Sarah Henchoz: What could the outcome of employee-status cases mean for employers?

SarahHenchozOrganisations that have a high population of atypical workers are coming under increased scrutiny, with workers challenging their legal status through the courts, as Uber, Yelp and FedEx have all recently experienced. These employees have alleged that, notwithstanding the label they are given, they should be deemed to be employees with the same rights and benefits afforded to others in the workforce. If successful, employers that have been relying on such workers will have to rethink their staffing solutions.

Using workers to undertake duties that may have otherwise been carried out by employees is a much cheaper form of labour. Workers generally do not have the same rights as employees; they are not given access to the same benefits, they are not eligible for bonuses and it is easier to terminate them when their services are no longer required. However, if workers (or at least some of them) are rebranded as employees, organisations will need to offer them access to the same benefits and on the same terms as their existing employees, and this will be expensive.

Not only will there be a future liability increasing the employer’s staffing costs month after month, there will also be a retrospective liability because employers that are found to have been denying workers rights they should otherwise have had will be required to make good these losses. Where possible, this may involve retrospective reinstatement into relevant benefit schemes, or alternatively a lump sum payment reflecting the loss the worker has suffered. Going forward, the worker will need to be given access to the schemes and, where benefits are based on length of service, this will need to be backdated to the date on which they should have first been deemed to be an employee.

But there are also other, less obvious, issues. For example, what of the worker who claims that, had they been correctly treated as an employee and had access to employer-provided healthcare when they were ill two years ago, they would have received better care and this has now had an impact on their future health? And exactly how will employers calculate benefits for workers who may work highly varied working weeks? There will certainly be a lot for employers to do in the event that these claims are successful.

Sarah Henchoz is employment partner at Allen & Overy.