Modern working practices
Modern working practices: the future shape of the gig economy
Companies and workers in the gig economy face a rapidly evolving legal landscape in the aftermath of the Taylor review and the rulings in Pimlico Plumbers and Uber.¹
About the author
David Bowden is a Solicitor-Advocate of David Bowden Law®.
On 11 July 2017, Matthew Taylor, chief executive of the Royal Society for the Encouragement of Arts, Manufactures and Commerce, delivered his 116-page report to the BEIS.² Good work: the Taylor review of modern working practices proposes seven steps ‘towards fair and decent work with realistic scope for development and fulfilment’, including the following (page 9):³
- ‘[t]he British way… should be explicitly directed toward the goal of good work for all’.
- ‘Platform based working offers welcome opportunities for genuine two-way flexibility and can provide opportunities for those who may not be able to work in more conventional ways. These should be protected while ensuring fairness for those who work through these platforms and those who compete with them.’
- ‘The law and the way it is promulgated and enforced should help firms make the right choices and individuals to know and exercise their rights.’
- ‘The best way to achieve better work is not national regulation but responsible corporate governance, good management and strong employment relations within the organisation’.
- ‘It is vital to individuals and the health of our economy that everyone feels they have realistically attainable ways to strengthen their future work prospects’.
- ‘The shape and content of work and individual health and well-being are strongly related. For the benefit for firms, workers and the public interest we need to develop a more proactive approach to workplace health.’
- ‘The National Living Wage is a powerful tool to raise the financial base line of low paid workers. It needs to be accompanied by sectoral strategies engaging employers, employees and stakeholders to ensure that people – particularly in low paid sectors – are not stuck at the living wage minimum or facing insecurity but can progress in their current and future work.’
The Taylor review recognised that the gig economy has an important place in the UK. It has helped new businesses to develop, and many individuals valued the flexibility the gig economy could offer them. The review emphasised that this flexibility should not be at the cost of key employment rights. It is important that protections remain in place as this would help to make gig economy jobs 'good work'.
Self-employment and the gig economy inquiry
In April 2017, the Work and Pensions Select Committee published ‘Self-employment and the gig economy inquiry’, which included specimens of the following contracts:
- the Amazon Flex contract;
- the Uber BV driver services agreement; and
- the Deliveroo scooter contract.4
Frank Field, chair of the Work and Pensions Select Committee, said: ‘Quite frankly the Uber contract is gibberish. They are well aware that many, if not most, of their drivers speak English as a second language - they recently lost a court case trying to escape TfL's new English testing rules for private hire drivers - yet their contract is almost unintelligible. And it, like Deliveroo's, contains this egregious clause about not challenging the official designation of ‘self-employed’, when the way they work looks in most ways an awful lot like being employed’.5
In October 2017, after opening an inquiry into the Taylor review, the Work and Pensions committee and the BEIS committee questioned Matthew Taylor on his report, including on how the government should act to ensure rights and fair pay for gig economy workers.
In November 2017, the committees published a joint report A framework for modern employment, which made the following recommendations:6
- clearer statutory definitions of ‘employment’ status, with legislation emphasising the importance of ‘control and supervision’ of workers by a company rather than a narrow focus on a power of substitution in distinguishing between workers and the genuine self-employed;
- legislation to implement a worker by default model which would apply to companies who have a self-employed workforce above a certain size defined in secondary legislation;
- for workers who work non-contracted hours, a premium on their pay above the levels currently set by either the national minimum wage or the national living wage;
- creating an obligation on employment tribunals to consider the increased use of higher, punitive fines and costs orders if an employer has already lost a similar case;
- enabling greater use of class actions in disputes over wages, status and working time;
- extending the existing duty of employers to provide a clear written statement of employment conditions to cover workers (as well as employees) from day one of a new job; and
- introducing stronger deterrent penalties (including punitive fines) for repeated or serious breaches of employment legislation.
