Gig Economy: Employment Status

Oksana Voynarovska, Vasil Kisil & Partners

In this article, Oksana Voynarovska at Vasil Kisil & Partners explores the key labour and employment concerns surrounding the gig economy and the challenges they pose for lawyers practising in the field. 

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The gig economy, also known as “on demand”, “open talent” or “sharing economy”, is currently one of the most controversial trends in employment law. Its defenders claim that it provides boundless innovation and empowers both workers and entrepreneurs, while critics argue that it disenfranchises the workforce and undermines workers’ rights.

A full-time job with one employer has been a standard for decades, but this does not apply to an increasingly substantial share of the workforce. Millions have to undertake short-term and unpredictable work engagements, or “gigs”, often for multiple work providers at once, on a freelance or independent contractor basis.

To put the record straight, this type of work has always existed but gig economy platforms have forced it into the spotlight. This is partly because the workforce is notably whiter and better educated than we might typically presume of low-wage workers. Moreover, such work is generally facilitated through technology, such as web platforms and mobile apps. This economy, spurred by digitalisation, is full of companies offering access to platforms that directly connect customers with providers of goods and services, such as Uber, Taskrabbit, Airbnb, Etsy, Amazon Mechanical Turk, Deliveroo, Hermes, CitySprint, etc.

 

ANY APPLE OF DISCORD?

The gig economy presents a huge range of opportunities for businesses that have historically favoured a more traditional employment model. One of its pivotal advantages is flexibility: a company is able to scale up rapidly and efficiently in busy periods to satisfy customer demands. Furthermore, the gig economy lets businesses source talent from the global marketplace and hire more quickly and cheaply than via familiar recruitment channels. Companies can thus “try before they buy” and avoid the cost of unnecessary long-term or permanent hires. 

The business model of many of these companies relies on engaging individuals as self-employed contractors, rather than as employees. This means that the companies are required to pay them only for the work performed, not for their time, and they do not have to provide paid holiday or pay the minimum wage. From a tax perspective, an employer’s national insurance contributions are not chargeable in respect of fees paid to self-employed persons. But in this regard, critics stress that gig-economy companies take advantage of self-employed workers by avoiding the obligation to grant statutory rights and benefits to individuals who deserve them.

 

EMPLOYMENT STATUS ON THE STAGE

The rapidly shifting nature of the gig workforce means that traditional classifications of employment status are not easily applicable: in other words, the employment status of gig economy workers remains unclear. But from an employment law point of view, status really matters because employees are endowed with more comprehensive guarantees and privileges than self-employed individuals. The latter benefit from a few statutory protections, such as workplace health and safety, and data protection rights. Employees have the same rights, but are also entitled to rest breaks, paid annual leave, the national minimum wage, enrolment in a pension scheme, unfair dismissal rights, redundancy pay and statutory notice.

It is crucial to distinguish between employees/workers and self-employed individuals. There have been several high-profile cases on this issue.

 

UBER

The matter of Aslam and others v Uber BV and others (October 2016) is one of the most notable cases to come before the Employment Tribunal in London. The Tribunal, making a decision on the employment status of Uber drivers, concluded that they were workers and should be entitled to at least the national minimum wage and holiday pay. The Tribunal rejected Uber’s argument that the drivers were working directly for the customers, and that the Uber app merely fostered that work or provided a platform for drivers to contract with customers. The degree of control exercised by Uber over its drivers was the crux of the final decision. It was found that Uber dictated various aspects of the work carried out by its drivers. Substantial factors pointing towards the drivers having worker status included the fact that Uber: 

  • interviews and recruits drivers; 
  • imposes a variety of conditions on drivers instructing them how to do their work and controlling them in the performance of their duties;
  • reserves the power to amend its drivers’ terms unilaterally;
  • requires drivers to accept or not to cancel trips, or both, on Uber’s terms; 
  • subjects its drivers to a rating system, which is effectively a performance management and disciplinary procedure;
  • determines issues about rebates, sometimes without involving the driver whose remuneration is liable to be affected; and
  • controls key information, particularly details about the passenger’s identity, that is unknown to its drivers.

Although Uber appealed the decision of the Employment Tribunal to the Employment Appeals Tribunal (EAT), the latter, in its decision dated January 2017, accepted the previous lower Tribunal’s conclusions and dismissed Uber’s appeal. In late November 2017, Uber sought leave to appeal the decision of the EAT directly to the Supreme Court, bypassing the Court of Appeal, but Uber’s request was denied. The case will be heard by the Court of Appeal at first instance.

 

CITYSPRINT

In January 2017, the Employment Tribunal in the UK heard a similar case and ruled that a bike courier, Ms Dewhurst, was a worker of the courier company CitySprint and should be entitled to paid annual leave (Dewhurst v CitySprint UK Limited). This is the first of four claims being brought against courier companies (the others being Excel, Addison Lee and eCourier). As in Aslam, the Tribunal held that the contract, which purported to treat Ms Dewhurst as a self-employed contractor, simply did not reflect the reality of the situation.

