Is it now time to review the employment status of your contractors? Are you vulnerable to similar action?
A recent case which is being hailed as a landmark judgment has led to organisations reviewing the way they treat those who they consider to be contractors, consultants or freelancers. The case was brought against Uber, the US based on-demand taxi organisation. Two drivers brought the claim stating that they felt that they were ‘workers’ and not contractors and should therefore be paid the National Minimum Wage (NMW) and receive paid holiday.
So what is the difference between a self-employed contractor, a worker and an employee?
This is not straightforward to answer as, firstly, an individual’s status in employment law may differ from their status in tax and pension law, although there are moves to bring the definitions in line. Secondly, there are a range of tests which have to be considered holistically. However, under employment law a ‘worker’ is someone who has a written or verbal contract to do work or services personally for a reward (money or benefit in kind). They only have a limited right to send someone else to perform the work and they must turn up for work on prescribed dates/times dictated by the company who provides work and equipment to enable the individual to perform the tasks. This is different from a ‘self-employed contractor’ who run their own business and take responsibility for its success and failure. They can decide what work they do and when, where or how to do it and can hire others to subcontract the work to. They can also work for more than one client at any one time.
The Uber case was based on the individuals’ status under employment law. During the case, Uber relied upon the following tests to show that the drivers were in fact self-employed:
- Drivers were responsible for all running costs of their vehicles
- Drivers funded their own private hire licences
- Drivers were free to elect which products/services offered by Uber to operate
- Drivers were to treat themselves as self-employed for tax purposes
- Drivers were not provided with clothing or uniform by Uber and did not display the Uber branding on their vehicles
However, the judgment found in the favour of the drivers with the Tribunal relying on the following tests to show that the drivers were in fact workers:
- Uber recruits and interviews the drivers
- Uber retains the key information on customer details rather than the drivers
- Uber requires the drivers to accept trips and those who refuse are logged off the App
- Uber sets the route and the driver has to follow it. They also set the fare and the driver cannot agree more with the customer
- Uber imposes conditions, such as type of car and instructs the drivers how to do the work
- Uber has a rating system which is a performance management/disciplinary tool
- Uber accepts the risk of loss – a self-employed driver would pick up the risk
- Uber handles customer complaints about the drivers
- Uber unilaterally amends driver terms and conditions of work
Uber have appealed this decision and whilst we wait the outcome it would be prudent for companies to review the status of any self-employed contractors, freelancers or consultants and document their decision. If any contractor could be defined as a worker, it may be worth considering moving to paying the National Minimum Wage and providing paid holiday allowances.
If you would like to discuss your terms of employment or any other matter please call Anita Wynne on 01438 747747 or email awynne@beststarthr.com