In this article, senior associate Nick Davies and solicitor Catherine Turpin, take a look at the most recent 'gig economy' case.
Once again, employment status in the "gig economy" is in the spotlight. The most recent case involves a cycle courier who has been found by an employment tribunal to be a worker, despite being held out as being a self-employed contractor. This follows previous decisions including CitySprint where riders successfully argued that they should be treated as workers and given the basic workers' rights. Please click here for our overview of employment status issues in the gig economy and here for our update in January on cases to hit the headlines in this area.
The Claimant (AB) started working for Excel Group Services Limited (Excel) as a cycle courier in September 2013. He signed two contracts during his engagement which referred to him as a 'contractor' and 'subcontractor' and he was registered as self-employed with HMRC.
He provided his own bicycle, mobile phone and protective clothing, but Excel provided him with his radio and palm computer (later replaced by an App which AB installed on his personal phone).
AB generally worked nine hours a day, five days a week and was expected to give notice and seek agreement for time off. His hours were not absolutely fixed depending on the needs of the business, and he sometimes took time off. However when working he was expected to be available throughout the day and was paid a fixed tariff for the work he did.
AB took one week's holiday which was not paid. As a result, he brought a claim in the employment tribunal for unpaid holiday in the sum of £321.16.
The key issue was whether AB was a worker, and therefore entitled to holiday pay (or whether he was self-employed as argued by Excel). AB initially claimed that he was an employee but this was withdrawn before the final hearing and so was not examined by the tribunal.
A Worker is an individual working a) under a contract of employment; or b) under another contract (express or implied, written or verbal) where they personally perform work/services for another party and where that party is not a client or customer of the individual's own business.
Self-employed individuals carry on a profession or a business undertaking on their own account, and enter into contracts with clients or customers to provide work or services to them.
In making its decision, the tribunal applied the judgment of the Court of Appeal in the case of Pimlico Plumbers Ltd v Smith (please see our case summary here)
The employment tribunal held that AB was a worker under the Employment Rights Act 1996 and the Working Time Regulations 1998 and he therefore succeeded in his claim for a week's holiday pay.
Similarly to previous 'gig economy' cases, the employment tribunal decided that AB's written contract with Excel that purported to hold him out as a self-employed contractor did not reflect the reality of the situation. The key factors that influenced the tribunal decision included:
Mutuality of Obligation
- AB worked nine hours a day for five days a week
- AB had to be available at all times during the working day and could only take time off, or change hours, on notice and with agreement
- AB had no choice or input on the terms on which he was engaged by Excel
- AB worked for fixed rates set by Excel which were non-negotiable
- AB had no part in agreeing terms with clients
- AB did not bear the risk of cost of damage in transit
- AB had a conditional right of substitution that was so restrictive that in practice that he would have difficultly providing a substitute courier
- AB received a 'driver memo' which is in reality a payslip not an invoice
These factors meant that despite the label assigned by Excel and the fact that he provided his own "tools of the trade", AB was working under Excel's direction and was not running his own business.
Summary and recommendations
Taken alone this case is likely to be of limited significance because Excel did not produce any evidence or attend the hearing and AB's evidence was therefore uncontested. This was because Excel had gone into liquidation (although the business has been purchased by Citysprint).
Nevertheless, the decision re-iterates that in the "gig economy", the day-to-day reality of self-employed contractor relationships is not reflecting the relationship described in the contracts. Our advice for clients in the relevant sectors is to 'health check' their current labour model to understand its risk profile and where possible take remedial action to limit potential reputational and financial risk exposure.