Self-employment and the world of modern work
By Harry Wall
28 July, 2017
The recent publication of the Taylor Review (the “Report”), a comprehensive UK Government commissioned “Review of Employment Practices in the Modern Economy”, covered a broad range of working practices in the UK, and in particular made interesting recommendations with regard to casual workers employed in the so-called gig economy.
This categorisation of employment status has seen increased scrutiny in recent times with many individuals engaged by gig economy platforms such as Uber and Deliveroo bringing claims to employment tribunals seeking to be granted employment rights more consistent with regular employees than self-employed contractors. Such claims are in turn resisted by the platforms on the basis that their business models are predicated on their “giggers” being independent contractors rather than employees.
Gig economy platforms like Deliveroo operate in Ireland also, and the recommendations emanating from the Report are interesting when considering if and how they might be applied in this jurisdiction.
Flexibility and the Gig Economy
As noted in the Report, labour markets are changing, self-employment is rising and innovative forms of working are causing us to question established norms and how current legislative frameworks fit in with these developments.
In turn the gig economy has been described as a labour market characterised by the prevalence of short-term contracts or freelance work, as opposed to permanent jobs.
Instead of standard wages, giggers get paid for the gigs they do, be it an Uber car journey or a Deliveroo food delivery. Giggers can benefit from flexible hours while platforms need only pay when work is available and do not incur staff costs at off-peak times.
What has proven contentious is the classification of such workers as independent contractors, meaning they have no protection against unfair dismissal, no right to redundancy, to receive the national minimum wage or to accrue holidays, and the argument is made that this new way of working does not truly fit within what could be descried as “traditional” self-employment.
While in Ireland we have two categories of employment, employee and independent contractor, the UK also recognises an intermediate third category of a “worker”. A worker typically undertakes work on a freelance or casual basis, and while they are entitled to some basic employment protections, they are not entitled to redundancy payments or to protection against unfair dismissal.
Over the last eighteen months a number of individuals working for gig economy platforms in the UK have brought challenges to employment tribunals seeking to be classified as workers rather than independent contractors.
Against this backdrop, the Report made a number recommendations around worker status:
Classification of Employment: The division of rights between employees, workers and the genuinely self-employed causes confusion. Rather than scrapping the classifications clarity should be provided as to the type of work that will fall into each classification. Clearer demarcation will help those in work know where they stand and aid in the enforcement of rights.
Control Test: The focus of the tests for worker status should be revised such that the main determinant would be the level of control exerted over the worker. Control should be looked at in a modern sense, assessing what control actually means in a modern labour market and not just simply in terms of the supervision of day-to-day activities.
Personal Service Test: Consequently, the absence of a right to work personally (i.e. the ability to send someone to substitute for you) should not be given as much weight in determining employment status, as the reality is that there will not be a right to work personally associated with most gig economy type roles.
Dependent Contractors: Workers should be re-classified as “dependent contractors”, to better reflect the reality of such work where workers may be tied to one employer, and to draw a demarcation between workers and genuine independent contractors.
Following on from the recommendations on employment status, the Report also made a number of recommendations centred on employment terms and conditions for the new category of dependent contractor:
Working time and Minimum Wage: For many organisations in the gig economy working out what constitutes working time is a major challenge, in trying to apply relevant legislation to the realities’ of workers making themselves available to multiple platforms at once. Given the difficulties associated with quantifying working time, the suggestion is to return to an old-fashioned “piece rate” concept, tied into the national minimum wage, whereby dependent contractors working for platforms such as Deliveroo or Uber would be paid per job completed.
Statement of Terms and Conditions: Dependent contractors should be given a written statement of terms at the start of an engagement.
Holiday Pay: Allow dependent contractors to “roll up “ their holidays, which would involve having their annual leave entitlement paid out as it accrues in the form of a premium on top of wages.
While the above are for now just recommendations, if implemented the measures envisaged would certainly go some way towards bringing UK employment law norms up to date with developments in modern working practices.
Classification of employment status under Irish law arguably presents greater challenges than those identified in the Report given that there are just two classifications under Irish law – employee and independent contractor. A range of tests are applied by Adjudication Officers and the Courts, with often contradictory results. The current tests for employment status, focusing on traditional norms of control, integration and personal working, were not formulated with new ways of working in mind.
Were existing testes to be overhauled to take new practices into account, it remains the case that giggers would not precisely fit into the current classification of either employee or independent contractor. The recommendation from the Report of an intermediate third category of a pseudo or dependent contractor with some basic employment rights has equal resonance in this jurisdiction as it would reflect the reality that giggers are not true independent contractors in the traditional understanding of being fully autonomous.
While this area has not been a priority in recent years, this may change in September of this year when the Competition (Amendment) Act 2017 (the “Act”) is to commence and shine a spotlight on freelance workers. While it focuses on collective bargaining rights, the Act sets out definitions, for competition law purposes, of “fully dependent self-employed worker” and “false self-employed worker”. These definitions look to reflect new realities in that they look to take factors such as the degree of subordination, independence and source of income into account, and the definitions may serve to start a debate on the overall categorisation of work in Ireland.
See our earlier blog post for more information here
For more information on the content of this Insight, please contact a memeber of our Employment team.