One of the perennial issues that crops up in employment law is about employment status, i.e. is the individual an employee, worker or self-employed contractor? The answer will determine what rights an individual has. The issue has generated a lot of case law over the years. As we see the rise of the ‘gig economy’, this is not going to go away, as was recently demonstrated in the widely reported decision of the Employment Tribunal in the case involving Uber drivers (Aslam and others v Uber BV and others (2015)).
Before looking at the case, here is a quick reminder of what is meant by the terms ‘employee’, ‘worker’ and ‘self-employed’:
- Under the Employment Rights Act 1996 (ERA 1996), an employee is defined as “an individual who has entered into or works under a contract of employment”. An employee has extensive rights under employment law.
- A worker is defined under ERA 1996 as an individual who has entered into or works under:
- A contract of employment; or
- Any other contract, whether express or implied and whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual.
Workers have less extensive rights than employees (we’ve heard the rights available described as the “half-promised land”), but do have some rights such as the right to be paid National Minimum Wage, the right to paid annual leave, rights to rest breaks and protection under discrimination legislation.
- A self-employed contractor is someone who genuinely works for themselves. Generally, the individual will: not be supervised or directed in the work they do, have no obligation to provide or accept work, and pay their own tax and national insurance.
Most of you will be aware of Uber and what they do. However, for those that are not – Uber provides a smartphone app so that individuals can order a taxi and pay the fare. Uber engage drivers who have to supply their own car and cover running costs. A driver can choose when to work by logging on to the app, which signals they are on-duty and available for hire. The app will partner up a customer and available driver in the area, and if the driver accepts the job, then the service is provided. Uber take a cut of the fare, and the rest is paid to the driver. Uber has treated the drivers as self-employed individuals, and the contractual documentation they put in place reflected that.
A number of Uber drivers brought claims for unlawful deduction from wages, and failure to provide paid leave. They argued that they were ‘workers’ under the ERA 1996, National Minimum Wage Act 1998, and Working Time Regulations 1998. This would mean that they would obtain the right not to be paid less than the National Minimum Wage, be subject to rules around working time, and be able to take paid holiday.
The Employment Tribunal agreed with the drivers that they are workers. They entirely rejected Uber’s argument that they simply provide a technology platform which puts drivers in touch with passengers and that it is not a provider of taxi services. In particular, the Employment Tribunal found that the contractual documentation in place did not reflect the reality of the relationship Uber has with the drivers, particularly as a driver cannot bargain with the passenger. The Employment Tribunal also said that it is an essential feature of Uber’s business to maintain a pool of drivers who it can call on as and when a demand for driving services arises, so it was “unreal” to say otherwise.
The case demonstrates once again that an Employment Tribunal will not be scared to look beyond the contractual documentation in place to make a decision about employment status. Contracts can certainly help, but if they do not reflect what actually takes place in practice then issues can arise. Employment status can involve some complex considerations, and also have quite far-reaching implications both in terms of an individual’s rights, and payments to HMRC for income tax and national insurance contributions.
As this is a decision at Employment Tribunal level only, Uber may appeal to the Employment Appeal Tribunal. If they do, we will keep you up-to-date.
If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).
Please note that this update is not intended to be exhaustive or be a substitute for legal advice. The application of the law in this area will often depend upon the specific facts and you are advised to seek specific advice on any given scenario.