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Don't judge a book ...

Don't judge a book ...

... by its cover, or you may be surprised (and not necessarily in a good way) by what you get. In the gig economy, when the self employed become workers, what are the implications for employers, individuals, customers and HMRC? Specialist employment lawyer Wyn Lewis discusses two recent cases.

Don't judge a book by its cover, or you may be surprised (and not necessarily in a good way) by what you get. 

Scrutinising whether someone is an employee, a non-employed worker or a self-employed contractor is what employers, contractors and self-employed people will need to do more of since it was decided recently that Pimlico Plumbers’ staff and Hermes’ couriers were all workers, not self-employed contractors and were therefore entitled to worker benefits.

Of course it’s all part of a trend (not breaking news) whereby individuals who provide personal services, who have previously been excluded from employee status by contractual labels such as “consultant” or “freelance”, or by artificial barriers such as having to use their own equipment, are having their worker entitlements “upgraded” from few (or none) to better or full protection.

This is good news for oppressed individuals whose lot has been limited. 

It’s also good news for HMRC, which will presumably receive higher income tax and NICs via PAYE than it would from workers, who come within the PAYE catchment area. 

But the consequence to employers is that engaging staff will cost more. 

And the consequence to end-users is that services will cost more.  So if you thought that the (admittedly competent) people from Pimlico Plumbers were already expensive, don’t be surprised if, from now on, your faulty valve or central heating will cost even more to repair.

Two cases reported in June 2018 have again turned the spotlight on this issue:

  • Pimlico Plumbers’ operatives were traditionally treated as being self-employed. This was due to factors such as: they could provide substitutes, could choose not to accept work and could offer themselves for assignments - so Pimlico was essentially the operative’s client, rather than their employer.  This was despite the fact that the individuals drove branded vans, wore branded clothing, were tracked, had Pimlico ID cards, were bound by post-termination restrictions, had fixed rates and (from speaking with my own Pimlico plumber) were basically told what to do and were tightly controlled.  However when one operative’s contract ended, he claimed he was entitled to claim unfair dismissal, wrongful dismissal and compensation for discrimination.  The issue for the Supreme Court boiled down to this:  whether the control demanded and exerted by Pimlico Plumbers, as well as the extent to which its operatives provided personal services (as opposed to generally independent services via the Pimlico Plumbers brand) tipped the balance away from self-employed in favour of worker (but not employee) status.  The answer was:  it did.
  • Hermes’ courier operatives were treated similarly. An employment tribunal (following the Supreme Court in the Pimlico case) held that the couriers had little autonomy, were controlled by Hermes, had an obligation to provide their services personally and couldn’t engage in a way that let them look after their own interests (rather, Hermes’ interests were paramount) such as by negotiating their rates of pay.  Although there were only 65 claimants, the judgment will affect around 14,000 Hermes couriers and Hermes has decided, perhaps accepting the inevitable, not to appeal the decision.  So again, if you use couriers a lot, don’t be surprised if your costs increase to fund increased employer costs associated with worker (not self-employed) status.

The technical effect of these decisions are important, but don’t set precedents.  These types of situations tend to be fact-specific and the trend of which they are part, may be that newly-elevated workers may eventually receive benefits such as holiday pay, sick pay, minimum wage, time-off and family-friendly rights, insured benefits, quasi-unfair dismissal rights and other termination (including redundancy pay) entitlements.  Many observers will say:  “And why not?”.

The operational effect of these decisions (and the trend associated with the gig economy) is that employers (and individuals) who have been making use of that economy may no longer be able to continue to do so.  There will be winners and losers.  The winners are people who don’t want to be self-employed and genuinely need the protection of employee or worker status.  The losers will be individuals who like their gig status, as well as employers who may have reduced profit margins and end-users, who may have to pay more for services). 

The story continues, because…

… the Taylor Review, published in 2017 with a number of suggestions for clarifying employment status, was then subject to Government consultation that closed last month.  This may result in a thorough overhaul of employee, worker and self-employed status.  Might it also result in the awkward status of “worker” being abolished in some respects?

… there was also a European Commission initiative in 2016 to establish a European-wide platform targeting employee status and false self-employment, but this may be irrelevant after Brexit.

… many are anticipating that the confusion and expense caused by worker status is likely to be exacerbated following the anticipated shortage of personnel post-Brexit, where people will be more assertive about their status in a market where employers must vie more for the attentions of a smaller workforce.

 

This publication is for general information only and is not intended to provide legal advice.