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The gig economy: how this may affect you

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The world of work is changing. Companies are always looking for more efficient ways to work and better ways to engage with their customers. This inevitably leads to changes in working practices.

You will no doubt have heard a lot in the media relatively recently about the so-called ‘gig economy’. In particular, the Uber case has received a lot of attention from the press.

But what is the ‘gig economy’, what has it got to do with employment law and what does it mean for you?

What is the gig economy?

The gig economy is a term used to describe companies that offer flexible, short-term or freelance work, rather than permanent jobs. People that work for gig economy companies are paid based on each ‘gig’ that they do, as opposed to being paid a traditional regular wage.

For instance, Uber and Deliveroo are both gig economy companies which are becoming increasingly popular.

Uber, the ride-hailing app company, pays its drivers based on each car journey they do, rather than the number of hours they work. Similarly, Deliveroo, the bicycle food delivery service, pays its riders based on each food delivery they complete. Again, this is as opposed to paying them a set hourly rate or salary.

Much needed flexibility or exploitation?

Supporters of the gig economy say that people who work within it benefit from flexible hours, allowing people to fit their work around their personal lives. In turn, there are benefits to employers too, as they only have to pay staff when the work is available, minimising unnecessary costs.

Due to the flexible nature of the work, people in the gig economy are usually classed as self-employed contractors. As such, they do not have the same employment rights as normal employees. For instance, they have no right to receive the national minimum wage, holiday pay or sick pay. This has led to concerns that people who work in these roles are open to exploitation.

What has this got to do with employment law?

A number of cases involving people working in the gig economy have recently gone to the Employment Tribunal.

The issue for the Employment Tribunal to decide has been to do with employment status. That is, whether the person working for a gig economy company is genuinely self-employed or whether they should actually be classed as a worker/employee.

The Employment Tribunal’s decisions have been very interesting. Tribunals have decided against companies that have tried to classify their staff as self-employed contractors.

How do you decide if someone is employed or is genuinely self-employed and why does it matter?

It matters because depending on which category a person falls into determines what employment rights they have.

It is worth looking at the basics before we go further.

  1. Employees: employees benefit from the whole spectrum of employment rights and protections.
  2. Self-employed: self-employed contractors do not benefit at all from any employment rights.
  3. Workers: workers are the half-way house between an employee and a self-employed contractor. They have fewer rights than employees, but do benefit from the right to receive the national minimum wage, the right to paid time off and protection from discrimination amongst other rights.

For this reason, the employment status of a person is very important.

The Uber decision

In October 2016, Uber drivers won the right to be classed as workers as opposed to self-employed contractors. As such, the Employment Tribunal decided that these workers should receive the national minimum wage and paid leave.

So, how does Uber work and why did they class their staff as self-employed contractors in the first place?

As you may know, Uber operates a smartphone app through which customers order a taxi and pay the fare. Very briefly, Uber operates as follows:

  1. Uber presents itself as a technology platform (i.e. the app) facilitating the provision of taxi services. They do not present themselves as the provider of the taxi service itself; and
  2. Uber’s agreement with passengers states that the contract for the taxi service is between the driver and the passenger (i.e. not connected with Uber itself directly).

The Employment Tribunal considered this and what the reality of the situation was. They decided that:

  • Drivers are not required to make any commitment to work. However, when a driver signs into the app, this usually signals that they are coming “on-duty” and therefore able to accept bookings.
  • Drivers supply their own vehicles and are responsible for all running costs, including the cost of private hire licences.
  • Prospective passengers book trips through the app. Upon receipt of a passenger request, the app locates an available driver (that is, a driver who is logged into the app).
  • The selected driver has 10 seconds to accept the booking through the app, failing which, Uber assumes that they are unavailable and locates another driver.
  • If a driver fails to accept bookings, warning messages are generated, which can lead to the driver’s access to the app being suspended or blocked. This prevents the driver from carrying out any more work via Uber.
  • Once a driver accepts the booking, Uber places the driver and passenger in direct contact, but only through the app. So, for example, the driver does not see the passenger’s contact details.
  • The driver is not made aware of the destination until collecting the passenger. Through the use of satellite navigation technology, the app provides detailed directions to the destination. The driver is expected to follow those directions unless the passenger stipulates a different route.
  • At the end of the trip, Uber’s servers calculate a recommended fare, based on GPS data from the driver’s phone. The driver cannot agree a higher fare. The passenger pays the fare directly to Uber through the app.
  • Uber operates a rating system. If a driver falls below a set average rating Uber can withdraw the driver’s access to the Uber app (effectively preventing them from being an Uber driver).
  • Uber takes the risk in some matters including, for example, some instances of fraud by passengers.
  • Uber deals with any fare complaints, often without requesting any comment from the driver.
  • Drivers are not required to wear any uniform.

Having taken these factors into account, the Employment Tribunal decided that the drivers could not be classed as genuinely self-employed and instead should be classed as workers. This was due to a number of factors including:

  1. Control: Uber has a relatively large amount of control over what the drivers do
  2. Mutuality of obligation: there is a requirement (to a certain degree) for a driver to accept fares, otherwise they can be suspended from being an Uber driver
  3. Integration and risk: Uber retains customer details and deals with complaints themselves

What does this mean for you?

The Uber decision reaffirms what has always been the case with employment status. An Employment Tribunal will always look behind the label that an employer puts on someone and will look at the reality of the employment relationship. If you engage self-employed contractors it is worth considering whether the nature of the relationship is actually self-employed.

If you would like any further advice on any aspect of employment law, please contact a member of our Employment & HR team on 01332 227 596 for a confidential chat.

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