The status of those working in the ‘gig economy’, whether they are genuinely self-employed or, in reality, workers or employees with greater employment law rights, has become a highly charged issue – and one increasingly the subject of legal challenge, notably involving Uber, Citysprint and Pimlico Plumbers in recent years. The ongoing review into modern employment practices commissioned by the UK Government, and being led by Matthew Taylor, has also kept the issue in the headlines, with the final report due later this year.

At the heart of the issue is whether the true nature of the relationship between companies and the individuals who provide a service for them is consistent with the self-employed label often used in the relevant contracts. Those in the gig economy may work as couriers, drivers or tradespeople, may wear uniforms, and in many cases are the company’s main interface with its customers. However, they also often work flexible hours and are free to decide when to clock on and off.

In the UK, there are three main categories of individuals in employment law:

Employee: Employees are subject to a personal service obligation (i.e., they cannot appoint a substitute to do their work) and have mutuality of obligation (the employer is obliged to provide work, which the employee is in turn obliged to undertake). Employees also tend to (i) be integrated into the organisations they work for, (ii) be subject to significant control as to when and how they work and (iii) bear limited economic risk in relation to their work. Employees benefit from the widest range of employment law protections. As well as the protections granted to workers (see below), only employees benefit from certain rights including unfair dismissal protection, the right to a statutory redundancy payment and eligibility for various forms of family leave.

Worker: The definition of worker includes all employees but is also much wider by encompassing anyone else working under a contract with a personal service obligation other than individuals providing services to clients in their capacity as a profession or business. Like employees, workers will have some limited form of mutuality of obligation and be subject to significant control, but may be less integrated into the businesses they work for and have more ad hoc working arrangements. Workers benefit from many employment law protections, including the right to the minimum or living wage, paid annual leave and protection from unlawful deductions from wages. However, workers do not have the additional protections only granted to employees.

Self-employed or independent contractor: Very broadly, this describes individuals who are genuinely in business on their own account and provide services to their clients rather than an employer. The self-employed will often work for a number of clients, be autonomous in when and how they work, and bear more economic risk. The self-employed have the least employment law protection and may only benefit from discrimination protection – and only then when they have a personal service obligation.

The employment law status of an individual will always depend on the facts of each case, but the gig economy is an area where purported self-employment has been most open to challenge.

In one of the most recent developments, Deliveroo has revised its agreement with its riders after the House of Commons Work and Pensions Select Committee was critical of some elements of its existing contract. According to news reports, Deliveroo has simplified its supplier agreement and made changes including:

  • Removing a clause prohibiting riders from challenging their employment status at an Employment Tribunal
  • Clarifying that wearing Deliveroo branded clothes while working is not required
  • Stating clearly that Deliveroo riders are at liberty to work for other companies
  • Removing riders’ obligation to give two weeks’ notice to terminate their engagement

Any prohibition on individuals challenging their employment status in the Employment Tribunals will be ineffective in any case, although such clauses are often seen in contracts with the purportedly self-employed. The other changes are certainly a move towards an arrangement which is more consistent with self-employed status. However, as in all cases, what will be critical is how the relationship operates in practice, rather than simply what the contract says. For example, will riders who are available less get offered less work, work at different rates of pay or otherwise be disadvantaged? Other aspects of the relationship can also still play an important part in determining employment law status, including whether individuals have equipment provided for them, are subject to performance appraisals and have conduct and performance issues dealt with under disciplinary and performance management procedures, all of which are more consistent with employee or worker status. Also, where the individual has little or no say in the contractual arrangements they work under, that can be a factor against self-employment status applying.

It is to be expected that changes will be made to engagement terms in many industries to address the recent trend towards looking behind alleged self-employment. This will continue to be an area of interest in employment law as these revised agreements come to be tested in the Employment Tribunals and also if further legislation following the general election and publication of the Taylor Report widens employment protections for those working more casually. The Conservative manifesto promises to act to ensure that the interests of employees on traditional contracts, the self-employed and those people working in the gig economy are all properly protected. The Liberal Democrats say they will modernise employment rights to make them fit for the age of the gig economy, looking to build on the Taylor Report. The Labour Party has committed to clamping down on bogus self-employment by, among other things, shifting the burden of proof, so that the law assumes a worker is an employee unless the employer can prove otherwise, and imposing punitive fines on employers who do not meet their responsibilities. Labour has also said it would extend the rights of employees to all workers if elected.

Reed Smith will be hosting a webinar on working with the new Gig Economy on 5 July.