In early October, we reported here that two parliamentary committees, Work and Pensions and Business, Energy and Industrial Strategy, would prepare reports about what should be done with regard to the legal status of individuals working within the “gig economy”.
The committees have now prepared a joint report named, “A framework for modern employment”. The report, in keeping with the gruelling questions asked by the committees during the collation of evidence, was quite critical of gig economy businesses. The ministers reported that the present working practices of these businesses exploited loopholes in employment legislation, by creating, “bogus”, self-employed opportunities to work in association with their businesses. Reading between the lines it appears that the ministers were annoyed that the gig economy businesses were using the legal loophole at the detriment of workers and future taxpayers. An inevitable consequence of the continuation of the self-employed status is that in years to come millions of workers would probably have failed to make adequate pension provisions and this in turn would become a financial burden on future Governments and taxpayers.
The findings of this report is at odds with a recent Central Arbitration Committee decision, which indicated that Deliveroo riders based at a London site were not “workers”, but self-employed. It now seems that this decision which raised hope of a compromise was no more than a “fly in the ointment”. There now appears to be an overwhelming movement towards shoring up the rights of individuals working in the “gig economy”, by providing them with a legal status of, “worker by default”, and access to basic employment rights. The implementation of the draft Bill proposed by the ministers would entitle many of the presently self-employed to holiday pay, national minimum wage and dependant on earnings, statutory sick pay and automatic pension enrolment.
What does ‘Worker by default’ mean?
Amongst other recommendations the report proposes that anyone working with a business that has a largely dependent workforce will be assumed to be a, “worker by default”, of that business. If the employer disagrees with the categorisation of the individuals, then at the cost of the employer, they can challenge the automatic status of, “worker”. A threshold will trigger the assumption, but at present we don’t know what number of self-employed individuals will be able to work in association with a business before the threshold is met. It’s likely that this automatic assumption of worker status will impact on businesses who regularly group self-employed trades or individual providers of specialist services together to work on projects. In future, when business projects hit the designated threshold then unless specific exemptions are put in place, businesses will need to challenge the assumption of, “worker by default”.
Other recommendations made by the committees:
- Clear statutory definitions, explaining the different types of categories of employment status, employee, worker and self-employed.
- Worker status by default for companies who meet a threshold (yet to be determined).
- Non-guaranteed hours should be paid at a higher premium than national minimum wage or national living wage.
- Continuity of service will be extended from 7 days to 1 month.
- Tribunals will be obliged to make punitive orders in respect of employers who are persistent in mislabelling the employment status of those working with their business.
- Class actions will be permitted for individuals pursuing disputes in relation to their employment status, wages and working time regulations.
- Legislation should not be introduced to undermine or complicate the right to receive either national minimum wage or national living wage.
- Workers and employees should receive written statement of employment particulars within 7 days of commencement of employment.
- Information and consultation rights to be extended to include those on worker contracts and the threshold for implementation of consultation forums to be lowered.
- Amendment of the Agency Worker Regulations 2010, removing the Swedish Derogation which presently allows opt-out for equal pay.
The Bill is still in draft and will journey through Parliament before it becomes law. In the interim it would make good business sense for businesses operating under the banner of the gig economy to carry out an audit of their labour force and consider whether they have incorrectly labelled any individuals. If, mislabelling has occurred businesses will need to decide whether they wish to transform the status of their workforce voluntarily, or wait for a challenge in the employment tribunals (which could be financially detrimental) or comply once the recommendations become mandatory.
Regardless of the working practices deployed by businesses one recommendation that is likely to impact all businesses will be the proposal to provide a written statement of employment particulars within 7 days of employment commencing. Businesses could consider what administrative changes need to made to ensure they are ready to comply with this recommendation and it’s also well worth checking that appropriate documentation is in place to meet the proposed future requirement.
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"Questions of employment status are often not clear-cut, and legislative reform would not entirely eliminate the need for the courts. But it is evident that clearer legislation on employment status could be valuable in preventing confusion and promoting fair competition between businesses."