Oct 4

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

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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.