Gig economy: six key developments

We select some recent gig economy highlights and assess whether some rebalancing of our employment protection law could be on the way.

There is nothing new about casual employment. Equally there is nothing new about divergent opinions about the relative benefits and disadvantages of a flexible labour market.

What is new about the gig economy is its effectiveness and reach. The use of new technology (in particular GPS and smart phone apps) has undoubtedly created a new way of delivering services and with it significant numbers of flexible jobs.

Either way it is a growing phenomenon that has attracted increasing public and political attention and generated a growing conviction in many quarters that “something must be done” to protect vulnerable individuals from exploitation. Debate has focused on whether current employment law (with its three-fold classification of employee, worker and the self-employment) is still fit for purpose, or whether some re-balancing is required.

Taylor Review explores how to promote “good work”

The Taylor Review was commissioned just over a year ago by Theresa May and reported in July 2017. It was the first comprehensive Government-sponsored review of the labour market status for many years.

It made four key groups of recommendations, as follows:

  • Creating financial incentives for employers to provide “good work” – for example remodelling the National Minimum Wage for the gig economy and higher overtime rates for workers on zero hours contracts.
  • Improving protection for workers – for example extending statutory sick pay to workers, changing the rules on continuity of employment and permitting rolled-up holiday pay.
  • Strengthening enforcement – for example launching an on-line tool to determine employment status, expanding the enforcement role of HMRC and reversing the burden of proof in employment tribunal claims where employment status is an issue.
  • Promoting worker engagement – for example extending the scope of the little-used Information and Consultation of Employees Regulations as well as broader proposals on corporate governance.

Joint Select Committee report calls for change

With the decline in the Prime Minister’s personal authority after June’s general election, combined with the distractions of Brexit, many doubted whether any significant steps would be taken to implement the Taylor Review.

However, pressure on the Government is likely to increase following the publication of a joint report from the Work and Pensions and Business, Energy and Industrial Strategy Committees on 20 November 2017. Launching the report, Rachel Reeves MP, chair of the BEIS select committee, and former shadow Secretary of State for Work and Pensions, put it like this:

“Uber, Deliveroo and others like to bang the drum for the benefits of flexibility for their workforce but currently all the burden of this flexibility is picked up by taxpayers and workers. This must change.”

The report makes a number of detailed recommendations which would implement most of the key proposals in the Taylor Review on strengthening rights of individual workers, clarifying the law and improving enforcement.

Employment status discussion paper announced

A few days later, in his Autumn budget, Chancellor Phillip Hammond announced plans to publish a discussion paper “exploring the case and options for longer-term reform to make the employment status tests for both employment rights and tax clearer.”

Although this is stated to be only part of the Government’s response to the Taylor Review, it is thought to be particularly significant that the paper will look at tax and employment rights together. The tax rules on employment status were outside Taylor’s remit. There has been no attempt in recent times to look the relationship between the two different but overlapping sets of rules, though it is widely accepted that the two issues need to be considered together.

A busy year for our employment courts

A number of big names in the Gig economy have been involved in employment litigation over the past year, including Uber, Deliveroo and Addison Lee.

The stand-out case has been the Employment Appeal Tribunal’s ruling in the Uber litigation on 10 November 2017. This upheld the employment tribunal’s decision that a test group of drivers should be treated as workers, not self-employed contactors as Uber had argued. This ligation has provided a fascinating insight (at least for employment lawyers!) into the detailed network of legal agreements behind the apparently simple app, which around 2 million Londoners have been using.

Although Uber lost the appeal, the EAT made it clear that this was the outcome of an extremely detailed analysis of the precise relationship between the drivers and Uber, and fell short of suggesting that all individuals engaged in the gig economy should be classified as workers. A perfect illustration of this point came a few days later, when the Central Arbitration Committee announced its decision about a union recognition application made on behalf of a group of Deliveroo riders.

In order to proceed with a union recognition application, the Independent Workers’ Union of Great Britain needed to establish that the riders it was representing were workers. It failed to do so because, in changes to terms and conditions which Deliveroo implemented shortly before the hearing, it had given its riders what the CAC accepted was a genuine right of substitution, meaning that they were under no obligation to work personally.

The European Court of Justice weighs in

At the time of writing the most recent development of 2017 was a decision of the European Court of Justice on 29 November. While not directly about the gig economy, it confirmed that workers who have been misclassified as self-employed can carry back claims for unpaid holiday pay right to the start of their engagement. In this case, the claim goes back 13 years.

It will be a while before the full impact of this decision on domestic law can be assessed, but unquestionably it increases the risks taken by businesses operating in the gig economy when they engage workers on the basis that they are self-employed.

Top courts to revisit employment status in 2018

We already know that the Supreme Court is due to hear an appeal in the Pimlico Plumbers case in February next year, in which the plumbing business concerned will be challenging a ruling that the individuals it engages are not self-employed. It is also possible that the Court of Appeal will hear Uber’s appeal from the EAT decision by the end of 2018.

Both these cases are examples of the employment tribunal adopting a painstaking analysis of the details of the terms of engagement and coming up with a decision that has been upheld on appeal to the EAT, although arguably in each case the decision could have gone the other way.

As the law stands at present, there is no simple test to distinguish a worker (who is entitled to basic rights like paid holiday and the National Minimum Wage) from an individual who is self-employed and entitled to no employment-related rights at all. Instead the courts look at a range of factors including the degree to which the individuals are integrated into the business which engages them and the degree of “true independence” in the delivery of the service.

If the opportunity arises, it will be interesting to see whether the Supreme Court confirms – as is widely expected – that this approach remains correct in the context of the gig economy. If so that would create added pressure on the Government to create some firmer guidelines to make it clearer which side of the line individuals engaged in the gig economy should fall. Alternatively, it could consider adjusting the tax regime to remove some of the advantages that self-employed status confers on individuals and the businesses engaging them. Neither option will be easy to implement.

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Every piece of content we create is correct on the date it’s published but please don’t rely on it as legal advice. If you’d like to speak to us about your own legal requirements, please contact one of our expert lawyers.

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