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The old adage is that you wait for a bus and then 2 come along at the same time. A similar thing has happened recently with cases relating to worker status. We have had numerous cases coming before the employment tribunals on the issue of whether a person is a worker and thus entitled to certain rights including paid holidays.

The latest case is that of Chris Gascoigne who sued his former employer Addison Lee. Mr Gascoigne was a cycle courier who delivered items by bicycle whilst working for Addison Lee. The problem was that Addison Lee didn’t view him as being a worker and therefore didn’t give him rights that a worker enjoys such as paid holiday. More on the Addison Lee case later but the starting point is to explore why this is an issue at all?

Worker rights and why this is important

Employment law is not written for clarity or ease of use and it is full of what lawyers like to call grey areas. Grey areas are generally disliked by clients (who prefer certainty) but are interesting for lawyers because there is broad scope for legal argument and often contested trials. The issue of employment status is one such grey area (quite a deep shade on the colour charts).

The starting point is that employment law recognises 3 ways in which a person can provide their services to a person who wants to engage them:

Easy you say; we all know who an employee is. Actually, the legal test is quite complicated but many businesses will simply engage people under contracts of employment because it suits everyone. These people are of course “employees” and they benefit from the broad range of employment rights.

At the other end of the scale is the self-employed person in business.

If I want to engage a person to paint my house it’s unlikely that I will employ them as an employee. I could do this (if I had a very big house), but it would be unusual. Instead, I will usually engage a painting and decorating business and this may be one man or woman who provides his/her services to me as a client. The UK is full of small businesses where the person is genuinely self employed and who has a book of clients.

One of the key factors in determining employment status is control. An employer has a significant amount of control over its employees, including hours of work, location and method of working. Self employed people will not be subject to this control.

This is the more tricky area.

Describing a worker is actually not that easy. They are individuals working personally for another (so like an employee) but the law treats them as not quite being an employee. There might not be the same amount of control that exists between employer and employee. Also, mutuality of obligations might not exist in the same way. In effect a worker is a “light” employee (a bit like a light beer perhaps – some of the elements that make the full strength drink are missing).

The law defines a worker as an individual who has entered into or works under (or, where the employment has ceased, worked under):

I have highlighted a couple of important bits. A worker is someone who provides services personally and the engager is not his/her client.

How do I spot a worker?

Although this has been the subject of a lot of litigation recently, if you take a common sense approach, my view is that you can generally recognise a worker when you see one (the harder distinction for me is that between employee and worker). The employment tribunals have recently shown this common sense approach and all of the recent high profile decisions have gone in favour of the individual. In most cases, it’s obvious when a person is genuinely self employed and running a business. Let’s take by way of example cycle couriers:

These couriers never intended to be small businesses in their own right. They are people willing to ride a bike and deliver a package in return for a payment from me. The law intends to protect them as workers (at least).

At this point you may ask why, if spotting a worker is not that hard, we have had so many cases on this point recently. The reason there have been so many cases is that some businesses have structured working arrangements to try and avoid providing worker rights to the individuals. Businesses have used (or been advised to use) elaborate structures and carefully drafted contracts to try and avoid the person getting worker rights. This use of elaborate structures has been criticised in a number of the recent rulings and the employment tribunals will look at the reality of the situation and not the labels attached to the person. In simple terms if you own a cat you are at liberty to call it a dog, but to the rest of the world it’s still a cat.

So what are the main worker rights? 

The cases revolve around holiday pay but workers have various employment rights including:

When you consider the above, you can see why some businesses have tried to categorise a person as a self employed person in business and not a worker. In simple terms, if you pay a person £100 for a day’s work when he has worked 8 hours to earn this then it’s OK as far as NMW is concerned. However, that person (as a worker) is accruing holiday which is worth 12.07{ba3215b0bf35eaeb06be458b3396ffbfc50bb9db10c9ff1594dfc3875e90ea48} in real terms so the £100 is effectively costing £112.07. Another way to look at this is that, after a little more than 8 days’ work, the worker has accrued a day’s paid leave. It gets more expensive again if the person is treated as an employee for tax by HMRC because there is employer NI to pay. Add to this the employer pension contribution and it’s all getting a bit more expensive. You start seeing the attraction of just paying the employee a flat sum with no extras. You also start seeing why some businesses have tried to structure work in a way to avoid the expense of worker rights.

Addison Lee case

In the Addison Lee case, Mr Gascoigne was a cycle courier and the following facts applied:

Mr Gascoigne had flexibility and did not have to work set hours or days. His pattern of work was shown to be variable. This suited Mr Gascoigne as he was a musician playing in a band. Unlike an employee therefore, he had control over when he worked for Addison Lee and could scale this back at times.

The employment tribunal ruled that Mr Gascoigne was a worker. He was required to perform his work personally and he was not running his own business. The reality of the situation did not reflect the description of Mr Gascoigne in the contract that he had signed.

My view is that this is a sensible decision. Mr Gascoigne enjoyed the flexibility he was allowed and there was not the same amount of mutuality of obligations as exists between employer and employee. Similarly, the level of control was pared down. However, he it would be stretching things to say that he was a businessman trading with Addison Lee as a client. He wasn’t entitled to the full suite of employment rights but he was entitled to worker protection.

Further case examples

The most recent reported case is the Addison Lee cycle courier case but this is one of many recent cases including:

In these two cases, cycle couriers engaged by other companies were found to be workers and not self-employed contractors.

The Uber case had a lot of media attention.  Uber taxi drivers found to be workers and not self-employed contractors.

A plumber engaged by Pimlico Plumbers was found to be a worker and not self-employed. The tribunal decision was confirmed by the Court of Appeal. Permission has been granted for this case to be considered by the Supreme Court so we haven’t heard the last of this case yet.

For details of any of these cases please contact me. It’s important to look at the facts of cases like this. However, an important point from the cases is that the employment tribunals are looking at the reality of the situation and not allowing complex structures and contracts to allow the employer to avoid worker liabilities.

The Future

The issue of worker status and the uncertainty this causes has been addressed recently by the Taylor Review. Representations were made to the committee that the three-tier approach to employment that we currently use should be replaced with a system similar to tax, i.e. a binary choice between employment and self-employment. The Taylor Review concluded that:

The Taylor Review recommended that the new name for workers should be “dependent contractors”. Furthermore, the Taylor Review made some recommendations relating to personal service and control. As far as personal service goes, the Taylor Review recommends that less emphasis should be placed on personal service and that the absence of a requirement to perform work personally should not be an automatic barrier to accessing basic employment rights. The Taylor Review also made some good observations on the issue of control and how this is a key factor in employment status, concluding that placing greater emphasis on control and less emphasis on personal service will result in more people being protected by employment law.

What should you do?

If you are an employer engaging individuals and calling them self employed contractors in business then I suggest you review these arrangements carefully. I have had a number of clients who have changed working practices to avoid a long term risk and ensure workers feel fairly and lawfully treated. Trying to use contractual documents to avoid employment/worker rights is not going to work and it’s better to have working arrangements that will stand up to scrutiny (either by HMRC or before an Employment Tribunal). Now that Tribunal fees have been declared unlawful, we are likely have more cases being brought before the Employment Tribunals and these will inevitably include claims for worker rights (usually holiday pay).

So has 2017 been the year of workers uprising against businesses who try to avoid providing worker rights? In truth the answer is no because the cases were launched a long time before this. However, 2017 has definitely been the year of reported cases and where the direction of travel in the employment tribunals has been one way – in favour of the individuals. It’s a good time to review those contracts and make sure you’re legally compliant.