The Taylor Review: changes to employment status on their way? Latest from the Government…

So we have reached the next stage in the plans for a potential major shake-up to employment law and the workplace, announced last year by the Government on a number of fronts on their setting up of the Taylor Review of Modern Working Practices. But is the much heralded major Review now becoming a let down and likely to result only in tinkering around the edges?

The Review was generally seen as thorough in raising many of the most important issues in the workplace that required improvement and change but it’s numerous recommendations were viewed as a mixed bag of good, not so good and failures, in terms of addressing them. Will the Governments decisions on the next steps in the Review improve that rating?

Possibly not. But the final results will depend in part on the quality, quantity and source of the responses to the Government’s latest announced consultations arising from their consideration of Taylor’s detailed recommendations, together with the Government’s willingness to implement the necessary changes.

For employers, and also for individuals engaged in work, it is useful to keep up to date with the plans as they are announced and implemented, so as to be ready for such changes.

The Government published their response to the Taylor Review recommendations on 7th February 2018, followed up by comment on that response from Matthew Taylor last week.

It appears only very few of the Taylor recommendations are to be implemented by the Government without further consultation and delay. These include:

  • Pregnancy and maternity rights: to review and consolidate the guidance on statutory protections; to update the governments website pages and to review the legislation on protection against redundancy
  • Interns: to take action to ensure unpaid interns are not doing the job of a worker and, if so, to enforce the payment of the national minimum wage
  • Payslips: to legislate to give the right to a payslip for all workers from day one, which for time paid workers must include the number of hours being paid.

The Government also launched four consultations on many of the Report recommendations, apparently to seek further clarity on how some of the recommendations could work and be best implemented. They confirm their acceptance in principle of a number of the Review recommendations in each consultation category but still put them out for further views.

Those recommendations are grouped together by Government under the following four consultation headings and some of the specific issues to be reviewed are set out under each heading below:

Agency workers’ recommendations

  • Ending the equal pay opt out ( the “Swedish derogation”)
  • The right to request a direct contract with hirer after 12 months
  • Policing umbrella companies

The employment rights recommendations

  • Enhanced enforcement of tribunal awards
  • Name and shame scheme for employers failing to pay awards
  • Enforcement of core rights( NMW, sick pay, holiday pay) for low paid workers

Increasing transparency in the UK labour market

  • Extend right to a written statement to all workers
  • Lengthen the current one week period which breaks continuity of employment
  • Increase awareness of holiday pay entitlements and change of reference period to 52 weeks

Employment status

  • Three tier approach – employee, worker and self employed- to remain as is
  • Possible change of label for worker to “dependant contractor”
  • Alternative tests for employment status
  • Develop on-line tool to help determine employment status

The last of the consultations deals with the troubled issue for many vulnerable workers of employment status. To recap, employees have full employment rights including the right not to be unfairly dismissed;, workers have some of those rights (holiday leave and pay, national minimum wage entitlement and probably sick pay) and the self employed have very limited rights, mainly under Health and Safety and discrimination law.

Over recent years many employers have sought to classify and treat large numbers of individuals working for them as self employed contractors, often by the use of what are likely to be sham self employed contracts which do not reflect the real work arrangements. This enables large savings to be made by them on eg NI contributions and holiday pay.

Legal challenges by those wrongly labelled as self employed have resulted mainly in success, with judgments in their favour as workers, or employees, not self employed. The tests applied by the Courts, as they have further developed law in this area in recent years, are complicated and judgements depend, as usual, squarely on the facts of the particular case. Decisions are also often appealed against by the employer right up to the Supreme Court, the latest example being in Pimlico Plumbers Ltd and anor and Smith where the Supreme Court decision is currently awaited.

The Review questioned whether the current tests by the Courts of mutuality of obligation, personal service (no right to substitute someone else to do the work) and a high level of control by the business, were still relevant in the modern workplace. There is a call for simplicity and clarity for individuals who work, from the outset of their engagement without the need to take a case to an employment Tribunal.

Now a number of commentators suggest that one way simplicity could be achieved is by using the test of integration only – is the individual integrated into the workplace, using a number of factors which could be objectively set – and if so, they would not be self employed but a worker.

Also to disregard whether there is a substitution clause in the contract when deciding worker status.

The integration test is already established in law, though overtaken by more recent case developments. Before the recent massive expansion in the gig economy, the case of The Hospital Medical Group Limited v Westwood [2012] established that although Dr Westwood was described as self employed, and was for tax purposes, he was integrated into the business and thus was a worker under s.230 Employment Rights Act 1996, He was therefore entitled to statutory holiday leave and pay.

The case gives useful guidelines for how such integration could be tested and opened the door to such claims by so called self employed individuals for workers rights. The case provides a basis for developing the integration test further.

What’s next?

Last week Matthew Taylor scored the Government a weak 4 out of 10 for their response, stating their decision at this stage to only consult further on a large number of the recommendations was a factor in that low score.

The four consultations close in May and June 2018. It is likely there will be widespread input from unions, businesses, their representatives and employment lawyers, particularly on employment status. The results of those consultations and how far the Government is willing to accept and act on consultation results will of course be key to the assessment of their effectiveness and willingness to improve the workplace.

So do watch out for the results of the consultations and the next Government announcements on the Taylor Review implementation from around autumn 2018 onwards.

See also:

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.