The so called 'gig economy' continues to grow at a rapid pace. According to a report published on 28 June 2019 by the Trades Union Congress and Foundation for European Progressive Studies, the gig economy has doubled in size since 2016 with gig platforms now employing one in ten adults.
The end of 2018 saw a flurry of litigation involving industry leaders, such as Uber, Deliveroo and Addison Lee. The crux of each case was whether individuals who undertake the work should be considered employees, workers or as self-employed under UK law (an important distinction in determining the employment rights available to them, as well as their tax obligations).
While not entitled to all the protection given to employees, 'worker' status grants the individual a variety of employment rights unavailable to the self-employed, including protection from unlawful deduction from wages, the right to the national minimum wage (£8.21 per hour from 1 April 2019 for people aged 25 and over), and the right to 5.6 weeks of paid holidays per year under the Working Time Regulations.
Clearly many people working in the gig economy are keen to obtain worker status, while the associated cost may be seen by gig businesses (including ride-hailing businesses) as a burden given their argument that the people working through their platforms are self-employed.
2019 has brought further developments. In January, parcel delivery firm Hermes announced a new scheme designed to address the concerns of its workforce head on. It allows its couriers to opt in to Hermes's 'self-employed plus' model, providing them some of the rights of workers in exchange for sacrificing some working flexibility while remaining contractually self-employed.
Developing law
Uber (Uber BV v Aslam)
Uber received a number of claims from its drivers for unlawful deduction of wages (because they had not received the national minimum wage to which they believed they were entitled as workers) and for paid annual leave. This case is due to be heard by the Supreme Court.
Uber argues that its drivers are self-employed. Rather than acting as employees or workers, the company says these individuals provide services to customers by virtue of holding a licence to use Uber's app. It points to the contracts in place, and the fact its drivers own or hire their vehicle and are free to choose when they work. So far, however, those arguments have not succeeded.
In December 2018, the Court of Appeal ruled against Uber, upholding the previous judgments of the employment tribunal and Employment Appeal Tribunal in determining that drivers operating through the company's platform are workers, and not self-employed contractors who provide services through a contract directly with passengers.
A majority of the Court of Appeal also found the written documentation did not reflect the practical reality of the working relationship between Uber and its drivers, and could therefore be discounted in accordance with landmark employment case of Autoclenz Ltd v Belcher.
Uber has been granted permission to challenge the decision in the Supreme Court, and it will be encouraged by the fact the Court of Appeal was not unanimous in its verdict.
Of particular interest was the practice of so-called 'multi-apping': the rise in the number of ride-hailing apps makes it possible for one individual to be logged into more than one app (and appearing to be available for work) through more than one platform at the same time.
The drivers argued working time should include all time spent logged onto an app waiting for jobs, whereas Uber said the clock should start only when the driver had accepted a job.
Two of the three Court of Appeal judges found that the drivers were to be regarded as working during any period when they were within their territory, had the Uber app switched on and were ready and willing to accept trips.
Lord Justice Underhill disagreed. He found no conceptual difficulty around a worker being in a contractual relationship with two employers at the same time, but he found it harder to accept that the worker could be available for work and carrying out duties for both at the same time, or how the same period of time could be counted twice and effectively result in an individual receiving the national minimum wage from two employers.
Drivers who refuse jobs are liable to be logged off for a period of time if they reject, or accept but then cancel, too many trips. Unlike the other judges, Lord Justice Underhill did not believe this implied a positive contractual obligation on drivers to perform a minimum number of trips, nor that workers should only be treated as working from the moment that they accept a particular job.
In his dissenting judgment, he was careful to say that what he terms the broader considerations at issue, are for Parliament rather than the courts to address as an issue of public concern.
The Supreme Court's decision will be eagerly awaited, considering the split decision of the Court of Appeal which suggests uncertainty in the current tests. Any deliberations by the Supreme Court may also influence the prospective 'clarification legislation' promised in the Good Work Plan.
