Employment status

Given the recent high profile cases involving Uber, CitySprint and the like, the true employment status of purportedly “self-employed” individuals has come under the spotlight. So what is genuine self-employment and what is a worker or an employee? And why does it matter?

What are the categories of employment status?

There are three categories of employment status for the purposes of employment law. These are “employee”, “worker” and “self-employed” (note that for tax purposes, there are only two: employee and self-employed).

An employee is someone who is employed by an employer under a contract of employment. That employee must perform the work personally, the employer exercises control over the individual (for example, setting their workload) and there is an expectation between the parties that the employer will provide the employee with work and the employee will perform that work. Although outdated for many workplaces, perhaps think about it as a “master and servant” relationship.

At the opposite end of the spectrum, a self-employed individual is someone who is carrying on business for their own account. In other words, they may work for others (i.e. their client/customer), but they are essentially providing the services in the course of their own business. Usually, someone who is genuinely self-employed will be engaged to carry out a specific project but left to determine how to fulfil that task, whether to engage others to assist in the delivery and that individual will often receive a fixed price for the work (rather than a daily rate).

The final category is that of worker, which falls somewhere between the two. This is someone who is required to perform work personally for the employer but who is not under the same direction as an employee and does not have the same freedoms as a self-employed individual.

Why does employment status matter?

Employees benefit from the full suite of employment law protections. This includes the right to take maternity and other family leave and related pay and the very important right not to be unfairly dismissed after two year’s of service.

Workers have more protection than self-employed individuals but less than employees. Workers are entitled, for example, to receive the minimum wage pay rates and holiday pay plus an entitlement to rest breaks (just like employees are too).

As for the self-employed, the only real protection that they benefit from is a limited right not to be discriminated against. This may be why many entities would prefer that individuals are classed as self-employed, rather than as a worker.

How is employment status assessed?

Whilst the contractual documentation that may exist between the parties may assist with the analysis, all too often the reality is not reflected in the paperwork. The Courts will look at the actual reality of the situation to determine what category an individual falls into. Key factors will include the expectations and obligations between the parties, the level of control exerted over the individual, whether the individual can appoint a substitute to do the work in their place, how integrated he/she is in the organisation, the pay reward structure, whether the individual can work for others (including competitors), the nature and length of the relationship and where the financial risk lies.

Determining employment status is often a complex and difficult exercise to undertake. Recent headlines involving Uber and CitySprint show just how difficult an exercise it can be.

So what happened in the recent Uber and CitySprint cases?

In the Uber case, Uber argued that it was simply a technology company which allowed self-employed individuals to use their app to put them in touch with potential passengers. However, the Employment Tribunal felt differently and said that the reality was that Uber was a taxi service and that the individuals were workers, contracting with Uber directly to drive the passengers.

In the CitySprint case, the Employment Tribunal found that cycle couriers, which CitySprint argued were self-employed, were in fact workers too. The individuals had very little autonomy to determine how they carried out the services, they were effectively directed by a controller over a radio or mobile phone and were required to be tracked by the company’s tracking system. They also had to wear a company uniform and commit to the times they indicated that they would be available to work.

Each case will turn on its own particular facts but businesses would do well to remember that if they are labelling someone as self-employed, then their practices need to reflect this too if they want to avoid potential challenge.

This article first appeared in QuickBite magazine.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.