Accept no substitute? Worker status in the gig economy


Employment status continues to be one of the most complex and contested areas of employment law. Although the basic division between self-employed individuals, workers and employees seems straightforward enough, it has generated seemingly-endless litigation (particularly in the gig economy), often with unpredictable results.  The consequences of wrongly labelling someone as self-employed can be significant, from tax and National Insurance liabilities to claims for unfair dismissal, holiday pay and minimum wage arrears.  A recent case highlights the importance of carefully thinking through both the contract terms and the working arrangements for self-employed contractors. 

The case concerned the status of a moped courier. He had signed up to work (on the face of it, on a self-employed basis) for a delivery company which used an app to allocate work.  When using the app, couriers could opt to carry out ‘ad hoc’ or ‘slot’ deliveries, where they had to commit to being available in a certain place at a certain time and were paid at least £9 per hour.   They could release a ‘slot’, making it available to other couriers, but if no one accepted, the original courier had to complete the delivery. 

The issue in the case was whether the claimant was a worker (and so entitled to holiday pay, SSP and the minimum wage).   The crucial issue was whether he was required to carry out work personally, which is the basic requirement to show that an individual is a worker.  The delivery company claimed that, because he could allocate slots to a substitute courier, there was no obligation for him to carry out the work personally.  Caselaw has established that a broad right to find a substitute is inconsistent with personal service and so will usually defeat a claim for worker status.  However, in this case the Employment Tribunal found (and the Court of Appeal agreed) that the right of substitution was too limited to defeat the claim.   In particular, the courier could only allocate his slot to another courier who was already signed up to the app and remained personally responsible for ensuring that the work was performed.  

Businesses seeking to engage self-employed contractors will usually include a substitution clause in the contract.  But there's often a tension between the desire to avoid worker status and the business' operational/quality control demands; it's difficult to manage the latter if your workforce can subcontract their work to anyone they like.  It's tempting to try to get the best of both worlds by allowing substitutions but subject to the organisation's right of veto - but a wide discretion to veto a substitute usually means that the individual can still be a worker.  Businesses need to evaluate carefully what substitution arrangements are compatible with their business model.  If only a tightly-restricted right of substitution will work, it may be preferable to accept that the individuals will not be genuinely self-employed and reflect this in their contracts and payment terms.  

The case serves as a reminder that, although the publicity surrounding the Uber case may have died down, employment status claims will continue to be litigated and HMRC is likely to come calling for employers who lose in the courts. 

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