7 months ago on 19 February 2021, the Supreme Court handed down its long-anticipated judgment in the case of Uber BV and others v Aslam and others. The Uber drivers were contracted as self-employed but sought to establish worker status in order to benefit from national minimum wage and paid holiday entitlement. The judgment confirmed that Uber drivers who were engaged under ‘partnership agreements’ and portrayed as self-employed were actually workers for the purposes of English employment legislation. They were therefore entitled to receive national minimum wage and annual paid leave for 2 years.
The case centred around the vexed question of employment status and in particular, what is a “worker” for the purposes of the Employment Rights Act 1996.
English employment law recognised 3 main types of employment status:
3. self-employed or freelancer
The employer’s labelling of the relationship is not definitive of what it actually is. The appropriate status applicable to any particular individual is currently determined by looking at the legally recognised definitions of each status, the contract and where there is a dispute as to the genuineness of a written term, the facts of the relationship between the individual and their “employer” (Autoclenz Ltd v Belcher and others ).
The term which is most commonly used incorrectly is ‘self-employed’. There are obvious reasons why an employer would want to call an individual self-employed. It’s cheaper and less complicated, the self-employed don’t benefit from statutory protections such as national minimum wage, sick pay, paid holidays, or pension auto-enrolment. Also, the employer does not have to pay employer’s National Insurance contributions (13.8%) above the secondary threshold which for the 20/21 tax year is: £169 per week or £732 per month.
The Uber case highlights that it is not always clear whether an individual is self-employed or is, in fact, in the more protected category of worker.
A worker is defined by the Employment Rights Act 1996 as someone who works under
(i) a contract of employment, or
(ii) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract, whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual.
The secondary limb (ii) of the definition of a worker consists of two elements:
• The individual must be obliged to do the work personally (i.e. do it himself or herself); and
• The person, for whom the work is done, must not be a client or customer of a business being run by the individual (not in business on their own account).
In considering contractual arrangements, the Employment Tribunal (ET) takes into account the relative bargaining power of the parties, because organisations which are offering work or requiring services to be provided by individuals are frequently in a stronger position to dictate the written terms which the other party has to accept. Therefore, in the employment context, it may be legitimate to disregard express contractual written terms where they do not describe the ‘true agreement’, even when the parties believe the contract was a true reflection of their respective obligations. This means an express written right under a self-employed or freelance contract to substitute another person to do the work needs to be a genuine reflection of the true agreement between the parties, otherwise the reality of the situation will prevail.
If an individual is obliged to do work personally, he/she will not be a worker if the other party to the contract (for whom he/she is doing the work) is a client or customer of his/her profession or business undertaking. It is common within the Arts and Culture sector for those engaged to have their own limited company or be genuinely registered as self-employed filling an annual self-assessment tax return.
Not all those who might properly be described as ‘self-employed’ are engaged in a business undertaking. In distinguishing between employees, workers and self-employed or freelancers (those engaged in a business undertaking of their own) the Courts must try to determine whether the essence of the relationship is that of:
• A worker; or
• An independent contractor who is in business on his own account, even if only in a small way.
Although there is no test of universal application, it will often be appropriate and helpful to apply the ‘integration test’, i.e. to consider whether:
• The individual actively markets his/her services as an independent person to the world in general (which would indicate he/she is not a worker); or
• He/she is recruited by the principal to work as an integral part of the principal’s operations (which would indicate he/she is a worker).
This case was always going to be divisive; it highlights the problems with the existing state of the law on employment status and how difficult it is to determine the difference between a worker and the genuinely self-employed.
On 17 December 2018, the government published the Good Work Plan in response to the Taylor Review of Modern Working Practices, a review intended to consider the implications of new models of working (including those used in the gig economy) on the rights and responsibilities of both workers and employers. One of the findings of the review was that the test for worker status needed to be clearer. The government has stated its intention in the Good Work Plan to legislate to improve the clarity of the employment status tests but has not given detail as yet on what this would entail. Perhaps now the pandemic is a little more under control, the Uber case will accelerate the governments considerations and action on this troublesome issue.
What is clear is that employment status is a very important issue. It is a common misconception that the wording of a contract or agreement is definitive in deciding whether someone is employed, a worker or genuinely self-employed. The ETs can look behind the agreement and will assess the working practices and the reality of the situation.
The Uber cases could be extremely significant for businesses in the Arts and Culture sectors who rely heavily on self-employed independent contractors (or freelancers). Although many of those who are engaged are truly self-employed, what is clear is that miscategorised of contractual relationships and incorrect classification of employment status could attract significant liabilities in terms of back pay of holiday pay and sick pay and other attaching statutory rights, if worker status is established.
Future reform of employment status
There have been several investigations into the changing nature of work and the gig economy, primarily the Taylor Review 2018, which have shaped the government’s proposals for reform. In addition, in the light of the 2019 COVID-19 pandemic, the IWGB has written a pre-action protocol letter to the Department for Work and Pensions in which it threatens judicial review proceedings if the government fails to extend EU health and safety at work directives to gig economy workers, not just employees.