In April 2018, the government published its response.7
In February 2018, the Department for Business, Energy and Industrial Strategy (BEIS) published Good work: a response to the Taylor review of modern working practices, which set out the government’s response to Matthew Taylor’s July 2017 review of working practices in the gig economy and a plan of action for taking forward the review’s recommendations.8 Alongside the response, BEIS issued a suite of four consultation papers on the ‘key areas covered by the review’.9
- enforcement of employment rights;
- agency workers;
- measures to increase transparency in the UK labour market; and
- employment status.
Only a few of the review’s recommendations will be the subject of change in the near future. The majority of the recommendations have been the subject of public consultation, and currently the government is analysing respondents’ feedback.
BEIS has given no timetable in respect of implementation. The consultation papers recognised that it is important that individuals who are engaged in flexible and casual work arrangements can still benefit from rights and protections, such as the national minimum wage, holiday pay and paid leave from the first day they start work. The BEIS consultation suggested that these rights should apply, and that it should be made clear that they apply. BEIS plans to extend the right to receive written particulars of employment to all workers from day one of their employment, whereas currently this right only applies to employees that are entitled to the written particulars within two months of starting employment.
In the introduction to the Employment status consultation paper, BEIS describes employment status as being at the ‘heart of both employment law and the tax system’ (page 7).10 BEIS acknowledges that ‘employment status is an important and complex issue that is central to both the employment rights system and the tax system, and so it is important to consider both systems in the round’ (page 9).
However, it seems that BEIS’s proposals set out in relation to the reform of employment status tests will not impact specifically on the employment status tests used for tax or national insurance contributions (NICs) purposes. BEIS makes clear that there are no plans to make changes to Class 4 NICs; however, question 29 asks: ‘Given the current differences in the way that the employed and the self-employed are taxed, should the boundary be based on something other than when an individual is an employee? (page 50).
In addition, question 62 asks: ‘If the terms employee and self-employed continue to play a part in both the tax and rights systems, should the definitions be aligned? What consequences could this have?’ (page 53). This does not indicate that BEIS will make any changes but neither does it rule it out.
Pimlico Plumbers: background to the UKSC appeal
Gary Smith was a plumber who, between 2005 and 2011, undertook plumbing work for Pimlico Plumbers. Pimlico Plumbers had 75 office staff and a bank of 125 contractors (including Gary Smith) that it could call on to carry out jobs for its customers.
Gary Smith commenced ET proceedings on 1 August 2011 claiming that he was unfairly or wrongly dismissed by Pimlico Plumbers, as well as a disability discrimination claim ((2012) 17 April, Employment Tribunal London (South), Employment Judge Corrigan). The Employment Tribunal found as follows:
- Gary Smith was held out to the public by Pimlico Plumbers as being an integral part of its work force;
- he was required to wear Pimlico Plumbers' uniforms;
- he had to drive a van with the Pimlico Plumbers' logo;
- he could only be contacted by customers through Pimlico Plumbers; and
- he had a contract with Pimlico Plumbers, which stated that his normal working hours consisted of a five-day week with a minimum of 40 hours a week.
The ET ruled that Mr Smith was a ‘worker’ within the meaning of Employment Rights Act (ERA) 1996 s230(3)( b) and that his relationship with Pimlico Plumbers was one of ‘employment’ under Equality Act (EqA) 2010 s83(2). The ET decided that it had jurisdiction to consider the complaints of direct disability discrimination; discrimination because of failure to make reasonable adjustments; and in respect of holiday pay (as well as about unauthorised deductions from wages).
Pimlico Plumbers’ appeal in the Employment Appeal Tribunal was dismissed ((1) Pimlico Plumbers Ltd (2) Mullins v Smith [2014] UKEAT/0495/12/DM, 21 November 2014). Subsequently, the Court of Appeal also dismissed Pimlico Plumbers’ appeal ([ 2017] EWCA Civ 51, 10 February 2017).
There were two issues for the Supreme Court, namely, whether Gary Smith was a 'worker' within the meaning of the ERA and regulation 2 of the WT Regs, and whether he was in ‘employment’ within EqA s83(2)( a). (See box below for UKSC judgment in Pimlico Plumbers Ltd and another v Smith [2018] UKSC 29, 13 June 2018).
