There are two types of self-employment in the UK. One is where a person operates the business and is their own boss (an independent contractor) and the other is where a person has greater freedom than an employee, but is not truly independent of the employer (a worker).
The distinction doesn’t affect tax treatment (both groups are responsible for paying their own taxes) but it does affect their workplace rights. Workers are entitled to the national living wage, annual leave, auto-enrolment (if they have sufficient earnings) pay slips and a written statement of employment as well as other types of protection. An independent contractor has none of these rights.
Following recent appeal court decisions, it is likely that most “gig economy” and “casual workers” will qualify for worker status. The fact that workers are free to work flexibly does not allow an employer to treat them as independent contractors.
A question of control
In Uber BV and others v Aslam the Supreme Court rejected the appeal by the company arguing that its drivers were not workers but were in fact independent contractors. The court decided that the drivers should be considered to be working for Uber for as long as they were logged into its app, rather than just for the time they were on a trip.
Lord Leggatt explained that it is ‘necessary both to view the facts realistically and to keep in mind the purpose of the legislation’ which is to protect ‘vulnerable workers’. It consequently followed that in deciding whether someone qualifies for ‘worker status’, the ‘greater the extent of such control, the stronger the case for classifying the individual as a worker’.
Uber’s control over its drivers ranged from:
- Dictating the fare which the drivers could charge, effectively determining their pay
- Imposing the contractual terms on which drivers could provide their services
- Constraining the drivers’ choice to accept or decline rides
- Handling complaints by passengers, including complaints about the driver
- Restricting communication between drivers and their passengers
These restrictions made Uber’s argument that the drivers were in fact independent contractors, with Uber simply acting as the booking agent for the passengers, difficult for the court to support. Ultimately the transportation service performed by drivers and offered to passengers was tightly defined and controlled by Uber which meant that the court felt inclined to see the drivers as workers, entitling them to the accompanying rights.
Lord Leggatt emphasised that the proper approach was to determine what the true situation between the drivers and Uber was and not what the employer simply labelled the relationship.
A question of personal service
The case of Nursing and Midwifery Council v Somerville further indicates the courts’ willingness to find statutory protection for atypical workers.
In this case Mr Somerville was a fee-paid panel member for the Nursing and Midwifery Council (NMC), working on its Fitness to Practice Committee. Mr Somerville was told by NMC that he had the status of an independent contractor. He was not required to accept the sitting dates he was offered. He was required to provide his services personally (if he was available and sent a replacement without prior agreement then NMC would not have been happy).
Mr Somerville presented a claim to the Employment Tribunal for holiday pay on the basis that he was not truly an independent contractor.
The EAT found that Mr Somerville was a worker even though he was free to deliver as much or as little work for the NMC as he chose. There was a contractual obligation on Somerville to accept a minimum number of sitting dates yet he was free to withdraw from the dates he had accepted. Even though this meant that he was not an employee, it was still consistent with him being a worker.
What does this mean for employers?
The NMC decision emphasises the importance of the requirement of personal service in making a finding of worker status. The Uber decision emphasises that the level of control exerted by the Company over the individual can be a decisive factor. Both decisions confirm that an employee’s freedom to accept or reject a minimum amount of work is far from being a central issue. This means that it is increasingly clear that those people who work in a very loose way, under a contract which allows them to work when it suits them, will still qualify for important workplace rights. The penalties that employers face if they fail to recognise these rights can be very serious. For example, an employer who fails to pay the National Minimum Wage to an employee can be required to pay a civil penalty of £20,000 and to reimburse the worker for the shortfall in wages.
If you would like to know more, please do not hesitate to get in touch with one of our specialist employment lawyers.
