How employers can best determine worker status

In light of recent case law, Stephen Morrall and Aman Khokhar explore what provisions firms should have in place when engaging with self-employed contractors

How employers can best determine worker status

Employment law is in a state of constant flux. Following a number of recent judgments by the Supreme Court and the Court of Appeal, the landscape is not static for employers. They may, therefore, need to consider whether they have to reevaluate their contractual relationship with some of their workers. The key issue is whether the worker is employed or self-employed. 

The critical distinction between a worker as opposed to an individual who is self-employed can be summarised as follows: a worker is someone who has a contract of employment or other contract under which s/he personally performs any work/services for another party, whereas a self-employed person is one who has an unfettered right to substitute another person to provide the services they provide. 

In this context, the impact of several decisions reached this year, which include some prominent employers, are important to consider:

In Uber BV v Aslam, the UK Supreme Court determined that in deciding whether someone is a worker, the courts will examine the level of control that an employer exercises over an individual. In doing so, they will disregard the written contract and instead look at whether an individual is in a position of subordination in relation to another person who controls their work. 

Following the court’s decision in the Uber case, this point was further emphasised in Addison Lee Ltd v Lange & Ors, in which the court ruled that the provisions of a contract are to be disregarded where they differ from the reality of the facts.

Last month, in Stuart Delivery Ltd v Augustine, the Court of Appeal examined the prerequisites of self-employed status in law. The court held that having a right to substitute another person is not enough: for an individual to be classed as self-employed, it needs to be unfettered and actually exercisable in practice, failing which they will be classed as a worker.

The Court of Appeal further addressed the issue of what defines a worker in Independent Workers Union of Great Britain v Central Arbitration Committee and another, relating to Deliveroo riders. It decided that Deliveroo riders were not workers and could be classed as self-employed since, unlike in Stuart Delivery, they were genuinely not under an obligation to provide their services personally and had a ‘virtually unlimited’ right of substitution. 

In a decision that demonstrates that worker status is not confined to the gig economy, but has wider implications for multiple organisations, the Employment Appeal Tribunal (EAT) rejected an appeal in Nursing and Midwifery Council v Somerville. 

The EAT found that the absence of an obligation to accept and perform a minimum amount of work was not fatal to establishing worker status in circumstances when there is an overarching contract between the employer and worker to perform services personally.

Do’s and don’ts for employers

Do

  • Negotiate substitution clauses, include them in the contract and give an individual the genuine right to exercise them.

  • Review your existing contracts with people who you treat as self-employed contractors to assess whether they reflect reality or contain provisions drafted with the intention of depriving those individuals of their statutory rights.

  • Decide the level of control you want to have (or need) over individuals who you engage. If you want more control, then be prepared to accept they are workers who enjoy workers’ rights including the national minimum wage and holiday pay.

Don’t

  • Include clauses that require an individual to financially indemnify you if they are deemed to be a worker. 

  • Include clauses applying sanctions to individuals if they are unable to appoint a substitute.

  • Assume that the absence of an obligation to accept and perform a minimum amount of work in the contract will exclude an individual from being a worker.

Stephen Morrall is a partner and Aman Khokhar a trainee solicitor at Hunters Law LLP