Deliveroo (Independent Workers Union of Great Britain) v Central Arbitration Committee and Roofoods Ltd t/a Deliveroo)
In 2017, Deliveroo won a ruling by the Central Arbitration Committee (an authority dealing with union recognition) that its riders are not workers, but actually self-employed, meaning they would not be entitled to join a union and benefit from collective bargaining.
Central to Deliveroo's argument, which was accepted by the CAC, was its claim that riders are not required to 'personally' perform the work. Rather, they have an unfettered right to substitute others for the job they have already accepted, or are yet to accept. The riders' autonomy and degree of choice was also an important consideration for the CAC. Through Deliveroo's app, a rider can choose which deliveries to accept or reject, and is able to decline a job even after it has been accepted.
In 2018, the IWGB union, representing a number of Deliveroo's riders, unsuccessfully appealed against the CAC's decision in the High Court. The High Court agreed with the CAC's conclusions, holding that Deliveroo's riders are self-employed and cannot form a collective bargaining unit. It judged that riders' entitlement to 'pass on' a job to a fellow rider – or abandon it altogether – meant they could not be categorised as either 'workers' or 'employees'.
This decision means that many platform services and other businesses will want to consider adding (and operating) a substitution clause into their contracts, bearing in mind whether the advantages of a self-employed workforce, with a right to ask others to provide services in their place, outweighs the risk that customers will perceive safety or reliability to have been impacted. The clause needs to be realistic and reflect the genuine working arrangement.
For ride-hailing services, this type of contractual arrangement may be difficult since their regulatory and licensing requirements set specific limits on who is permitted to pick up or to drive passengers, and where those drivers may operate, reducing the scope of any substitution clause.
Addison Lee (Mr M Lange and Others v Addison Lee Ltd)
Three drivers for Addison Lee brought claims in an employment tribunal against the company for unpaid holiday pay and the national minimum wage. The tribunal found the drivers were in fact workers and entitled to these payments.
In reaching this decision, the court took into account that, in practice, there was sufficient mutual obligation on Addison Lee and its drivers to offer and accept work, respectively. Its drivers, for example, would need to work 25-30 hours per week to meet the fixed costs of hiring the Addison Lee branded vehicle, so naturally there existed an expectation of a minimum amount of work to be provided and accepted to meet these costs.
The tribunal did not accept Addison Lee's argument that the language within their contracts ensured that their drivers were independent contractors, providing them with complete flexibility as to what days and hours to work, with nothing contractually obligating them to accept work.
On 14 November 2018, the Employment Appeal Tribunal upheld the employment tribunal's decision. It found the tribunal was entitled to take a "realistic and worldly approach" to the facts of the case and having done so, found the contractual documentation did not reflect the reality of the situation.
Differing slightly from Uber and Deliveroo's app-based service, Addison Lee provides its drivers a handheld device called the XDA. When drivers are ready to work, they log onto the system which then allocates them work according to their location. They are then expected to accept work offered to them, and are required to provide an acceptable reason for refusing. The company may levy sanctions on drivers if these are not deemed reasonable.
The Employment Appeal Tribunal found that in practice, there was a worker-employer relationship, with Addison Lee required to provide work and their drivers required to accept it, taking into account the time and money spent by drivers in training and hiring the vehicles, as well as the threat of sanctions for turned down trips.
Pimlico Plumbers (Pimlico Plumbers Ltd and another (Appellants) v Smith (Respondent)
Although Pimlico Plumbers (a London based plumbing firm) is not a ride-hailing or delivery platform, the Supreme Court and the courts beneath it were required to apply the same established tests, making it highly relevant to such companies.
This case concerned Gary Smith, a plumbing and heating engineer, who solely contracted with Pimlico Plumbers on terms stating he was an independent contractor. After suffering a heart attack and having to reduce his hours, his contract was eventually terminated by the firm, which led to him make claims for failure to pay holiday pay, unlawful deductions from wages and disability discrimination. For entitlement to these, he required 'worker' status.
