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17 July 2020

The Gig Economy and the Changing Nature of the Workforce – Lessons for Employers

An upcoming Supreme Court hearing which is taking place remotely on 21 and 22 July 2020 will again consider the nature of Uber’s business model and the classification of their drivers. Are they “workers”? Or are they, as Uber puts it, self-employed “partners”? If they are workers, they should be entitled to holiday pay and at least the national minimum wage, which Uber does not give them, and each driver could be entitled to an average of £12,000 in compensation.

As the Gig Economy continues to increase in popularity, cases such as this highlight the speed at which the nature of the workforce is changing and whether current employment law can keep up with those changes. It also puts into focus the importance of carefully considering the status of the people that work for you.

The Uber Case

The Court of Appeal has already ruled that Uber’s drivers are workers and not self-employed. The factors taken into account were, among others:

  1. While they had the app switched on they were ready and able to accept work.
  2. They had a positive obligation to be available to accept passengers while the app was switched on.
  3. The degree of control that Uber exerted over them and the ratings system used to assess performance.

As workers, they are entitled to basic employment rights including holiday pay and national minimum wage. Simply labelling them as self-employed “partners” did not necessarily mean that that was their status in law.

However, cases such as this always turn on the specific facts of the case – some specific drivers in a specific tech company. The fact is that many people are self-employed in the Gig Economy and they enjoy the freedom and flexibility it brings. However, the inconsistency with the court decisions on the classification of “workers”, and also the different treatment under tax law, is a weakness in the current framework for classifying people who provide services, especially as the nature of the workforce is changing and will continue to change as the trend towards independent contracting and remote-working gathers pace.

Practical Lessons for Employers

If you have self-employed independent contractors working in your business, they will need to fall outside of the definition of “worker” or “employee” pursuant to section 230(1) and (3) of the Employment Rights Act 1996. An “employee” should be fairly easy to classify but a “worker” has a very fuzzy distinction due to the inconsistent case law. If those people you had originally considered to be self-employed turn out to be workers, then there could be large claims for unpaid statutory holiday by your entire workforce. Alternatively, they could be entitled to carry that untaken holiday over indefinitely and be paid in lieu on termination (according to the European Court of Justice’s decision in King v Sash Window Workshop Ltd (C-214/16) EU:C:2017:914).

It is therefore of paramount importance that you keep a watchful eye over your workforce’s status to avoid paying the price of misclassifying them. Perhaps the Supreme Court in the Uber case will take this opportunity to clarify the case-law in this area. Practitioners in this space are keenly anticipating the remote hearing later this month.

Contact us

To find out how Steeles Law Employment team can support you and your business, please do not hesitate to call 01603 598000 or email employment@steeleslaw.co.uk. Appointments are available at our Diss, Norwich and London offices or at your offices by appointment.

*The information provided in this article is designed to provide useful information on the subject, not to provide specific legal advice.

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