Contracts of Employment: Is the Gig Up for the Gig Economy?

The gig economy is in the spotlight once again this week as a number of high profile cases are before the courts seeking to determine the employment status of individuals. The eagerly awaited Pimlico Plumbers case was heard by the Supreme Court last week, while the Uber case is scheduled to be heard by the Court of Appeal next month. These landmark cases could have huge ramifications for those currently employed on insecure contracts.

The timing of these cases is particularly noteworthy and will certainly bring the precarious nature of the gig economy, exploitative employment practices and the issue of insecure contracts to the fore, given that the UK government published its response to the Taylor Review only last week. The government welcomed many of the recommendations made by Matthew Taylor in his ‘Good Work Report on Modern Working Practices' and said it would consult on the best way to proceed on others. It stated it intended to go beyond the recommendations of the Taylor Review by enforcing holiday and sick pay entitlements for vulnerable workers, giving all workers the right to demand a payslip, and allowing all workers to demand more stable contracts.

We asked Mark McAllister of the Labour Relations Agency to set out key learning points from the Government's response. Read his summary here.

Pimlico Plumbers

Last week the Supreme Court was tasked with deciding whether plumber Gary Smith, who between 2005 and 2011 worked exclusively for Pimlico Plumbers on a self-employment contract, was a worker (acquiring certain rights) or a self-employed contractor.

The Supreme Court hearing before Lady Hale, Lords Wilson, Hughes and Lloyd-Jones and Lady Black, considered whether Smith was a 'worker' within the meaning of the Employment Rights Act and Regulation 2 of the Working Time Regulations 1998, and whether he was in ‘employment’ within section 83(2)(a) of the GB Equality Act 2010.

If the Court of Appeal's decision (that Mr Smith was a worker) is overturned it could have important lessons for the wider economy, including many businesses that use independent contractors operating outside of the gig economy, and sectors such as the media and healthcare.

https://www.peoplemanagement.co.uk/news/articles/workers-rights-tested-pimlico-plumbers-supreme-court

Response to the Taylor Report Recommendations

Given the complexity and lack of clarity on the subject, the House of Lords has produced a guide entitled the ‘Gig Economy: Legal Status of Gig Economy Workers and Working Practices’ in an attempt to minimise the difficulties encountered when trying to define the employment status of an individual under the current law.

The Lords Library Briefing provides information on current employment law and what it means to be ‘self-employed’, a ‘worker’, or an ‘employee’. It provides information on all current and previous legal challenges brought against companies operating in the taxi driving, food delivery, goods couriers and skilled manual labour sectors of the gig economy, and their meaning for the employment status of individuals working in these sectors, referring to various government and parliamentary reviews.

http://researchbriefings.files.parliament.uk/documents/LLN-2018-0026/LLN-2018-0026.pdf    

At present, there is not a straightforward test to determine the status of individuals but rather the consideration of numerous factors, namely, control, mutuality of obligation, personal service, provision of equipment, and acquisition of risk, amongst others. We anticipate the Supreme Court will provide some much-needed clarity in the Pimlico judgment in order to codify the law on employment status and assist practitioners in prospective cases of a similar nature.

Christa Ackroyd Media v HMRC [2018] UKFTT 69

Bogus self-employment has continued to be criticised by the courts this week as former BBC presenter Christa Ackroyd was ordered to pay more than £400,000 in unpaid tax after a Tax Tribunal found that she was an employee and not a self-employed contractor. 

Ms Ackroyd was a freelance journalist and television presenter. She operated under a ‘personal service company’ known as CAM Ltd and worked at the BBC pursuant to two fixed-term contracts. Under previous IR35 rules, the contractor decided their own employment status but, since April 2017, the organisation does. Contractors deemed to be inside the IR35 regulations are taxed in the same manner as employees, despite being ineligible for employment rights, such as sick pay. In July 2013 the BBC dismissed Ackroyd, who was on a seven-year contract for services up to 225 days per year, following HMRC’s formal demand for unpaid tax.

The Tribunal acknowledged that Ackroyd had the right to specify what services Cam Ltd would provide; that the BBC would have control over the content owing to its editorial responsibility; that she was unable to provide services to other organisations without consent; and was obliged to provide personal service negating the right to substitution.

