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Self Employed vs Workers – What does the Uber decision mean for the gig economy?
3rd Mar 2021
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Self Employed vs Workers – What does the Uber decision mean for the gig economy? - Linkilaw Solicitors
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On the 19th of February 2021, the Supreme Court issued the landmark decision that Uber drivers were to be considered workers and not independent contractors. This decision entitles each driver to increased employment rights including the national minimum wage, annual paid leave and rest breaks.

At this stage, this decision only benefits the applicants of this claim – the drivers themselves. However, it sets an important precedent in the courts of England and Wales, encouraging prospective claimants in similar circumstances to explore the possibility of obtaining a legal determination of their status as workers.

Types of employment status

The UK has 3 general categories of employment status: employee, worker, and self-employed person.

Employees

An employee, in accordance with the Employment Rights Act of 1996, is a person who has entered into a “contract of employment”, which is defined by the 1996 Act as: “a contract of service or apprenticeship, whether express or implied, and (if express) whether oral or in writing”. This definition also states that other ‘kinds’ of contract, which are not explicitly stated to be a contract of employment, can be construed as one for the purposes of the act.

Alongside this somewhat flexible definition, case law has provided some tests for characterising an employment relationship, and these cases have explored nuanced concerns involving control, integration and the economic realities within a working relationship.

Employees are entitled to the full range of employment rights, including the national minimum wage, sick pay, holiday pay and parental leave pay, as well as the ability to claim for redundancy and unfair dismissal after 2 years of service.

Workers

The definition of workers within the Employment Rights Act 1996 covers a variety of modern employment practices where a person does not strictly classify as an employee.

Generally, the characteristics of a worker are that he or she is a party to a contract – whether “employment” or described otherwise – requiring the worker to carry out work personally. However, there is no obligation on the employer to provide, or the worker to carry out work.

Workers are those persons who don’t strictly satisfy the conditions for an employee definition, but also cannot be considered self-employed. One example of this categorisation includes persons who are casual workers on zero-hour contracts.

They are entitled to fewer employment rights than employees, but these include the national minimum wage, holiday pay, protection against unlawful discrimination, and protections in the event of “whistleblowing” – when a worker passes on information concerning employer wrongdoing.

Self-employed individuals

Self-employed persons, including independent contractors, run businesses for themselves and take responsibility for the success or failure of those businesses, carrying out work for other parties based on contractual agreements. These persons are not classified as employees and can also be instructed through agencies. However, they can sometimes be considered as employees for tax purposes under the IR35 rules.

Self-employed persons, including independent contractors, run businesses for themselves and take responsibility for the success or failure of those businesses, carrying out work for other parties based on contractual agreements. These persons are not classified as employees and can also be instructed through agencies. However, they can sometimes be considered as employees for tax purposes under the IR35 rules.

Self-employed persons are only entitled to a very limited range of employment rights, including protection against discrimination and health and safety rights whilst on clients’ premises.

Self Employed vs Workers - Gig economy

The impact of the Supreme Court decision

During legal deliberations, the court considered the significant degree of control that Uber has over their drivers, and the lack of bargaining power available to drivers regarding pay and working conditions, as proof of a “worker relationship”.

The workers were considered to be working during the time in which they had the app switched on, were within the territory in which they were authorised to work, and were able and willing to accept rides. In the future, those working for and administering the services of other apps with similar characteristics might argue that they also have the right to be paid for time ‘in-between’ assignments to clients.

Indeed, within the gig economy as a whole, other businesses functioning similarly to Uber are at risk of facing a similar claim or future changes to legislation in light of this case. If affected, gig economy businesses would need to undertake significant cuts to earnings in pursuit of making payments to their workers in line with these new employment rights.

It would also be required for these businesses to run payroll for their workers, deducting tax and national insurance contributions before making payments. If a business has not factored this in from the start, the costs could be so significant that it may no longer be viable for it to continue operating.

Current and future gig economy companies will have to look closely at the degree of control they impose over their current “independent contractors” and pay close attention to the contract that exists between the parties.

Persons working with and within gig economy companies should ask themselves the following questions that were considered by the Supreme Court:

  • Does the company exercise a high degree of control over the way the contractor works?
  • Does the company penalise a contractor in certain situations, e.g., when he/she declines a job?
  • Is the contractor paid hourly?
  • Does the contractor have an agreement with the company rather than with the clients?
  • Does the company control the contractor by continuously monitoring performance and the way he/she works?

If the answer to any of the above is yes, persons working in gig economy companies and especially HR professionals should seek legal advice on navigating or circumventing a claim similar to Uber’s. Similarly, if anyone performing services for a gig economy app answers in the affirmative, they should seek legal advice to consider the benefits of bringing a similar claim forward in pursuit of workers’ employment rights.

How we can help

The law is continuously evolving, generating changes that impact numerous lives and businesses in different ways. Whether you are an independent contractor for a gig economy app, someone who is working within one, or looking to start one, feel free to contact us with any related legal queries by booking a free call with a member of our legal team.

Our legal commentary is not intended to be a comprehensive review of all developments in the law and practice. Please seek legal advice before applying it to specific issues or transactions.

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