Not so long ago, employers were accused of taking advantage of workers by making them work under zero hours contracts and thereby attempting to limit their employment rights. As companies develop more innovative ways of doing business and engaging with customers they also need a flexible workforce which they can call upon as and when they are needed but without creating an ‘employment relationship’ with all the rights that go with this. Workers also increasingly want to enjoy the flexibility of choosing who they work for, and when, without being overly restricted. However, these new 'gig' forms of working are blurring the lines between self-employment, worker and employee; and the people that ‘work’ for these companies are challenging their right to receive basic employment entitlements.
With the rise of App-based companies such as Uber (taxi), Deliveroo (food delivery) and Handy (cleaners), there has been an increase in the number of people being engaged as so-called self-employed ‘partners’ or ‘independent contractors’. Are these ‘partners’ or ‘independent contractors’ truly self employed though? Also, can employers who engage such ‘independent contractors’ confidently avoid giving them basic workers’ rights such as minimum wage, paid holiday or rest breaks?
We reported in our blog in September 2015 about the challenge that Uber was facing in a case brought by the GMB Union on behalf of its drivers. The drivers are claiming that they are not self employed ‘partners’ as Uber has maintained, but are in fact workers and entitled to basic workers’ rights.
Another App-based company, Deliveroo, has allegedly gone one step further and drafted their contracts so as to prevent any such legal challenge from happening in the first place. In a bid to avoid the legal action that Uber is now facing from its drivers to prove that they are in fact workers, Deliveroo has apparently included a clause in its contracts to prevent its couriers from challenging their self employed status in the courts. This clause apparently reads that the ‘independent contractor’ will not present a claim to challenge their status but that if they do, they will pay Deliveroo any costs and expenses incurred in respect of such legal action.
Although this might appear to be smart move by Deliveroo, the reality is that if their couriers are in fact workers and not truly self employed they have every right to bring legal claims to challenge this and enforce their rights, without having to indemnify Deliveroo’s costs. Statutory rights can only be waived through a settlement agreement or through ACAS. In addition, such an onerous costs penalty where there is significant inequality between the bargaining powers of the parties is likely to be found to be contrary to public policy and thus void.
Ultimately, there is no way for an employer to avoid giving their workers or employees basic employment rights if they are entitled to them. Employment status is not determined by what the employer wants it to be, even if this is written into the contract and the worker or employee signs it. Employment status is a matter of fact, decided by the courts who will focus on the reality of the ‘employment’ relationship and not necessarily what any written agreement states.
Inevitably, that status determination impacts on a business in respect of PAYE and NI contributions. Even where an ‘independent contractor’ sets up their own limited company and provides services through this company, it is still open to challenge as to whether the contractor is truly self-employed if the contractor provides an exclusive, personal service and is controlled and directed by the ‘employer’. This is an area HMRC are increasingly clamping down on, regarding these arrangements as ‘disguised employment’ and removing the tax advantages enjoyed by both the contractor and the company they provide their services to. This even applies where the services are provided via another intermediary such as an agency.
So, all in all, a considerable amount to be considered.