In addition, Uber London is challenging an EAT ruling that its drivers are workers and entitled to the national minimum wage and working time rights ((1) Uber B V (2) Uber London Ltd (3) Uber Britannia Ltd v (1) Aslam (2) Farrar (3) Dawson and others [2017] UKEAT/0056/17, 10 November 2017) (see below).
In a detailed, reserved, unanimous judgment, Judge Snelson, presiding with lay members Mr D Pugh and Mr D Buckley, ruled that the freelance drivers were indeed ‘workers’ with all the protection that this entailed ((1) Aslam (2) Farrar and others v (1) Uber B V (2) Uber London Ltd (3) Uber Britannia Ltd, 2202550/2015 and others, (reserved judgment of the ET, 21 October 2016 and reasons for the reserved judgment on preliminary hearing sent to the parties on 28 October 2016).¹¹
The ET was ‘struck by the remarkable lengths to which Uber had gone in order to compel agreement’ with its ‘analysis of the legal relationships between the two companies, the drivers and the passengers’ (para 87). The ET said that Uber had resorted in its ‘documentation to fictions, twisted language and even brand new terminology’, which merited a ‘degree of scepticism’ (para 87).
Judge Snelson found as follows:
- Uber London Ltd was the entity that employed the drivers.
- The choice of law clause for the contracts was English not Dutch law.
- A driver was working for Uber when he had the Uber app switched on (even if he was not driving).
- Uber drivers could not be made to work more than the maximum period of 48 hours under the WT Regs.
- Uber drivers were entitled to be paid the national minimum wage.
Uber’s appeal to the EAT was dismissed ((1) Uber B V (2) Uber London Ltd (3) Uber Britannia Ltd v (1) Aslam (2) Farrar (3) Dawson and others [2017] UKEAT/0056/17, 10 November 2017). HHJ Eady QC applied the Supreme Court ruling in Autoclenz Ltd v Belcher and others [2011] UKSC 41, which looked beyond the written contractual terms and instead examined the practical realities of the situation. The judge ruled that the nature of the true agreement between Uber and its drivers had to be determined, and to the extent that the written terms did not reflect reality, they could be disregarded. The judge was ‘satisfied the ET did not err either in its approach or in its conclusions when rejecting the contention that the contract was between driver and passenger and that ULL was simply the agent in this relationship, providing its services as such to the drivers’ (para 116).
Uber London’s Court of Appeal hearing will take place on 31 October and 1 November 2018.
These developments leave those advising businesses operating in this sector with a considerable challenge in trying to navigate a rapidly evolving landscape, and those advising online companies in something of a quandary. Although the focus of the Uber London case was workers’ rights, the decision of the ET involved an attack on all of Uber’s contractual documentation, including that between Uber BV and Uber London, and not simply that between Uber London and the drivers. The ET scathingly lambasted as ‘faintly ridiculous’ the ‘notion that Uber in London is a mosaic of 30,000 small businesses’ (para 90).
Although the outcome of this case will be of greatest interest to those working in human resources and to employment lawyers, it does not end there: those drafting and negotiating IT contracts with online platforms will need to dissect its ultimate outcome to ensure that future contracts are watertight.
There remains a lack of clarity surrounding the definitions of ‘employee’, ‘worker’ and ‘self-employed'. However, the overarching themes of control and integration in recent cases suggests that those wishing to utilise a gig economy model may need to consider a lighter approach when it comes to drafting contracts.
Employers must ensure that the reality of the arrangement is consistent with the documentation. Where extensive provisions govern dress codes, equipment usage, working hours and billing/invoicing systems, or where individuals are subject to company disciplinary and grievance procedures, those persons are more likely to be considered employees or workers. The less control exercised by the company, and the less integrated an individual is into the daily operations of the business, the more likely they are to be considered self-employed.
The tax and national insurance position does not mirror this under employment law. HM Revenue and Customs has only two categories for the purposes of the pay-as-you-earn system: employee and self-employed. If an individual is self-employed for tax purposes, it does not necessarily follow that they are self-employed for the purposes of employment legislation.
This appeal considered whether the respondent was a ‘worker’ within the meaning of the Employment Rights Act 1996 and the Working Time Regulations (WT Regs) 1998 SI No 1833 reg 2.
