As MPs publish “unintelligible” gig economy contracts, when is self-employed not self-employed?

Guest blog by Peninsula Employment Law Director Alan Price

The Work and Pensions Committee has published contracts from Uber, Deliveroo and Amazon as part of its review in to the gig economy, with one MP calling the Uber contract “gibberish”.

The gig economy has encouraged an increase in businesses which provide work to individuals, often through technology and smartphone apps, where they are paid a set price per “gig”, or piece of work. These individuals are generally classed as self-employed contractors in their contracts with the business, however this does not always tell the whole story.


Contracts are not enough

Employers should be aware that labelling someone as self-employed in their contract will not necessarily bind an employment tribunal when they are later examining this. A tribunal will look beyond the contract at the time it is agreed and at any later stage of the business relationship to examine what actually happens in reality, following the Supreme Court decision in the Autoclenz case.

For example, if the contract says that the individual is self-employed because they can turn down work when this is offered to them but this has never happened in practice, or the individual is disciplined for turning work down, then the tribunal will look at the practical reality of whether there is mutuality of obligation to offer and accept work.  This has been the case in many of the gig economy claims that have passed through tribunals in recent months.

In Dewhurst v CitySprint UK Ltd, the contract classed couriers as ‘self-employed contractors’ and gave them a right to substitute someone else to do the work; one of the main self-employed tests. However, the tribunal found that the couriers could not, in reality, substitute another because there were further requirements placed on substitution including that the substitute had to have the required insurance cover, knowledge, skills and ability to satisfy the company that they were competent. This made the opportunity to substitute so small that it could not actually happen.


What is the difference?

According to HMRC, a ‘self employed’ person becomes a worker based on the following tests:

  • they have a contract or other arrangement to do work or services personally for a reward (your contract doesn’t have to be written) and
  • their reward is for money or a benefit in kind, for example the promise of a contract or future work
  • they only have a limited right to send someone else to do the work (subcontract)
  • they have to turn up for work even if they don’t want to
  • their employer has to have work for them to do as long as the contract or arrangement lasts
  • they aren’t doing the work as part of their own limited company in an arrangement where the ‘employer’ is actually a customer or client

Courts, however, are looking at many factors to determine what constitutes a worker, for example in the recent Pimlico Plumbers Ltd & Anor v Smith hearing, plumber Gary Smith was determined to be a worker based on:

  • operatives were required to wear Pimlico uniforms,
  • they drove vans with the Pimlico logo
  • could only be contacted by customers through Pimlico
  • contracts and estimates were issued in the name of Pimlico
  • payment was made to Pimlico
  • Pimlico monitored the movements of operatives through a GPS system on their vans.’


What the different statuses mean in practice

Gig economy workers that are truly self-employed have no employment rights, except in relation to protection from discrimination in certain circumstances.  Payments are made from the customer or client excluding tax and national insurance.

Those who are found to be workers are entitled to some employment rights but not all. Workers have the right to minimum rest periods and breaks, paid holiday, national minimum and living wage, and the right to be auto enrolled in a pension scheme.  Gig economy employees will gain all employment rights; some from the first day of work, i.e. protection under TUPE, maternity leave, statutory sick pay, whereas others have a minimum service requirement such as the right to not be unfairly dismissed after two years’ service.  Workers will usually have tax and national insurance deducted at source.




Author: Editorial Team

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