Employment status: the dominant theme for 2017

Author: Darren Newman

Darren Newman

Consultant editor Darren Newman discusses the employment status cases that have been dominating the news this year.

There is no doubt that the dominant employment law issue of 2017 has been the question of who counts as an "employee" or a "worker". A flurry of employment tribunal cases have been brought by drivers, couriers and other contractors against firms such as Addison Lee, Deliveroo and CitySprint. Meanwhile Uber has just appeared before the Employment Appeal Tribunal (EAT) contesting an employment tribunal finding that its drivers are workers, and Pimlico Plumbers is going to the Supreme Court to try to overturn a Court of Appeal ruling that one of its "self-employed" plumbers was actually "in employment" for the purposes of the Equality Act 2010.

In the media these cases are often lumped together as examples of the "gig economy", but we should be careful about using this label too freely. Each case is going to turn on its own particular facts, with the principles applied those that have been developing in case law for many years. Giving a new name to an issue does not mean that the issue itself is also new.

Take the Uber case as an example. In the EAT, Uber has been arguing that there is nothing new or novel about the relationship that it has with its drivers. Just as a driver for a traditional minicab company is regarded as a self-employed driver who pays the company a fee or commission to have access to its system of allocating customers, so an Uber driver pays the company for the use of its app. The difference is simply one of scale, made possible through technology.

A key issue for the EAT in that case will be whether or not the various measures that Uber takes to control the riding experience of customers is such that, in reality, the driver is working for Uber rather than contracting with each customer individually. This mismatch between how the contractual documentation describes the relationship and how the relationship is alleged to work in practice is also at the heart of the appeal in the Pimlico Plumbers case. In fact, it is quite possible that arrangements will be made for the Uber case to be joined with Pimlico Plumbers in the Supreme Court - leapfrogging the Court of Appeal.

Those not used to employment law are often taken aback by how readily employment tribunals "look behind" the terms of a carefully drafted contract and focus on what they see as the "commercial reality" of the situation. Counsel for Uber in the EAT was highly critical of the employment judge for being so dismissive of the "armies of lawyers" who drafted detailed contracts that, on the face of it, made clear that drivers could not be regarded as either employees or workers. The Supreme Court dealt with this issue in Autoclenz Ltd v Belcher and others [2011] IRLR 820 SC, which involved car valeters who cleaned cars prior to their being auctioned. The contracts that they signed gave them complete freedom to refuse work or send a substitute in their place - which would be inconsistent with their being either employees or workers. The Supreme Court said that those clauses in the contract could be disregarded because they did not reflect the true agreement between the parties. The Court emphasised that employers are often in a position to dictate the written terms on which work is offered and that tribunals should be alert to this inequality of bargaining power in deciding if the written terms truly represent what was actually agreed.

It has to be said, however, that in Autoclenz the gulf between the written agreement and the reality of the relationship was huge. The workers had no control at all over how they did their work and in reality worked on a full-time basis; sending a substitute in their place was never contemplated as a practical possibility. The position is rather less clear when it comes to Uber, Pimlico Plumbers and many of the other cases currently being looked at by the tribunals.

The alleged mismatch between the written contract and the reality on the ground is not, however, a new issue for the courts. There have been "bogus" self-employment cases for as long as there have been statutory employment rights - and we should remember that making an arrangement appear to be one of self-employment can have tax advantages for both sides.

One thing about the gig economy cases that is new is the ease with which work can be allocated through an app. This allows a business to have a much higher tolerance for individuals refusing assignments, because the app can easily pass the work on to someone else. If the organisation operates on a sufficiently large scale, it can be confident that the work will be successfully allocated almost immediately. Under traditional employment relationships, the employer instructs the employee to work and the employee agrees to work as instructed. If there is no obligation on the individual to do any work, we say that there is no "mutuality of obligation" and the individual cannot be an employee. Recent cases have also started applying this principle in the wider context of workers and this may present a problem for many of the cases now being considered. Uber argues that the freedom that drivers have to turn their app off or refuse to accept a job that is allocated to them means that they cannot be seen as workers. If that argument succeeds, it will constitute a significant gap in the protection given to gig economy workers.

One solution might be to regard an individual as a worker on each occasion that he or she accepts work, but not in the gaps between individual assignments. Each individual job would then have to be paid at the rate of the national minimum wage with a small amount allocated for accrued holiday pay, but there would be no need for the organisation to pay the worker as he or she waited for the next assignment. However, this would be an unsatisfactory - and rather messy - outcome. My hope is that, when the issue reaches the Supreme Court, it takes a wider view and confines this strict approach to mutuality of obligation to the question of "employee" rather than "worker" status. If it does not feel able to do that, it may fall to Parliament to ensure that gig economy workers are properly protected.

perspective@xperthr.co.uk