October 4

Worker or self-employed? Employers take note of Uber’s predicament……

In the past few months, a series of legal cases have been brought by individuals claiming that they are workers (and therefore have workers’ rights) against companies attempting to classify them as self-employed contractors.

The main cases to hit the press have been against Uber and Addison Lee. These cases have all been decided in the workers’ favour – the individual has been held by the tribunal to be a worker not a self-employed contractor.

Why the explosion of these cases?

There is a general trend for employers to increase the flexibility of their workforce to cut costs.
Engaging the majority of the workforce on ad hoc, self-employed contracts is cost effective and efficient for a company. It can give its contractors as little or as much work as it wishes, and end the relationship without going through any procedures and with little risk of a claim against it.

Self-employed contractors have almost no rights under employment law. In particular, unlike workers, they have no right to a minimum wage or holiday pay, and these are the main rights that are sought by individuals.

Why did the workers succeed in their claims?

In the decided cases, the workers’ victories came down to two main issues:
1.. the companies have too much “control” over the way they work
2. the companies require them to perform the work personally, rather than being able to provide a substitute.

Although employment tribunals use a number of tests to decide whether an individual is a worker or self-employed, the “control” and “substitution” tests are two of the most important.

Control

In both Uber and Addison Lee, the employment tribunal decided that the contracts between the company and its drivers bore little resemblance to the way they worked in practice.

The tribunal therefore largely disregarded the contracts and looked instead at the reality of the working relationship.

In Uber, the company claimed that it was merely a technology platform, linking 30,000 drivers operating their own independent businesses. The tribunal rejected that deciding that the level of control exerted by Uber over the drivers was key to the tribunal’s decision.
The drivers had very little autonomy to determine the manner in which their services were performed and no chance at all to dictate its terms.

The level of control exercised by the company over the claimant in each case was held as incompatible with genuine self-employed status. The individual was an “integral part” of the company’s operations and “subordinate” to the company.

Substitution

The principle of substitution is the right of an individual to substitute another if, for whatever reason, they cannot provide the service or carry out the work. Therefore, a genuine self-employed contractor can usually substitute another worker to perform the contract. On the contrary, a worker or employee is obliged to provide their services to the company personally.

In both Uber and Addison Lee, it was clear that substitution was not a realistic possibility. The individuals were under an obligation to provide their services personally. Both companies would have considered it too risky to allow an unrestricted right to substitute another individual and at the very least would have wanted to exercise control to ensure that the service was provided in such a way as to be in keeping with its brand and standards.

The way forward for employers….

Employers will need to keep control to a minimum, both in the contract and in reality, to protect against a finding of worker status, rather than self-employed. The tribunals are increasingly critical of arrangements that disguise workers as self-employed individuals.

Against this background, it may be that, ultimately, employers will be vulnerable to a finding that their contractors are actually deemed to be ‘workers’ if they require their contractors to meet their standards and perform the work required of them, whether this is reflected in the contractual documentation or simply in the day-to-day working arrangements.

Therefore, employers should take care and reconsider how they classify those who work for them. If in doubt it will be important to make allowances for holiday pay and compliance with the national minimum wage – especially in light of the recent ruling that tribunal fees are unlawful because this could well see a rise in the number of claims lodged by workers in respect of their employment status.

October 4

How to manage annual leave: five common employer pitfalls

Mismanagement of annual leave can have a dramatic impact on a company’s business, as demonstrated by Ryanair’s cancellation of hundreds of flights after it admitted “messing up” the planning of pilots’ holiday. Where do employers commonly get annual leave wrong?

1. Not encouraging employees to take annual leave across the leave year
Allowing staff to build up too much annual leave and not spread out their holidays over the year can be a major problem for employers. This can occur where there is an excess of work to do or where a business is struggling – in either case employees may feel that they are simply not in a position to take annual leave at certain times during the year without putting their job at risk.

Employers should therefore encourage employees to plan and take annual leave. This will prevent the workforce from building up an excessive amount of leave to take at the end of the leave year which is always tricky for a business to navigate through. It will also ensure that employees take proper breaks through the year thus reducing the risk of increased absenteeism due to stress and other factors caused by over work.

Typically, the responsibility for monitoring annual leave is allocated to line managers, who should periodically check their employees’ annual leave balance and remind staff that they need to use the holiday up by the end of the leave year.

2. “Buying out” employees’ annual leave entitlement

An employer may be tempted to offer staff a cash substitute in return for giving up their annual leave entitlement, for example to solve a staffing crisis, complete a big project, or tackle a build-up of accrued but untaken holiday across its workforce.

However, it is unlawful to pay employees in lieu of their minimum statutory annual leave entitlement except on termination of employment. When an employee leaves a job part way through the holiday year he or she will be entitled to be paid for any accrued statutory holiday not taken at the date of termination.