Dismissing Ms Ackroyd’s appeal, and thus regarding her an employee for income tax purposes, tribunal judge Cannan said:

“The existence of a 7-year contract meant that Ms Ackroyd’s work at the BBC was pursuant to a highly stable, regular and continuous arrangement. It involved a high degree of continuity rather than a succession of short-term engagements. That is a pointer towards an employment contract.”

“We do not consider that Ms Ackroyd could fairly be described as being in business on her own account. She was economically dependent on the hypothetical contract with the BBC which took up most if not all of her working time.”

Once again this case highlights how complex employment status is and stresses the importance of analysing arrangements and understanding IR35 tax rules and the use of PSCs.

https://www.scribd.com/document/371646593/Christa-Ackroyd-Tax-Appeal-Ruling-Feb-2018

Mr R Blakely v On-Site Recruitment Solutions Limited & Heritage Solutions City Ltd UKEAT/0134/17/DA

The case of Mr R Blakely v On-Site Recruitment Solutions Limited & Heritage Solutions City Ltd is another recent judgment attempting to stamp out bogus self-employment.

The case was for the unlawful deduction of wages and employer’s national insurance contributions as well as the failure to pay holiday pay. The EAT held:

• The tribunal was wrong to decide that Mr Blakely was not a worker (when determining whether there was a contract the tribunal must consider the intentions of the worker and all surrounding circumstances, not just the intentions of the employer);
• There was a contract between Mr Blakely and On-Site (the agency) - importantly, the use of a payroll company did not circumvent this relationship;
• Mr Blakely (and therefore other agency workers being paid through payroll companies) could be a worker of the agency, the payroll company or both.

Unite Assistant General Secretary Howard Beckett said:

“The fact the EAT held that a worker could be jointly employed by two organisations is a game changer in the campaign against bogus self-employment. Unite will be ensuring that the EAT’s findings are fully utilised to ensure that other workers are not denied their basic employment rights or exploited by agencies and parasitical payroll companies.”

https://www.gov.uk/employment-appeal-tribunal-decisions/mr-r-blakely-v-1-on-site-recruitment-solutions-ltd-2-heritage-solutions-city-ltd-debarred-ukeat-0134-17-da

Conclusion

The aforementioned landmark cases put the gig economy and the lack of clarity around employment status on trial. It is hoped that the forthcoming judgments will clarify the law in this area and set a clear precedent for other gig economy disputes in the future.

With any luck, the UK government will acknowledge the uncertainty facing many attempting to determine their employment status and the rights to which they are entitled. Although, strictly speaking, it is not applicable to NI, the work is predicated on a UK-wide industrial strategy and all of the "Good Work" related issues could have equal application in NI. And, of course, Matthew Taylor and his team came to Belfast as part of their research analysis.

Whilst not an easy task, it is evident that the government needs to address the issue as a matter of urgency by providing clearer legislation that reflects the modern workplace and a definitive outline of the tests for employment status. Perhaps this is one recommendation by Matthew Taylor the government will implement sooner rather than later.

“Government should replace the minimalistic approach to legislation with a clearer outline of the tests for employment status, setting out the key principles in primary legislation, and using secondary legislation and guidance to provide more detail.”

- Good Work: The Taylor Review of Modern Working Practices

Find Out More:

Legal-Island is hosting an event in association with Mills Selig entitled ‘Contracts for the Modern Employment Relationship’ on 17 May 2018 at the Merchant Hotel Belfast, a must for any organisation looking to update their contracts of employment or seeking to introduce organisational change.

As employers are faced with ever-increasing demands for flexibility from clients, contractors and employees alike, the effective management of your contracts of employment has never been more important.

The event will enable you to stress test your current template so you can identify which clauses in your template contract of employment need to be updated; arm you with ‘best in class’ clauses which you can incorporate into your template contract; identify where standard clauses, including restrictive covenants, need to be brought up to date with the digital world; and show you how to build flexibility into your contracts to enable the organisation to adapt and react to a fast-changing global economy.