Reward insight
Working in the gig economy
Stephen Morrall, partner in the employment department at Hunters Solicitors, discusses the status of ‘gig’ workers, a recent court judgment and offers advice
T he gig economy has been in the press again since the decision of the Court of Appeal on 10 February 2017 in the case Pimlico Plumbers & Charlie Mullins v Gary Smith. Typical organisations that offer ‘gig’ work are the minicab service Uber, the cycle courier provider Citysprint, and the car valet Autoclenz. The ‘gig economy’ has an up-beat overtone, implying that people can do a gig here, a gig there, with freedom and independence but without the tedium of being tied to a single employer. While this may suit some people, for others it means uncertainty and the risk of being exploited for doing piece-work jobs at cut-price wages. The common thread running through all these cases is a carefully structured relationship between a company and its workers, which is arguably within the black letter of the law, but which the courts have decided is artificial and does not reflect the true nature of the working relationship. Traditionally, people think of themselves as either employed or self-employed, i.e. they either have a contract of employment or are an independent contractor providing services to whoever will engage them. Employees have security and benefits and the protection of employment law; but for the self-employed, it is no work, no pay. The gig economy has resulted in an increased use of various types of casual arrangements, including zero-hours contracts, which can be unsatisfactory for the individual. Depending on the nature of the relationship, an individual whose status as an employee or self-employed is unclear might nevertheless be categorised as a ‘worker’, which is an intermediate status between the two. Workers have limited rights under the employment legislation, including the rights to paid holiday, sick
pay and protection against discrimination. Confusingly, employees are workers, but not all workers are employees; and a self- employed person can also be a worker. The label does not change the substance of the relationship Pimlico Plumbers is the latest case to consider the position of workers. Mr Smith, a plumber, was engaged by Pimlico Plumbers as a self-employed operative to provide services to the latter’s customers. The parties considered that Mr Smith was self-employed. He was VAT (value added tax) registered, he accounted directly to HM Revenue & Customs (HMRC) for tax and National Insurance contributions, he insured himself and he carried the risk that he would not be paid for his work. After Mr Smith suffered a heart attack and could no longer work full-time, his contract was terminated. He claimed unfair and wrongful dismissal and that he was owed sick pay and holiday pay. He also claimed that he had been discriminated against by reason of disability. If he were an employee, he would have the full protection of employment law, including against unfair dismissal. If he were a ‘worker’, he would have more limited protection, including against disability discrimination, and the right to sick pay. The Court of Appeal had to decide whether Mr Smith was an employee, a worker or self-employed. The Court confirmed that the test for being a ‘worker’ was that the individual must perform the work or services personally; the ‘employer’ under the contract should
not be a customer of the individual’s business undertaking; and there must be a contract between them containing mutual obligations. The court decided that Mr Smith was not an employee because Pimlico Plumbers was not obliged to provide any work, nor Mr Smith to do work if asked. Mr Smith had to do the work personally and he could not send a substitute. He was subject to a high degree of control – he had to work forty hours per week, he had to wear a uniform and hire a branded van, and the contract contained restrictive covenants both during and after termination of the contract. In all the circumstances, the Court of Appeal found that Mr Smith was self-employed but was nevertheless a worker. The differences between being a worker, being employed and being self-employed can be confusing. Some employers have tried to treat people as self-employed, and they may even pass HMRC’s test for determining self-employed status in ‘IR35’, but that does not exclude someone (like Mr Smith) from also being a worker. Employers cannot assume that by calling someone self-employed, they can avoid employment law. Particularly where the employer exercises such a degree of control over its employees that they are not genuinely able to run their own businesses as they wish, they are likely to be categorised as workers and, possibly, even employees. The label does not change the substance of the relationship. The party is not yet over. Pimlico Plumbers and the other decisions do not preclude ‘gig’ relationships, but employers who treat their workers as self-employed need to review their contracts carefully and consider the consequences. Each case will be decided on its own facts. n
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Issue 30 | May 2017
| Professional in Payroll, Pensions and Reward |
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