The Supreme Court ruled in Mr Smith's favour, finding that he was in fact a worker. To reach this point the courts applied the worker status tests, considering the level of control Pimlico exercised over its workforce, and the mutuality of obligations on both Mr Smith and the firm. It paid particular attention to Mr Smith's limited right of substitution.
Although staff did often substitute themselves for others in the performance of tasks, it was only with other contractors of the firm. The wording of their contracts and manuals also emphasised that it was their personal service which was required.
For a deeper dive into the background of this case as well as our insights into what it means for businesses, you can find our previous article here.
Hermes – Self-Employed Plus
In an innovative attempt to provide some middle ground between the 'all or nothing' position which currently exists between classifications of 'self-employed' or 'worker' in relation to employment rights, the delivery company Hermes agreed a new model of work with the GMB union in January 2019.
Those delivery drivers who opt in to 'self-employed plus' status are entitled to 28 days of paid leave and pay of at least £8.50 an hour. In return, they agree to follow prescribed delivery routes (ensuring the most efficient route is taken).
Good Work Plan
In the Good Work Plan published last December, the government threw its hat in the ring in committing to legislative changes to ensure greater clarity to the employment status test, as well as improving online guidance and tools to help individuals and employers make a determination.
We are still awaiting details of the form any legislative changes will take, although the government has said that they will aim to reflect "the reality of modern working relationships".
The new legislation may also attempt to tackle the issue raised by Matthew Taylor, whereby companies claim to include 'substitution' clauses in their contracts despite there being no genuine and unrestricted right to provide a substitute, in order to misclassify or mislead their staff and avoid the rights which accompany worker and employee status.
Recognising that such changes to the test represent a significant challenge, the government has commissioned independent research to help understand the impact they would have on individuals and businesses.
The Good Work Plan also sets out other changes which the government believes will benefit those on temporary or insecure contracts, including a right to request a more stable contract, giving all workers a statement of the terms under which they work and (at least in theory) a stronger enforcement regime under a single enforcement agency, protecting the rights of vulnerable workers.
If successful, this could mean fewer cases being brought by individuals seeking the protection to which they believe they are entitled.
Lord Justice Underhill in the Uber case also stressed the need for Parliament to act, acknowledging that the question of whether those who provide services through platforms such as Uber's should enjoy some or all of the rights and protections of worker status is "a very live one at present".
His conclusion that in this case the drivers are not workers "does not depend on any rejection of that view", and is based simply on what he believes to be the correct construction of the current legislation. If there is inadequate protection, especially where one party has superior bargaining power over the other, "the right answer is to amend the legislation".
Employment status remains a significant and pressing issue across the economy. It is unfortunate that, two years on from the findings of the Taylor Review (which led to the government's Good Work Plan), businesses considering the structure of their workforce are still searching for answers in case law.
What does all of this mean for ride-hailing businesses?
Despite the technological differences, the courts have seen Uber and its competitors in the same light as traditional mini-cab companies. They have shown a tendency to find an employer-worker relationship although there have been opposite findings and judgments.
If a business identifies certain individuals as independent contractors, rather than workers or employees, it needs to consider whether those individuals are afforded complete freedom to ask someone else to fulfil the contract in their place.
The business also needs to pay close attention to the level of control it exerts over its workforce, and the extent of expectations relating to the offer and acceptance of work.
In deciding what the terms of the contract should be, parties in regulated sectors like private hire will find their options may be limited by regulatory requirements such as those of Transport for London.
The reason behind the inclusion of a particular term cannot be taken into account when categorising an employment relationship. The courts and tribunals will look at the sum of the agreement, and will not discount those terms which are required by regulation.
Flexibility in the relationship between ride-hailing businesses and their drivers can be good for both businesses and the individual, but only if it is truly mutual.
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