Between August 2005 and April 2011, the respondent, who is by trade a plumbing and heating engineer, did work for Pimlico Plumbers Ltd. In August 2011, the respondent issued proceedings against Pimlico and Mr Mullins in an employment tribunal, alleging that he:
- had been an 'employee' of Pimlico under a contract of service within the meaning of the Employment Rights Act 1996 s230(1), and as such he complained, among other things, that Pimlico had dismissed him unfairly contrary to ERA s94(1) of it; and/or
- that he had been a 'worker' for Pimlico within the meaning of section 230(3) of the ERA, and as such he complained that Pimlico had made an unlawful deduction from his wages contrary to section 13(1) of it; and
- that he had been a 'worker' for Pimlico within the meaning of WT Regs reg 2(1), and as such he complained that Pimlico had failed to pay him for the period of his statutory annual leave contrary to reg 16 of the WT Regs; and
- that he had been in Pimlico’s 'employment' within the meaning of the Equality Act (EqA) 2010 s83(2)( a), and as such he complained that both Pimlico and Mr Mullins had discriminated against him by reference to disability contrary to section 39(2) of EqA and had failed to make reasonable adjustments in that regard, contrary to section 39(5) of the EqA.
The employment tribunal decided that the respondent had not been an 'employee' of Pimlico under a contract of service, and it further held: (a) that he had been a 'worker' within the meaning of section 230(3); (b) that he had been a 'worker' for Pimlico within the meaning of reg 2(1) of the WT Regs; and (c) that he had been in Pimlico’s 'employment' within the meaning of EqA s83(2)( a). Were the decisions on these three threshold issues to be upheld, the result would be that the respondent could proceed with the complaints referred to above.
Pimlico brought an appeal against the tribunal’s three further decisions to the EAT, which was dismissed, and a further appeal to the Court of Appeal, which was also dismissed. Pimlico appealed to the Supreme Court, which was in substance a further inquiry into the entitlement of the tribunal to have made the three decisions referred to above. Pimlico argues that the tribunal’s reasoning in support of them was inadequate, and it asks the court to set them aside and to direct the tribunal to reconsider the three threshold issues.
The Supreme Court dismissed Pimlico’s appeal, with the result being that the substantive claims of the respondent as a limb (b) worker could proceed to be heard in the tribunal. It was necessary for the respondent to have undertaken to personally perform his work or services for Pimlico, and the company be neither his client nor his customer.
- This summary is reproduced with kind permission of UKSC Blog. Please note that the full judgment of the court is the only authoritative document, available at: www.supremecourt.uk/cases/docs/uksc-2017-0053-judgment.pdf
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1 (1) Uber B V (2) Uber London Ltd (3) Uber Britannia Ltd v (1) Aslam (2) Farrar (3) Dawson and others [2017] UKEAT/0056/17 and Pimlico Plumbers Ltd and another v Smith [2018] UKSC 29 2 Available at: https://tinyurl.com/yaf4fk5e
3 See note 2, page 110, and see BEIS press release, ‘Government employment practices reviewer outlines ‘7 principles for good quality work for all’, 11 July 2017 available at: https://tinyurl.com/yblu72yb
4 Available at: https://tinyurl.com/y9beu865
5 Gig economy contracts ‘unintelligible’, contain questionable clauses’, available at: https://tinyurl.com/ybtwmpcg
6 House of Commons Work and Pensions and Business, Energy and Industrial Strategy Committees: A framework for modern employment. Second report of the Work and Pensions Committee and first report of the Business, Energy and Industrial Strategy Committee of Session 2017–19 Report, HC 352, 20 November 2017, available at: https://tinyurl.com/y7f5ul4y
7 Available at: https://tinyurl.com/ycmwom9q
8 Available at: https://tinyurl.com/yadyxzxp
9 See BEIS policy paper ‘Government response to the Taylor review of modern working practices’, 7 February 2018, available at: https://tinyurl.com/y9utlj56
10 Available at: https://tinyurl.com/ybhzdyda
11 Available at: https://tinyurl.com/y7gtcbcs and at: https://tinyurl.com/y8psthtb respectively