Maz Dannourah

Associate

Employment and HR


Spotlight on employment status

Maz Dannourah

The development of the so called “gig economy” has brought into public focus the issue of employment status which may previously have only concerned a small number of individuals, businesses and their employment lawyers.

What is the gig economy?
The gig economy is the term given to the developing labour market which involves companies providing services to their customers via the use of individuals, typically working on a self-employed basis. In general, individual service providers will be expected to be “available” for work to suit the demands of the business and may well be connected to the company via a smart phone or tablet app. Well known examples of companies operating in the gig economy include Uber, Deliveroo and Hermes which provide taxi and delivery services and employ thousands of individuals to provide services to their customers.

Why the controversy?
The controversy surrounding the gig economy stems from the fact that companies are operating on the basis that the individual services providers are self employed contractors and not workers or employees. As self employed contractors, individuals have little protection in the form of employment rights and generally have no entitlement to paid holidays, sick pay or the National Minimum Wage. For some individuals, this has led to allegations of abuse in the form of being required to work long hours for little pay with no security regarding future work.
Whilst many individuals are reputedly happy with the balance and flexibility that self employment brings, large companies are seen by others to be exploiting workers and circumventing employment rights that should be afforded to individual employees or workers.

Employment status – basics
Employee status. An individual enters into or works under a contract of employment defined as a contract of service or apprenticeship.  A contract of employment can be created expressly or by implication and it may be oral or in writing.
Worker status. An individual enters into or works under a contract of employment or any other contract which provides for the individual to perform personally work or services for the other party to the contract where such party is not by virtue of the contract a client or customer of any business carried on by the individual.
Self employed status. An individual is neither an employee nor worker and carries on providing services as an independent contractor individually or by way of a separate legal entity such as a limited company or limited liability partnership.

The definitions above are very much the beginning of the story when it comes to assessing employment status.  Where a dispute arises regarding an individual’s employment status a Court or Employment Tribunal will consider the following questions when deciding if a contract of service exists (and the individual is therefore an employee or worker):
1. Is there an obligation on the individual to provide personal service?
2. Is there control of the individual by the master?
3. Are the other provisions of the contract consistent with a contract of service?

Positive responses to the above questions are likely to lead to an individual being deemed to be an employee or worker as opposed to a self-employed contractor. The line between employee and worker is often blurred with the definition of worker said to offer a “lower” threshold for individuals to obtain employment rights.  In a case where there is doubt about an individual genuinely being a self-employed contractor, but where some features of “employment” are present it is often found that they are workers as opposed to employees (as has proven to be the case in the various legal proceedings brought against Uber, Excel and Pimlico Plumbers).

Determining employment status can easily become a complex matter requiring expert legal analysis on a case by case basis. In light of the current spotlight on the use of self employed contractors it would be prudent for any business in doubt about the status of its workforce to seek advice.

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