would be too complex and disruptive in the current economic climate.  However, new guidance was published in conjunction with this response stating the intention of summarising employment status case law into one place for businesses and individuals to access Employment status and employment rights - GOV.UK (www.gov.uk). But unfortunately, that it not the same as making the law simpler or clearer.

The Mills & Reeve employment team will however be able to provide greater insight on the practical application of the law to your business. Please contact Stuart Craig on Stuart.Craig@mills-reeve.com or Charles Pigott on Charles.Pigott@mills-reeve.com for further assistance.

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