The Gig Economy: The Common Law and Worker’s Rights
In recent years, there have been several challenges in courts concerning gig economy workers and atypical working. These are likely to have profound implications on the wider gig economy, as will be explored in the article.
Section 230(3) of the Employment Rights Act (ERA) 1996 states that a worker is an individual who works under a contract of employment or any other contract "whereby the individual undertakes to do or perform personally any work or services for another party to the contract" (i.e. a contract of service). This is the definition in the legislation but the tests are found in the common law, often referred to as "limb (b) cases" after the ERA 1996 Section 230(3)(b). Such cases, as to be discussed, are significant in this context as worker status confers a number of employment law rights and protections on individuals which those who are self-employed or are independent contractors (i.e. a contract for service) do not enjoy. These rights include, include, inter alia, the entitlement to the national minimum wage; working time rights including paid holidays and protection from discrimination (including equal pay).
The gig economy (and the atypical working it involves) has grown considerably; it has near-tripled in England and Wales in the last five years according to research by the Trade Union Congress, with 4.4 million people involved in this economic sphere. The gig economy is “a labour market characterised by the prevalence of short-term contracts or freelance work as opposed to permanent jobs”. In a government-sponsored survey conducted by the Department for Business, Energy & Industrial Strategy in 2018, providing courier services (such as food delivery companies like Deliveroo and Just Eat and other services such as Uber or CitySprint) is the most common type of gig economy activity. In this study, Uber was the most mentioned platform used. One in four respondents reported that they earned less than £7.50 per hour which was the National Minimum Wage for those over 25 at the time of the survey. From these studies, it is clear that typical working is becoming less prevalent and this has seen a rise (as mentioned above) in these new types of atypical working such as temporary and zero-hours contracts within the gig economy. This type of working had, especially before major cases which reshaped employment law rights in this area, and still has (to some extent) great benefits for businesses and organisations. For instance, it gives them great flexibility and they save money and resources as they are not responsible for providing employee benefits such as those mentioned previously.
One of the first key cases in reshaping the law in this area was the 2018 Pimlico Plumbers & Mullins v Smith; this involved a plumber who was employed under a self-employed contract as an independent contractor, thus not entitling him to any employment law rights enjoyed by those with worker status. However, the United Kingdom Supreme Court held that Smith was a worker, as personal service was the dominant feature of his contract, and that he was not an independent contractor because he was subject to certain obligations and controls under his contract. An even more high-profile case came before the Supreme Court in 2021: the Uber v Aslam litigation. This concerned the taxi drivers that operated via the Uber app, whom Uber argued were independent and self-employed drivers. However, the Supreme Court disagreed, holding that, in reality, the drivers were contracted with Uber to personally perform work for Uber and that Uber exercised tight control over their drivers with regards to the fare charged and monitoring the activity of the drivers. This case is also significant as it affirmed the principle laid down in 2011 during Autoclenz v Belcher where it was found that the relative bargaining power of the parties must be taken into account in deciding whether the terms of any written agreement in truth represent what was agreed. Therefore, the courts can look beyond the "sham" doctrine (the contract), which may not accurately reflect actuality, at the reality of the situation; the Supreme Court in Uber referred to the "high degree of fiction" in the contract. Thus, the courts are prepared to enforce workers’ rights against large companies operating in the gig economy.
A number of other courier organisations have also typically characterised their couriers as "independent contractors" only for courts to find them actually to be workers. For example in 2019 it was held in Addison Lee v Lange that a courier for Addison Lee was a worker and in 2016 the employment tribunal found that a courier for Citysprint was also a worker (Dewhurst v Citysprint). These findings by the courts and tribunals that these individuals involved are in fact workers have potentially severe ramifications for these companies within the gig economy, as discussed below. However, it must be noted that not all courier personnel are workers; in 2021's IWGB v Deliveroo it was held by the Court of Appeal that Deliveroo couriers were not workers due to a lack of personal service, thus limiting the rights of certain gig economy workers.
This jurisprudence, finding that a large number of persons in the gig economy are workers, could have large implications for the companies that operate within the gig economy. As mentioned above, those who hold worker status enjoy several rights, such as national minimum wage entitlement and working time rights. The knock-on effect of this could be numerous claims coming to the courts concerning the (non) payment of holiday pay and annual leave and potentially relating to entitlement to the minimum wage. One of the first major breakthroughs in this area concerned the Pimlico Plumbers case, which as recently as last month came back to the Court of Appeal concerning the repayment of Smith’s holiday pay. Smith had taken holidays, but these were unpaid; the Court held that Smith was entitled to payment in respect of the untaken leave (this decision extended the 2017 principle of King v The Sash Window Workshop Ltd). According to the law firm DWF, this case will have a significant impact on employers engaging purported "independent" or "self-employed" contractors, not only in the gig economy but in wider fields. Such workers will be able to claim back holiday pay dating back to when they started work, which for many employees could be a considerable time and for many employees will be of great expense. However, as workers rather than employees, they will not be afforded further protections, such as the ability to claim unfair dismissal or redundancy. Again, with regard to the Uber case, there will now be a re-evaluation of what the Uber drivers have been paid. The decision to classify its drivers as workers means that 70,000 Uber drivers in the UK are now entitled to certain statutory rights, including but not limited to hourly pay, the minimum wage and (backdated) holiday pay. In addition, Uber and other companies could face further backdated claims, such as those for unlawful deductions under Section 13 of the ERA 1996.
Therefore, if many other workers follow the route taken by Smith, outlined above, there could be a large number of claims being brought to the employment tribunals and the courts concerning not only unpaid holiday pay but also other rights which workers are entitled to as mentioned above. This could be the cause of great concern for these large multinational companies who operate within the gig economy as these cases have opened the possibility of those who work for them being entitled to a number of contractual benefits that were previously denied which would be of great expense. These decisions could result in higher costs or revised business models for companies, that are not actually party to the cases, relying on similar arrangements. It is likely that these decisions, especially Uber v Aslam will “reverberate through the entire gig economy” and other companies in the wider gig economy will be forced to review and rearrange their working model, in some cases quite drastically. Moreover, the threat of legal cases being brought against other companies on the back of these decisions may add further pressure for other firms to follow suit. For example, Just Eat has offered to change their couriers’ zero-hours contracts, providing them with an hourly wage.
These decisions will also eradicate many of the competitive advantages that the gig economy enjoyed or currently enjoys. The United States SEC report on Uber in 2019 stated that if drivers were classified as workers this would "incur significant additional expenses". A further negative implication for these companies could be a fall in productivity. There is evidence that moving from paying an hourly wage to paying workers for each individual good or service they provide (i.e. timework or piecework) results in higher average productivity. This could lead to a fall in productivity in these areas as drivers (and other individuals previously classed as "independent contractors" or "self-employed") lose their economic incentive to complete as many jobs as possible. This might not only have positive effects for the workers in the gig economy; the report suggested that this might lead to a rise in prices for the consumer and thus lower demand, resulting in unemployment, not just for Uber but for other companies that operate in this sphere.
In summary, these decisions, including but not limited to the landmark Supreme Court decision in Uber v Aslam, have wide-ranging consequences for the individuals and companies operating within the growing gig economy in the United Kingdom. As the Financial Times has succinctly put it, "the days of profiting from ambiguity in UK employment law could come to an end."