Taylor review: Establishing employment status
Author: Darren Newman
Consultant editor Darren Newman looks at the proposals in the Taylor review to clarify employment status.
The employment law proposals in the Taylor review - there are about 30 of them - have at their centre a new approach to the question of who qualifies for employment law protection.
The review rejects suggestions that employee and worker status be merged so that there is only one test of employment status. It accepts a continuing distinction between "workers" who qualify for the national minimum wage and are protected by legislation such as the Equality Act and the Working Time Regulations, and the narrower group of "employees" who also qualify for unfair dismissal and redundancy rights, as well as maternity and shared parental leave.
Some confusion has been caused by the term "dependent contractor" referred to in the review. To be clear, the review does not recommend that this should be a new employment status with its own set of rights. Rather, it proposes that this should be the new name for those "workers" who are not also "employees". We can argue about whether this is a good or bad idea. I personally think it is not worth the effort involved in redrafting the legislation, but many people think that the term "worker" is too obscure and not well understood. Whatever your view, however, this is a proposal that - in itself - would not change anything.
More important is the proposal that the definitions of "employee" and "worker" (I will keep using that term until it is officially dropped) should be set out more clearly in the legislation. The review is concerned that understanding an individual's employment status involves not just familiarity with the statutory definition, but also an awareness of the case law that has built up over many years. It is proposed that the principles of the case law should be incorporated into a clear statutory definition, which would not be "open to as much interpretation as currently".
Clarity is a good thing. If someone came up with a statutory definition of employee and worker that was clear and simple and allowed everyone to know where they stood - while not allowing employers to avoid the legislation through the careful drafting of the contract - I would certainly welcome that. However, the real challenge lies not in calling for a clearer definition, but in actually providing one. I look forward to seeing the Government attempt this, but it may prove to be a harder task than the Taylor review envisages. The review states that "if it looks and feels like employment, it should have the status and protection of employment". That frankly, is an approach that is more conducive to case law looking at all the circumstances of an individual case, than a clear statutory definition - but we will wait and see.
The review seems broadly happy with our current understanding of what makes someone an employee - but proposes a different approach to determining who should be considered a "worker". The new definition, the review says, should focus on the control exercised over the worker by the employer, and drop the requirement that the worker be obliged to perform the work personally.
There is a strong argument that a substitution clause - on its own - should not be sufficient to deny an individual the rights associated with being a worker. Such clauses allowing a worker to send a substitute to do his or her work are often simply inserted into the contract without any real expectation that they will be used. But that should not detract from the point that personal service is at the very heart of what being a worker is all about. Without any need for personal service, a worker is simply a business supplying the work of others and it is difficult to see how any employment law can possibly apply.
As for "control", the review seems to be under the impression that this is the most important factor in identifying a worker - but it really is not. Control is part of the irreducible minimum of a contract of employment (Ready Mixed Concrete (South East) Ltd v Ministry of Pensions and National Insurance [1968] 1 All ER 433 HC) but is of much less significance in a worker's contract. An independent contractor may have extensive control over the way in which work is done - or where and when it is done - but still be required to work for the employer and not be in business on his or her own account. In that case the individual may not be an employee, but would be a worker with an important set of employment rights. It seems unlikely that the Taylor review would want to exclude such contractors from the scope of employment law, but a greater emphasis on control in the statutory definition could well lead to that.
As well as changing the definitions, the review has some interesting proposals for how employment status should be established. As the law currently stands, an individual cannot simply ask a tribunal to adjudicate on whether he or she is an employee or a worker. The individual has to bring a substantive claim - such as a claim for failure to give paid annual leave - and see if the employer disputes his or her right to claim it. The tribunal will then have to decide whether or not the individual can bring the claim and may hold a preliminary hearing to determine what sort of contract he or she has.
The review proposes that the process for reaching this preliminary hearing should be streamlined and that no fee should be payable until after employment status has been determined. Essentially, an individual concerned that he or she might not qualify for a particular right could initiate a claim without paying a fee and take the matter to the preliminary hearing stage. Once the tribunal had decided the issue, the individual could then decide whether or not to progress the substantive claim - and only then be required to pay the initial tribunal fee.
This is an interesting idea and the review is right to highlight the fact that the need to pay employment tribunal fees deters potentially vulnerable workers and employees from exercising and enforcing their rights. However, the problem goes much wider than cases determining employment status, and it would surely be better to reform the system as a whole rather than tinker with one narrow issue.
The review also proposes that the burden of proof in a case where employment status is in dispute should be reversed so that the employer has to prove that the individual does not have the right to being a particular claim. In an unfair dismissal claim, the tribunal would start with the assumption that the individual was an employee and in a claim for the minimum wage the tribunal would assume that the individual was a worker.
In strictly legal terms this would not make much difference. When tribunals have to determine facts, they rarely do so through the operation of the burden of proof. They listen to all the evidence and then make the findings that they consider appropriate. If such a change were to be made its impact would probably be more psychological. Perhaps, if there was a presumption of employment status, employees and workers would be more likely to challenge an employer's claim that they were self-employed. Perhaps employers would be less likely to make such a claim in the first place. It is hard to tell, but this at least is a change that would be easy to make and would do no harm.
The Government is due to respond to the review after the summer recess and we should get some idea then of how eager it is to proceed with legislation. However, given the amount of parliamentary time that will be taken up with Brexit legislation, it seems highly unlikely that any concrete changes will be made for at least the next two years. That gives employment lawyers lots of time to argue over how best to define employees and workers.
This is just as well. The review's proposals on employment status are far-reaching and profound - but they are not yet fully thought through. A recasting of the definition of employee and worker will require a lot of work and extensive consultation to ensure that it does not inadvertently exclude groups who need employment law protection. The end result may well disappoint those who think that there is a simple and clear - but at the same time comprehensive and robust - definition out there just waiting to be discovered.
