Legal

What will happen to the gig economy?

18 May 2018 By Claire McKee

Claire McKee considers what the courts have said about gig economy workers, and where the situation will go from here

As the gig economy has developed, so too has the law regarding gig workers and how their employment status should be regarded. In November last year, the Employment Appeal Tribunal (EAT) rejected app-based taxi firm Uber's appeal against the employment tribunal's earlier decision that its drivers should be categorised as workers rather than self-employed contractors. The EAT looked beyond the wording of the contract to the facts of the relationship, with a particular focus on the control held by Uber over its drivers. 

The decision ultimately turned on the obligation of the drivers to be able and willing to accept at least 80 per cent of assignments when their app was switched on and being subject to penalties for cancellations. This landmark decision, which Uber has appealed to the Court of Appeal (due to be heard on 31 October 2018), has widened the definition of what constitutes a worker and potentially conferred rights upon millions of those working within the UK gig economy.

In another significant case, Pimlico Plumbers Ltd and another v Smith, the Court of Appeal had to consider whether Mr Smith was a worker or in fact ‘self employed’ as his agreement stated. The employment tribunal in the first stage of the litigation process had focused on the fact that Smith was obliged to work a minimum five-day and 40-hour week. A contractual provision that Smith could reject work did not reflect the reality of his minimum contracted hours. The Court of Appeal agreed with the tribunal's findings and dismissed the appeal. We now await the Supreme Court decision with interest.

New worker benefits

Both decisions will be significant in identifying the status of purportedly self-employed contractors, and will have far-reaching implications for the gig economy. They may also have given rise to a shift in the attitudes of gig sector companies towards their workforce, particularly in relation to reward. For example, Deliveroo has since provided its riders with accident insurance. This mirrors the US example of ‘The Black Car Fund’, which is a benefits platform for limousine and black car drivers in New York. It is a not-for-profit insurance provider that provides compensation for drivers who are injured while working. It operates by adding a 2.5 per cent surcharge to passengers' fares for drivers who are in the scheme, entitling them to claim in case of injury. 

While starting to offer some employee-like benefits, Deliveroo maintains that, within the definitions offered by current employment law, its riders remain classed as self-employed, and not workers. 

The controversy surrounding the status of platform workers, and how they may be exploited by companies operating within the gig economy, is presumably Deliveroo's motivation in providing its riders with new benefits. We may see more gig operators follow suit, as it could provide workers with a much-needed extra incentive in light of the social and political storm and provide companies like Deliveroo and others with some much-needed positive media coverage. 

As the gig firms compete with each other for a flexible workforce to suit their needs, these incentives will no doubt become a tool for encouraging workers to join one over the other, as with traditional benefits packages in the contract of employment model. In doing so, however, organisations will seek to avoid crossing the boundary into what may be considered an employer/worker relationship. 

Flexibility

The key issue for firms such as Uber and Deliveroo is flexibility – something they insist their drivers and riders are also keen to maintain. Based on the current state of the law, this flexibility is what potentially stands in the way of gig workers being legally recognised as employees and being granted the security that comes with this status.

With the gig economy growing (an estimated 1.3 million people in the UK are now engaged in this area), employers are more likely to provide gig workers with select benefits of their choosing in an effort to encourage engagement in the industry – not least because of the Taylor review recommendations around benefits. For now, this could ease pressure to provide them with the full statutory entitlement afforded to workers – a compromise that could maintain their desired level of flexibility. 

In time, the resultant administration or bureaucracy involved in providing benefits to gig workers will mean organisations have to weigh up the pros and cons of using traditional contracts of employment. Certainly, organisations will need to be cautious that the provision of benefits to attract genuine gig workers does not result in them hiring permanent employees via the back door.

Those employers that use contractors, or are trying to build a contractor-based business model, need to take a close look at their practices – not just the letter of the contracts, but the day-to day-interactions between contractors and clients.  

Claire McKee is an associate at Dentons

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