Employment status in the UK
The UK recognises three categories of employment status: employees, workers and self-employed contractors, each with varying levels of protection under employment law. Employees are entitled to the full suite of employment rights, while self-employed contractors have very little protection under employment law. Workers who are not employees sit somewhere in the middle and are entitled to core rights such as sick pay and breaks, national minimum wage, statutory holidays and holiday pay. Hermes claimed that their delivery couriers were self-employed and, as such, were not entitled to these core workers’ rights.
The employment tribunal decision
In reaching the decision that the couriers were workers, the tribunal held that:
- The couriers were controlled by Hermes and had an obligation to perform services personally. They were not performing a professional service nor operating a business undertaking for their clients or customers i.e. there was a “dependent working relationship” such that they were not truly self-employed.
- While the couriers had a right to substitute others to perform services for Hermes on their behalf, Hermes retained control over who that substitute was and could veto the courier’s choice of substitute. The couriers also had to ensure that the substitute performed the deliveries to the standard required by Hermes.
- Hermes’ own evidence on the documentation and, in particular, regarding pay negotiations between it and the couriers, was “wholly unpersuasive” and, at times, implausible. The tribunal found that, to the extent any existed, pay negotiation was – in reality – limited and exceptional.
What does it mean for businesses?
This finding is another judgment in a long run of gig economy cases, in which individuals who are ostensibly self-employed have succeeding in their claims that they are, in fact, workers. The reason that Hermes and other companies in the gig economy (Pimlico Plumbers, City Sprint, Addison Lee etc.) are fighting these status cases so hard is that misclassification is expensive, for both future payments and in respect of past omissions, including for non-payment of holiday pay following the recent ECJ’s decision in the case of King v The Sash Window Workshop Ltd. In that case, the ECJ decided that the right to paid annual leave under the Working Time Directive carries over indefinitely where the employer refuses paid leave, including in the scenario where an individual is incorrectly classified as self-employed.
Hermes has stated in the press that it will appeal the decision, amidst intensified calls from unions and others for changes to the law on employment status. In the meantime, businesses are well-advised to take the opportunity to review the proper status of their arm’s length engagements and to rectify any anomalies, in a bid to stave off future claims.