02nd March 2017

Employment Status Review

Earlier this month, the Department for Business, Innovation and Skills published its Employment Status Review which evaluates the current model of UK employment status. The Review also considers ways in which the government could deliver a framework that strikes the correct balance between the rights of the individual and the needs of business, in a climate where there is an increasing need for a flexible workforce.

Who’s Who?

As you are no doubt already aware, employment rights are determined by employment status.

Our current model provides us with 3 main types of employment status, which are summarised below:

  1. The Employee: someone who enters into work under a contract of employment; basically where one person agrees to serve another.

Employees have extensive employment protection rights.

  1. The Worker: casual/zero-hour workers emerged during the 1990s and the terms were used to describe someone who is not a traditional employee but yet is not self-employed. A worker is someone who is contracted to personally perform work, i.e. there is an expectation by the employer that the employee will accept work when it is offered and an expectation by the worker that the work will be offered to them by the employer. There must also be an element of control over the worker. An example of a worker could be a doctor providing services once a week to a private cosmetic clinic, or a doctor acting as locum.

Workers have limited employment rights in comparison to employees.

  1. The Self-employed: this status arises where neither of the above types of contract exists and as is self-explanatory – the worker is not employed by another party and completes work for themselves.

The self-employed do not benefit from any of the employment rights that workers and employees benefit from.

Determining Status

Employment status is usually documented in a contract of employment or a contract for work. Where it is not, or where it is asserted that the contract is not a true representation of the reality, the Tribunal will examine how the arrangement operates in practice and have the power to draw an alternative conclusion.

A good example of this is the Deliveroo case. Deliveroo engaged couriers as “self-employed contractors” and asked the couriers to sign an agreement containing a clause to say that they would not bring any claims asserting that they were workers or employees.

When the couriers challenged their status, the Tribunal held that it did not matter what the written contract said, the Tribunal can look beyond a contract to what is actually happening on the ground. It was determined that the couriers’ true status was that of ‘worker’.

DeliverOn the back of this, Deliveroo’s MD Dan Warner confirmed to a Parliamentary Select Committee on 22nd February 2017 that the company needed to “revise the contract.”

 “Gig Economy” – What’s Wrong?

Deliveroo are one of many new businesses who are choosing to offer work in new and innovative ways, for example, by engaging people on a job-by-job basis as a way of offering work flexibly.

In 2016, there was a rise in the number of cases where individuals challenged their contractual employment status.

No doubt you’ve also heard about the UBER case. UBER, the infamous ‘taxi app’, originally engaged its taxi drivers as self-employed contractors. Some of the taxi drivers claimed that UBER was trying to control their working patters but were denying them basic workers’ rights e.g. minimum wage, rest breaks and paid holidays. A Tribunal ruled that the drivers were in fact ‘workers’ and thus entitled to workers’ rights.

It is becoming more and more apparent that companies are either unable to identify the correct status for the people they engage or they are imposing the employment status they want, rather than the status that best reflects the working relationship.

As a result, employees are being treated as casual workers or workers as self-employed contractors, which means that, unless they challenge this in the Employment Tribunal, the individuals concerned loose out on the legal rights and protections that they are entitled to such as paid holidays, the right to be paid national minimum (or living) wage, employer pension contributions, SSP entitlement, etc.

The Taylor Review

Given the increasing amount of cases disputing employment status, it is arguable that employment law has failed to keep up with new and innovative business models and flexible working practices.

RSA Chief Executive Matthew Taylor has been asked to lead an independent review into modern employment practices and their compatibility with modern business models. Mr Taylor began his Review back in October 2016 and we eagerly await his response.

Amongst other things, the Taylor Review will look at the working arrangements of people who are not covered by the normal range of employment rights and will look to conclude whether the current definitions of employment status need to be updated to reflect new forms of working.

Employment Status Review

The Department for Business, Innovation and Skills’ recent Employment Status Review examines ways in which flexibility can be maintained in a way that supports job security and workplace rights.

The Review considers future possible reforms that will provide clarity for employees as to which employment status applies to them and certainty for employers who want to know what is expected of them.

Interestingly, the Review calls into question the relevance of the distinction between ‘worker’ and ‘employee' status and even suggests that:

“it may be helpful to have a statutory test for ‘self-employment’”.

The Review highlights the issue that employment status is only ever confirmed when a dispute reaches Tribunal and proposes:

“a future system around a statutory presumption that an individual working in the UK was automatically entitled to the full suite of employment protections, carving out those employment relationships that require different treatment.”

Conduct your own review

Individuals working in the health and social care sectors often work as casual workers or on zero-hour contracts, which is, of course, reflective of the fact that service provision requirements fluctuate and that there is often no guaranteed demand for staff.

However, zero-hour and casual worker contracts should not be offered where regular hours are being worked over a continuous period of time, and they certainly should not be used as a means of avoiding employer responsibilities.

ACAS have recently published new guidance to help employers and their staff understand the different employment arrangements which can be found here:

http://www.acas.org.uk/index.aspx?articleid=5071

You should take time to consider employment status of your self-employed contractors and workers and whether or not their status matches their working patterns/practices in reality. Where you can identify work that is predictable, this should be offered to individuals under an employment contract or contract for work where possible. This will avoid exposing your business to potential employment tribunal claims where your staff seek to challenge their worker status.

*All information is correct at the time of publishing

Katy Parkinson

Napthens LLP – Employment Law Specialist

Katy is one of our Employment Law Specialists from Napthens Solicitors. Read more

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