“Good Work”: The Taylor Review

Posted in : Supplementary Articles NI on 11 August 2017
Majella Culbert
PwC Legal

The Taylor Report was published on 11 July 2017 and is a government commissioned review of modern working practices.  It has made over 30 recommendations which are proposed to change employment law for the better.  Whilst the Review focussed on GB legislation, the consultation extended to Northern Ireland and the legal and tax principles apply within this jurisdiction.

The Report has been the focus of media interest not least because of its scrutiny of the “gig economy” which has been subject to recent employment litigation on “worker” status (as per cases involving Uber, City Sprint and Pimlico Plumbers).  Matthew Taylor has not shied away from this and one of his more controversial recommendations has confirmed that people who are eligible for worker rather than employment rights be legislatively defined as “dependent contractors”. Detractors have stated that this is a meaningless new label for a category that already exists, which is workers.  My own view is that this reclassification of itself solves little of the current confusion around status, but if sufficient clarity can be provided within the proposed legislation and/or any explanatory documentation, then it could be extremely helpful to employers and workers alike.

We already have three categories of employment status: employee; self-employed and worker but Mr Taylor sets out his finding that ordinary members of the public are confused as to which rights they may or may not have.  This is probably a fair assessment in that evolving case law has left the statutory definition of employee behind when setting out the various tests which need to be applied to determine status.  This leaves both individuals and employers confused as to the true nature of their relationship and with little understanding on how legal tests such as mutuality of obligation, personal service and control, are decisive in determining the true legal nature of the relationship.  However, it remains a point of concern that any purported attempt to simplify the classifications of employment status through amendments to statute and the provision of additional guidance will simply open up the potential for further litigation which can test the boundaries of any new legal definitions.  Mr Taylor goes on to express a view that an assessment of the level of “control” exerted over an individual should be the key test of status as a dependent contractor.  This could bring an end to the use of substitution clauses and personal service companies to defeat claims of employee/worker status.  This isn’t to say that employers and employment lawyers won’t seek to portray self-employed contractors as being entirely in control of their own work, but it may be a harder primary test to defeat worker (or the  newly defined dependent contractor) status.

Some commentators have dismissed the Taylor Review as only being applicable to employers engaging individuals via the gig economy, but a closer reading shows that if implemented, the Taylor proposals would have major consequences for any business engaging significant numbers of non-payroll staff. The recommendations impact businesses who engage directly or indirectly:

  • Self-employed contractors
  • Agency workers
  • Casual/seasonal/part-time workers
  • Students
  • Interns/Apprentices
  • Zero-hour contractors

Mr Taylor has also suggested that employees ought to be able to apply to an employment tribunal for an assessment of their status, with the burden of proof in showing that they are not an employee/worker remaining with the employer.  This, combined with the removal of Employment Tribunal fees in Great Britain (we do not have a fee regime within the Industrial Tribunal system in Northern Ireland) is likely to make many employers feel apprehensive about the move towards greater regulation and Tribunal intervention in the employment relationship. Section 28 of the National Minimum Wage Act 1998 does already make provision for the reversal of the burden of proof regarding NMW claims and unlawful deduction of wages claims (typically used for holiday pay claims in the Industrial Tribunal).  However, it may be that Taylor has a broader application in mind, we may need to see what further detail is put forward on this to give a proper view.

One of the other resounding findings of his Review is that there is a need for better quality work. Mr Taylor puts forward the view that this would satisfy the need for employees to be able to progress in their role and not to get stuck on National Living Wage.  Whilst this is more of a societal shift than an issue which can be legislated for, it does support the view that whilst the UK is presently experiencing historically low unemployment rates, productivity rates remain low relative to other countries.  Mr Taylor has also stated his view that the balance of power and flexibility in the gig economy is presently placed entirely with employers with workers having little security about hours to be worked and wages to be received.  Mr Taylor does not appear to be opposed to the gig economy in principle and indeed confirms his recognition of the contribution it has made to the estimated one million people working in the sector.  He praises the flexibility it can provide and refers to a Labour Force Survey issued in March 2017 which found that 62% of those on zero hours contracts did not actually want to work or be contracted for more hours.  This is further supported by a recent PwC survey which found that 58% of 18-34 year olds would consider gig work.  Perhaps unsurprisingly only 30% of those aged over fifty five were interested in working in this way.  However, Mr Taylor does state his view that existing gig workers advised him they could not see a means to progress from their current job to a better paid one with greater opportunities.  To me, this plays to a common misconception that “gig workers” are predominantly made up of the lowest paid workers in society.  Whilst delivery and courier services do form 9% of the category of “gig workers”, over 28% are involved in accountancy, legal advice and other consultancy work (RSA Survey 27 April 2017). It would follow that those 28% have deliberately chosen this career path in the full knowledge and understanding of what participating in the “gig economy” will do for their career.  Unsurprisingly, critics of the Taylor Review state that the additional layers of legislation recommended will do little to simplify an already complex and fraught area of employment litigation.  Perhaps an alternative (but perhaps equally controversial) suggestion is to roll out certain additional rights to those individuals who fall within the definition of worker at present.

The Report sets out over 30 recommendations for reform.  Some stray into areas of tax and social policy and may be of less interest to employment and HR practitioners but I will discuss the most important of these recommendations during the course of my talk in November.  In the meantime, it is hard to imagine that the government in the midst of Brexit negotiations will be prioritising employment law reforms as an agenda item. We will have to await their consideration of the recommendations and an outline of their proposals which have been scheduled for provision by the end of this year.  The Government’s motivation in implementing some of the Taylor proposals may well be linked to their need to have fewer people in self-employment so that they can increase tax revenues on those in employment.  This is especially so given the recognition that 80% of those who are self-employed do not employ others and have not sufficiently saved for their retirement, such that they will likely have to seek benefits from the state that they have not contributed to, in contrast with employees.  I will also be covering the different employment rights and benefits available within each classification of employment status at my forthcoming session at the Annual Review of Employment Law and examining some of the recent case law which has shaped interpretation of the different classifications. 

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Majella Culbert will be discussing this report as part of her Solicitors Guide to Contractual Flexibility and the Gig Economy session at Legal-Island's flagship Annual Review of Employment Law conferences in November. 

This article is correct at 11/08/2017
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Majella Culbert
PwC Legal

The main content of this article was provided by Majella Culbert. Contact telephone number is 028 9041 5198 or email majella.culbert@pwclegal.co.uk

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