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17th November 2017

Deliveroo defeats claim that riders are workers by issuing new contracts

17th November 2017

Deliveroo defeats claim that riders are workers by issuing new contracts

Tabytha Cunningham

Posted: 17th November 2017

T: 023 8048 2135

E: Email Me

It’s been an interesting week for the gig economy. On Monday Uber faced a defeat in the Employment Appeal Tribunal, which found that its taxi drivers were workers. Demonstrating the uncertainty in this area, in contrast, Deliveroo have now successfully demonstrated that its delivery riders are not workers.

The key difference in the decisions is the contractual terms. Just weeks before the hearing in the Deliveroo case, Deliveroo issued new contracts to its riders, giving them more flexibility and the clear right to engage a substitute, allowing them to ask a friend to fill in for them if needed.

Although it was acknowledged that this right was rarely used in practice, this right of substitution was found fatal to the claim that Deliveroo riders were workers.

The facts of the Deliveroo case

The Deliveroo case was brought by the Independent Workers Union of Great Britain (IWGB). It had asked Deliveroo to recognise it as a union and allow it to represent its workers in London.

Deliveroo refused on the basis that they didn’t have any workers – their riders were self employed individuals who had no right to union representation.

The IWGB applied to the government body that resolves collective worker disputes, the Central Arbitration Committee, challenging Deliveroo’s decision. The key issue was whether the riders were workers or not.

The worker status test

There are three categories of employment status. Firstly there are the genuinely self employed, individuals in business on their own account who have flexibility to work as they chose. Secondly, there are employees. This category covers most individuals. Employees have a personal contract and have prescribed work, hours and obligations.

The third category of workers sits between the two. Workers are those who carry out their work personally for a company but have more flexibility in their working arrangements than employees. For example zero hours contracts fall under this category where there’s no obligation for the worker to accept hours. In order to be a worker, an individual must show that they have a contract to provide service personally to the company.

One of the key issues in worker status cases is therefore whether individuals have a right to provide a substitute – i.e. can they send someone in their place, or must they personally perform the work?

The Deliveroo contract

Deliveroo is an app based platform. Riders login to an app as and when they choose and are then offered deliveries. They are paid a fee per delivery completed. There is no requirement for minimum hours. Instead Deliveroo uses “surge” pricing to incentivise riders to login to the app when demand is high.

New riders have to complete a comprehensive application and induction process and are subject to a criminal record test. They have to pay for a branded equipment pack and are required to sign a contractual agreement with Deliveroo.

Crucially just before the hearing, Deliveroo substantively changed their rider contracts, providing new terms for all drivers.

The key change under the new contract was to provide a clear right for riders to provide a substitute on their behalf. The new terms made it clear that there was no policing by Deliveroo of a rider’s use of a substitute and no prior approval from Deliveroo was needed. If a substitute was appointed there was no need to tell Deliveroo or for them to undergo the induction process. The rider is directly responsible for paying the substitute and ensuring they are suitable.

The terms under the earlier contract were markedly different. They involved much more direction and control by Deliveroo, including strict uniform requirements and a different attitude to substitutes. The changes seemed designed to make it clear that the riders were not required to provide personal service and therefore support Deliveroo’s argument that they were not workers.

The decision

The Central Arbitration Committee acknowledged that the new contracts contained a clear right to appoint a substitute. They made it clear that Deliveroo’s choice to include this puzzled them. Given riders’ ability to log into the app as and when they wished, they could not see why a need to appoint a substitute could arise. They also questioned why Deliveroo would spend so much time following a selection and induction process with riders if they could then just sub-contract the work out.

The IWGB argued that this demonstrated that the right to appoint a substitute was not genuine – it had just been inserted into the contracts to defeat the worker claim.

The Central Arbitration Committee disagreed. Whilst they were perplexed by the need for a right of substitution; they acknowledged that this was set out in the contract. Deliveroo had also provided a few examples of riders who had chosen to exercise this right.

They found that, although bizarre, the right to substitute was genuine. This meant that the riders were not required to personally perform the work for Deliveroo and could not be workers. The IWGB therefore did not have a right to be recognised.

What’s next?

The decision means that Deliveroo does not have to offer its riders the national minimum wage or holiday pay.

The IWGB has said it will review the judgment and consider its next steps. With the decision in the Uber case also being appealed and other cases waiting in the wings this is unlikely to be the last decision on worker status.

The recent Taylor review recommended that the Government review worker status and replace this with a new category of ‘dependent contractor’ to cover this type of hybrid role, providing specific and clear rights to this category. Of particular relevance to the facts of this case, Taylor has recommended that ‘personal service’ should not be a pre-condition for this ‘dependent contractor’ status. This could require employers, for example, to provide the right to statutory sick pay and holiday pay, without compromising the flexibility that these contracts provide.

The Government is due to clarify its position on worker status by the end of the year. This case is likely to place further pressure on the Government to take action to address this area of uncertainty.

For companies in the gig economy, the case demonstrates the difference well worded contracts can make to the question of status. Companies in doubt as to whether their contracts are sufficient, or as to the true status of the individuals they engage, should review their arrangements and take advice.

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Tabytha Cunningham

Posted: 17th November 2017

T: 023 8048 2135

E: Email Me