3. Allowing employees to carry over excessive amounts of holiday

The general rule is that your basic statutory holiday entitlement under the EU Working Time Directive (four weeks of holiday) must be taken during the holiday year. Otherwise it will be lost.

The only exception is if you are unable to take your holiday because you are sick, injured, pregnant or on maternity leave. In these circumstances, you can carry forward your holiday into the next holiday year.

If you are entitled to more than the statutory minimum amount of paid holidays (in the UK all employees are automatically entitled to a minimum of a further eight days) then you may be able to carry the extra days forward – or at least some of them. This depends upon your contract of employment which should clearly state whether or not you are allowed to carry over accrued but untaken days holiday from one holiday year to the next, if so how many, and whether they have to be taken say within the first quarter of the next holiday year.

4. Allowing too many employees to take leave at the same time

One of the biggest dangers for employers is the knock-on effect on the business of allowing too many employees to take time off during particular periods, typically the summer or at Christmas.

Line managers can sometimes be reluctant to turn down employees’ holiday requests, particularly if an employee has already planned a trip, but they should be reminded that employers are not obliged to agree to a worker’s request to take holiday at a particular time, unless the employment contract provides otherwise.

Employers should have a clear policy on holiday requests (typically, a “first-come, first-served” approach). Line managers should be brave enough to turn down holiday requests (with the correct notice) when the timing of leave would cause the business difficulties.

5. Not paying employees the right amount during annual leave

In recent years, perhaps the single biggest employment law headache for UK employers has revolved around the calculation of holiday pay – namely the fact that it is no longer permissible to calculate holiday pay on the basis of an employee’s basic pay only.

Case law has established that pay during annual leave should now include other payments such as overtime pay (both compulsory and voluntary), commission, standby/call-out allowances, shift premia and travel allowances.

Employers need to decide on a sensible approach to holiday pay calculations, particularly the length of time used to calculate the average (with 12 weeks being a popular suggestion) and what allowances should be included (if in doubt, include it). A holiday pay miscalculation across the workforce could be costly in the long run.

Managing annual leave: do’s and don’ts for line managers

1. Do encourage staff to submit dates for their holiday as far in advance as possible.
2. Do review regularly whether or not employees have taken, or at least planned to take, some of their holiday leave.
3. Do remind employees periodically how much annual leave they have outstanding.
4. Do ask any employee who has not taken any holiday or submitted any holiday dates by for example the middle of the holiday year to nominate holiday dates as a matter of urgency.
5. Do ensure that holiday leave is planned in such a way that the department has adequate cover at all times.
6. Do be proactive in the management of holiday.

7. Don’t leave the matter of holiday to chance.
8. Don’t take the view that it is up to each individual to decide whether or not he or she wants to take holiday.
9. Don’t wait until near the end of the holiday year before reviewing whether or not employees have taken all their holiday.
10. Don’t give in to employees’ requests for pay in lieu of holiday.
11. Don’t make staff feel guilty about taking holiday.

October 4

Employment Tribunal fees are unlawful and should be scrapped……

The decision made on 26 July 2017 by the Supreme Court has been welcomed by employees and trade unions, but has understandably caused employers a lot of concern.

Prior to July 2013, it was “free” to bring an Employment Tribunal claim. That changed when fees were introduced in July 2013 requiring claimants to pay a fee of up to £1200.

The impact of the fees was that it deterred many claimants from making a claim, which was positive news for employers. Before fees were introduced, the average number of cases taken to tribunal was about 5,000 a month; this fell to about 1,500 a month after fees were brought in.

Supreme Court decision

1. The Court decided that the fees have the effect of preventing access to justice.
2. There was “a dramatic and persistent fall in the number of claims brought” and fees were the most frequently cited reason why employees decided not to make a claim.
3. The Court decided that the fees are indirectly discriminatory against female claimants, because a higher proportion of women bring the type of claims for which the higher fee is payable (discrimination claims).

With immediate effect, fees will no longer be charged.

What does this mean for employers?

1. Employers who welcomed the fee system when it was introduced will be nervous about what happens now. Whilst we do not know exactly what will happen next, it is unlikely that fees will be abolished completely but any new fees introduced will have to be significantly lower.
2. It is very likely that there will now be an increase in claims because, as things stand now, anyone who has been treated unlawfully or unfairly at work will no longer have to pay to take their employer to court.
3. Since fees were introduced, employers might not have taken a careful approach when they released staff and might have made bolder decisions in relation to how they dealt with workplace disputes, counting on their employees to be put off by the fees and not make a claim. Following this judgment, employers might want to act more cautiously moving forward, certainly until we know what the new system is going to be.