The law on work status has had a lot of recent press coverage. Here is a brief guide on key issues for businesses to consider.
The work categories
The three relevant categories are workers, employees and the self-employed. Workers and employees have certain rights, such as entitlement to the national minimum wage and paid annual leave. Employees (who would also fall within the worker definition) have additional rights, such as the right to statutory sick pay and protection from unfair dismissal (which is normally subject to having two years’ service). Self-employed contractors have none of these rights.
This is separate from HMRC‘s definition of self-employment, and an individual may be considered to be self-employed for tax purposes while the courts might find that they are in fact a worker or employee.
Work status is not determined by the wording of the contractual documentation. It is what is happening in practice and the reality of the relationship that counts.There has been a lot of criticism of “sham contracts” which state that the individual is self-employed. The Courts, however, not afraid to go beyond the wording of the contract and look at the reality of the situation.
For a contract to form there needs to be “mutual obligation”, regardless of the type of status. What this means is that both parties must have a requirement to honour their side of the bargain. One example could be a gardener promising to tidy a garden for payment or a cleaner agreeing to clean a house for a sum of money. In the two examples the parties would have to fulfil their obligation.
The person must be obliged to provide work or services, personally, rather than sending someone else in their place.
The person must also not be providing the work or services as a business. This means that they must not be in business themselves but instead working for others.
The requirement for personal work or services was considered in the Deliveroo case. It was held that as the couriers had a right to find replacements as there was no personal work or services and, as a result, the couriers were not deemed to be workers. By contrast in the recent Pimlico Plumbers case, it was held that even though the plumber had a right to substitute another Pimlico operative the dominant feature of the contracts was personal performance.
In the Uber case, the main issue was whether the drivers were in business themselves or working for Uber. The Employment Appeal Tribunal upheld the tribunal’s decision that the drivers were working for Uber, and therefore entitled to the national minimum wage and paid holiday. In particular the Employment Appeal Tribunal agreed with the tribunal that a key relevant factor was the amount of control that Uber had over its drivers. Uber has now appealed to the Court of Appeal.
In the Pimlico Plumbers case, the Supreme Court held that the tribunal was entitled to conclude that Pimlico was not a customer or client of the plumber and had considered relevant factors such as the tight control the company exerted over him.
Again the work or service must be done by the person under contract, but there also needs to be an element of control present. Control could mean, for instance, whether the person is subject to an internal disciplinary policy or, say, whether the person has to wear a uniform. There may be other factors to consider too.
Criticism of working practices, particularly relating to people working in the gig economy and on zero-hours contracts, led to a review by Matthew Taylor. In his report, published in 11 July 2017, he put forward various proposals. The Government has stated that it will be carrying out various consultations.
This guide is intended for guidance only and should not be relied upon for specific advice.