The basic rights that workers are entitled to have been under scrutiny in recent months. Deliveroo (a restaurant food delivery company) and Uber (an app based taxi company) both tech driven, have classified their employees as self-employed until now. In July the UK Union, the GMB brought two test cases to the Central Employment Tribunal to determine whether Uber acted unlawfully by not providing its drivers with basic workers rights such as holiday pay and national minimum wage. This has been the first time that Uber’s claim that drivers are self-employed has been tested under UK law.
A landmark ruling delivered by the London Employment Tribunal last month has found in favour of the Uber drivers. Uber drivers have been classed as workers rather than self-employed. This ruling affects 40,000 drivers across England and Wales. The ruling also means that Uber drivers are entitled to compensation for missed holiday pay and back payments for work paid at rates below the national living wage of £7.20 an hour.
Research by Citizens Advice suggests that approximately 460,000 people could be falsely classified as self-employed. This has led to loss of £314m a year in tax and employer national insurance contributions.
In the case of Deliveroo, a clause inserted into their contractors’ contracts prevents them from challenging their status. A further clause in the contract states that if they challenge their status they will be contractually liable to pay Deliveroo’s legal costs. The purpose of this clause is to deter contractors from bringing legal action. The enforceability of this clause is questionable and unconscionable as it penalises individuals for bringing an action against the company. Arguably if Deliveroo contractors are considered to be workers, then they have a statutory right to bring a claim and enforce their rights without having to indemnify Deliveroo’s costs. Whether a contractor can be construed as a worker or self-employed depends on the extent of the services they provide and the degree of control exerted over the worker.
The Tribunal’s decision will have an impact on companies which operate through business models similar to Deliveroo and Uber which engage individuals as self-employed and this is likely to reshape the contractor model of working. Four courier firms are also facing legal action from workers who want to be recognised as employees. The first case is scheduled to be heard in November.
If you need advice on your contracts or if you are a start-up and need advice on the formation of your employment contracts then please contact Tony Fisher at [email protected].