Nick Willis: Clarity around employment status could lead to dramatic impacts on gig economy

Nick-Willis

Perhaps the oldest question in employment law is ‘when is someone genuinely self-employed?’ The question remains a difficult one to answer and it is becoming difficult to keep up with the pace of developments on this very basic issue.

One of the latest pieces of news is the publication of a draft bill by two Select Committees around a new framework for modern employment, focused on the gig economy. Among other provisions, the bill states that “it shall be presumed that the individual is a worker unless the contrary is established”. So the default position will be that, unless shown otherwise, someone will be classed as a worker by default.

The status of ‘worker’ sits on the spectrum between employment and self-employment. It has been the subject of the slew of recent cases in the gig economy. These claims were brought in the employment tribunal and have been the subject of appeals. Factors that led to a finding of worker status include personal service from the individual, the lack of a genuine right for the individual to provide a substitute and the degree of control is exercised by the ’employer’. Another claim was taken to the Central Arbitration Committee in the context of union recognition. Here, it was held that there was no worker status because a genuine right of substitution existed.

Taken together, these cases show how decisions on status rely on piecing together all the pieces of the often-complex jigsaw, and that seemingly small differences in the factual background can lead to a different conclusion on whether someone is a worker.

If the bill becomes law, an organisation will have to demonstrate, based on the specified factors, that an individual is genuinely self-employed. This shift is likely to bring more individuals into the worker category. Does this matter too much, given that there is no tax withholding for workers and many rights, such as redundancy and unfair dismissal, are limited to employees? The answer is yes. Workers are entitled to the national minimum wage, pensions auto-enrolment and the equivalent of 5.6 weeks’ paid holiday.

The last of these has suddenly grown in significance following the decision of the European Court of Justice in King v The Sash Windows Workshop in November 2017. This held that if a worker was wrongfully excluded from paid holiday, a claim for back payment of holiday pay can relate to the whole period of their employment and not two years as has been the position under UK law. This case may see a change in the law, which would have a dramatic impact in the gig economy.

So will the bill be enacted? Probably not because it is unlikely to be supported by the government. However, in November 2017’s Budget it was announced that a new discussion paper will be published in response to the Taylor review of employment practices in the modern economy, exploring the options for reform to employment status tests. Depending on that discussion, and on the results of current appeals going through the higher courts, we can indeed expect a change in the test for being a worker.

Nick Willis is director and solicitor at PricewaterhouseCoopers (PWC)