Gig Economy: Self-employed or employed?

by Maryam Khan

In recent years, there has been a decline in the number of regular and permanent employment contracts and growth in new working arrangements, such as self-employment, temporary freelance work and zero-hour contracts. This article will look at the strengths and challenges of the gig economy, and discuss some high-profile cases which the UK courts have heard, concerning the employment status of certain gig economy workers. 

What is the gig economy?

A ‘gig’ is a term used to refer to jobs for a short-term period. The name ‘gig economy’ derives from this word, and tends to include project-based work. Independent contractors, freelancers, project-based workers and temporary hires across almost every industry can be categorised as ‘gig workers’. This includes graphic designers, dog walkers, content writers, artists and web developers, to name a few roles. Some notable companies that use gig workers include, Deliveroo, Uber, Yodel, Amazon and Ocado. It was reported that around five million people in the UK were working in the gig economy last year.

How does it work?

Gig workers work for others as independent contractors. An independent contractor is someone who agrees to provide a service to another as a self-employed individual. Therefore, gig workers, in general, are not entitled to holiday pay, sick pay,  redundancy pay, or any other benefits that an employee is. 

An employee is someone who is bound by an employment contract, whereas, self-employed individuals are responsible for their own practice, and the success or failure of it. On the other hand, a worker is usually contracted to provide a service in exchange for a reward i.e. money or other benefits. All three categories are separate and have their own rights and responsibilities.

If you wish to learn more about the classifications and the associated rights and responsibilities, please click here.

The idea of working in the gig economy seems excellent, due to the prospects of running one’s own business. However, as mentioned, gig workers are not entitled to a minimum wage, holiday pay or sick pay. There is also a lack of job security as work is not always guaranteed and is purely dependent on when the company requires their services. 

Why has the gig economy been in the news recently?

The Court of Appeal has heard several high-profile cases concerning gig workers and their employment status. Many have involved multinational corporations, such as Uber and Pimlico Plumbers. 

Pimlico Plumbers

The Supreme Court’s decision regarding a plumber who won his claim against Pimlico Plumbers set a precedent for many similar disputes. In this case, the Supreme Court found that Mr Smith was a worker, even though he was operating as a self-employed contractor, according to his contract.

The judgment is significant as it highlights that merely having a contract to say that an individual is self-employed does not make them self-employed. The court examines the relationship between the company and the individual, to determine if their relationship mirrors that of a worker or self-employed. They will look at things like, if the individual is mandated to work fixed hours, attend the same office/ location, has the ability to refuse work, and fundamentally how much control is exercised by the employer.

Uber 

The Employment Tribunal dealt with a case concerning Uber drivers,  also on the issue of their employment status. The question they were asked to consider was whether the drivers were self-employed, or workers, and entitled to a minimum wage, holiday pay and paid rest breaks.  The crux of Uber’s argument was that the terms of business provide that all drivers work for themselves and have a right to work elsewhere too. 

However, the drivers argued that there wasn’t a contract between them and their customers and that the conduct of the company mirrored an employee-employer relationship. The drivers were monitored, controlled and evaluated via technology and subject to company rules and regulations. It was also considered that there was a positive obligation upon the drivers to accept work whilst their booking application was active. The Employment Tribunal held that the drivers were in fact workers, as opposed to self-employed. 

Similar to the Pimlico Plumber’s judgment, it was said that simply using the word ‘self-employed’ does not mean that it is the employment status. Uber’s appeal was again dismissed by the Court of Appeal, which also confirmed the decision delivered by Employment Tribunal. However, Uber appealed to the Supreme Court. 

The significance of the Supreme Court decision is that the employment status of drivers will determine what rights they are entitled to. If declared ‘workers’, then Uber drivers will be entitled to holiday pay, paid rest breaks and sick leave, as well as a right to minimum wage, with a potential back payment for at least up to 6 years. The arguments were considered by the Supreme Court in July, and the Judgment is expected in the next couple of months.

The Supreme Court judgment will have catastrophic consequences for the gig economy as a whole, as it not only determines the rights of Uber drivers but will also open up other companies to challenge by their workforce.

Hairdresser Case

The Employment Tribunal decided that a self-employed hairdresser was, in fact, an employee and had the right to claim for notice, holiday, sick and redundancy pay.  The court took into account that the salon the claimant worked at took 67% of her earnings and dictated her hours of work. This was carried out despite her working as an independent contractor and having no control regarding pricing. 

Similar to the Court of Appeal’s reasoning so far in the Uber case, despite what the contract stated, the relationship depicted otherwise. The claimant had no control over the hours she worked and had to comply with several rules. This did not reflect the working relationship of the self-employed, and she was declared an employee of the salon.

Many companies from the gig economy have found themselves before the courts, challenged over the employment status of their workforce. It is evident from the discussed cases that the courts are not plainly concerned with what the contract reads, but look far beyond, at the nature and substance of the relationship shared between both parties.

The expected Supreme Court judgment in the Uber case and the ruling in the Hairdresser case has caused some unease in the industry, as only in August, Just Eat announced that they would stop using gig economy workers. Predictably, other companies will follow suit. The Supreme Court judgment is highly anticipated as it will change the entire sector, and employers will have to think hard about the reality of their relationship with their workforce.

Please find below an explanatory video by Maxwell Short on Gig Economy and Uber case:

This article is intended for guidance only and must not be relied upon for specific advice.

 


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