 

DELIVEROO

A group of north London Deliveroo riders has chosen a slightly different tactic. The application was brought in May 2017 to the Central Arbitration Committee (CAC) by the Independent Workers Union of Great Britain to be recognised for collective bargaining purposes in relation to this group of riders. The riders wanted employees’ rights such as holiday pay and the minimum wage. However, the CAC concluded they were self-employed because of their freedom to substitute themselves both before and after they have accepted a particular job.

 

PIMLICO PLUMBERS

On 20 February 2018, the Supreme Court of the UK found that a plumber, Mr Smith, was a worker rather than a self-employed contractor, endowing him with employment rights such as access to reasonable adjustments and holiday pay (Pimlico Plumbers Ltd and Mullins v Smith). Although Mr Smith had some degree of flexibility over the hours he worked and was treated as self-employed for tax and VAT purposes, it was stated to be vital that Mr Smith was required to perform the work personally. In addition, as in Aslam, the degree of control exercised by Pimlico Plumbers and the integration of Mr Smith within Pimlico Plumbers were inconsistent with Pimlico Plumbers being a customer or client of a business run by Mr Smith.

 

GRUBHUB

On 8 February 2018 in California, there was a case named a win for “gig economy employers”. In this case, Lawson v GrubHub, the California District Court ruled that the food delivery service GrubHub had properly classified its driver as an independent contractor, not an employee. The driver, Mr Lawson, had sued for minimum wage violations, unpaid overtime and failure to reimburse business expenses. But the court denied the driver’s claims, holding that GrubHub had little control over the details of the driver’s work. GrubHub did not monitor how and when the driver delivered orders, because it neither stated the amount of time in which the driver had to complete a delivery, nor specified a particular route the driver had to take. Mr Lawson could choose to schedule his work by signing up for a shift or “block” online. Ultimately, the court held GrubHub did not exercise control over the “manner and means” by which the driver performed his work, and as a result, the driver was an independent contractor and not an employee.

In support of this conclusion, the Judge resorted to the Borello test, developed by the California Supreme Court in a cucumber-farmer case in 1989. Factors of the Borello test considered by the court include:

  • Does the employer provide tools and a place to work?
  • Is the worker required to invest in equipment, materials or helpers?
  • Does the service require a special skill?
  • Does the worker’s profit or loss depend on their managerial skill?
  • Is the work different from the employer’s main business?
  • Is the alleged employee engaged in an occupation or business distinct from the employer?
  • Is the work done under the direction of the employer? Or by a specialist without supervision?

Under this test, a worker’s status as an employee or contractor hinges on how much control the employer has over the worker while on and off the job. 

Considering the above court practice, it may be concluded that two primary factors must exist to establish employment status:

  • Personal service: this means the individual is obliged to perform work personally in return for a wage or remuneration and is not permitted to use a substitute to perform the work or to subcontract the work.
  • Control. Frequently, the level and nature of the control exercised by the purported employer will be one of the most carefully scrutinised factors. The focus on what sort of control pivots on not only the type of work that is to be done, but also the manner and way in which it is done. The employer must have sufficient control over an employee, while a self-employed person will typically have greater freedom to decide how and when to work.

Furthermore, gig workers do not work fixed shifts, and are not required to carry out a minimum number of hours each day. In theory, they can work as much or as little as they choose without strict monitoring by the employer. 

 

LEGAL FRAMEWORK

It is indisputable that the legal framework regarding employment and self-employment needs re-examination. On a national level, the tension between, on the one hand, wanting to embrace the new flexibility and freedom the gig economy offers to individuals and, on the other hand, wanting to protect vulnerable individuals against exploitative practices, is demonstrated very neatly by the EU’s early attempts to find a legislative solution. Thus, the Commission, which continues to push for the creation of a digital single market, has called on governments to focus on finding innovative ways to offer life-long and personalised support for employment, skills and welfare, adapted to the needs of individuals, and has backed away from calling for robust new employment rights legislation. In turn, in January 2017 the European Parliament approved recommendations on a new European Pillar of Social Rights that would guarantee basic rights for workers, regardless of the form of employment and contract, and specifically including work intermediated by digital platforms.

On a worldwide level, the global trend towards promoting greater flexibility in working arrangements continues to spread. Various countries have seen recent legislative measures aimed at increasing flexibility for workers.

 

The gig economy, being a move away from traditional “nine-to-five” jobs and towards technology-enabled “gigging” for multiple work providers, constitutes a modern challenge for employment law. It remains for us to make a choice concerning the influx of gig workers: a new category of employment status, or greater clarity around the existing one.

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