DLA Piper UK LLP

A changing world: the ‘gig economy’ and employment law

Question

What are the legal implications of the 'gig economy'?

Answer

The working world is changing. Developments are being fuelled by technology and the drive toward a flexible and adaptable workforce. As a result, we have seen a sharp rise in those working in what has been coined the 'gig economy'. With projections that almost 20% of the labour market in the United Kingdom will be working within the 'gig economy' by 2022, the legal framework behind the sector is becoming more important than ever.

However, the emergence of the 'gig economy' has presented problems for the application of the established legal test of employment status. As a result, the employment status attributable to those working within the industry is unclear, with some advocating that such individuals should be classed as self-employed contractors and others arguing that they should benefit from increased rights by virtue of being 'workers'. The debate has caught the headlines in recent months as numerous household names including Uber, Deliveroo and CitySprint have become the subject of employment tribunal claims. The recent litigation raises the question whether the distinction between self-employed contractors, workers and employees is fit for purpose in the modern world of work.

The 'gig' economy

The phrase 'gig economy' stems from the height of the financial crisis in 2009, at which time those struggling to find work took up several part-time jobs wherever they could. The term can be defined as a labour market characterised by the prevalence of short-term contracts or freelance work as opposed to permanent jobs. Within this, individuals sell their skills on an ad-hoc basis and get paid per 'gig' completed, be it food delivery or a car journey. The technological revolution has caused a surge in the usage of such working models and it is now estimated that there are around five million workers within the industry in the United Kingdom.

The model has been praised for offering flexibility and creating opportunities for those working within it. The companies operating within the sector take advantage of a new generation of workers who seek flexibility by working shifts that fit around their lifestyle and commitments. The working model provides the employer with the ability to adapt to fluctuations in demand by being able to scale their workforce up quickly, while benefitting from avoiding employer's National Insurance contributions. However, the working model has been criticised by some commentators for denying individuals working within it of the rights and protections that they are entitled to.

Why all of this matters

Broadly speaking, employment law differentiates between three main categories of employment status: employees, workers and self-employed contractors. However, the modernisation of the working world has caused the traditional distinction between the three categories to become blurred. The employment status of an individual is important as it determines the statutory rights afforded to them. Self-employed contractors are in business on their own account, the company will be a customer or client and the individual often carries financial risk. They benefit from the most limited rights including whistleblowing, data protection and protection from discrimination.

'Workers' constitute a middle ground between employees and self-employed contractors. 'Workers' benefit from the additional protection of maximum working hours, the National Minimum Wage and holiday pay. The concept is characterised by personal service, the limited right to provide a substitute and mutuality of obligation. Employees benefit from the greatest level of statutory protection including minimum notice periods, unfair dismissal rights and redundancy pay (subject to applicable service requirements).

Series of litigation

The defining characteristics of these categories has been the subject of a recent string of high-profile employment tribunal claims. While cases relating to employment status are not a new phenomenon, the debate has been reignited by the emergence of the 'gig economy', with companies operating within it seeing legal challenges to their business models. The recent litigation has been brought by individuals working for companies such as Uber, CitySprint and Deliveroo, claiming that the terms and conditions of their work mean that they should be classed as 'workers' rather than self-employed contractors, and should therefore benefit from the associated rights and protections. 

When determining cases in this area, the employment tribunal will often focus on the extent to which the individual is subordinate to the company and the extent to which the individual is integrated within the business through aspects such as branded uniforms and vehicles. In order to be deemed a self-employed contractor, there must be a lack of obligation on the company to provide work and a lack of obligation on the individual to perform the work offered. Each case will be highly fact sensitive and the arrangements between the company and the individual will be closely scrutinised.

While we have seen decisions such as Aslam and Others v Uber holding that Uber taxi drivers are workers rather than self-employed contractors, such decisions are first instance and consequently non-binding. There are various ongoing claims which are yet to be heard by the higher courts and therefore this year is likely to see a great deal of development in the area. Undoubtedly, the case precedents will have implications both for the companies and individuals operating within the 'gig economy'. The final decisions are likely to have a lasting impact on transport services, delivery drivers, couriers and warehouse workers, among other sectors. What is evident is that as there will continue to be employment tribunal claims brought as the 'gig economy' continues to grow and diversify.

Government intervention

The area has attracted a great deal of interest from the government in recent months, with several reviews being launched to investigate whether the existing legal framework of employment status remains adequate. On 30 November 2016 the government launched an independent review of employment practices, entitled the Taylor Review, aimed at considering new models of working on the rights and responsibilities of workers. While the review has been put on hold due to the General Election and its aftermath, there is the potential that such reports may lead to legislative changes regarding employment status to bring the law in line with modern working methods.

Comment

In this rapidly developing world, employment law is being criticised for failing to keep pace and adapt to modern trends and working methods. The effect of technology upon the use of the traditional model of freelance work means that the 'gig economy' presents challenges as to how the employment status test is applied, with the working model struggling to fit neatly into one category. Commentators assert that the arbitrary categories imposed by the law fail to accommodate modern working practices. Undoubtedly, clarity is required regarding the employment status of people working within the 'gig economy' and the rapid growth of the sector is making the issue more important than ever. There will no doubt be further employment tribunal cases arising this year and there is potential for new legislation in the area stemming from the Taylor Review. The only thing that seems certain for the 'gig economy' is that further developments are on the horizon.

Abby Walton is a trainee solicitor at DLA Piper

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