The recent Uber ruling at the Supreme Court has highlighted the risks associated with using the wrong employment status. Self-employed, worker or employee - are you classifying correctly?
What is the difference between a worker and a self-employed person?
The HR Dept writes:
Last Friday the long-awaited result of Uber v Aslam, a high-profile case which delved into the subject of employment status, came to a head at the Supreme Court.
Backing previous findings by employment tribunals and the Court of Appeal, the Supreme Court agreed that Uber drivers are “workers”.
You may well have seen the headlines and commentary that followed, announcing that the findings of this case will have ramifications for the gig economy and businesses engaging with self-employed consultants or independent contractors. This is because it is expected to set a precedent for the future of employment status and workers’ rights.
Employment status is a complex area of HR, and as the results of the Uber case have shown, can be expensive and time consuming to get wrong.
If your business hires the self-employed or you are thinking about making changes to your business that involve current employees becoming self-employed, we urge you to keep reading.
Looking at Uber in particular
Uber fought their case to the very end, claiming that its drivers are independent, third-party contractors. This was backed up by contractual terms which drivers had to agree to before being permitted to work under the Uber name and app.
The Supreme Court first looked at the reasons why the National Minimum wage was introduced: to protect the low paid and vulnerable. In this case, the number of contracts and rules for drivers demonstrated that the power was all with Uber and the contracts did not reflect the true position.
Under the Employment Rights Act 1996 employment status is defined by a number of factors and must take into consideration the rules of the working relationship as dictated by the employer.
In Uber’s case, they held significant control over a driver’s day-to-day work, such as dictating fares for journeys, monitoring service with the ability to terminate, and issuing penalties if too many journeys were rejected.
These points helped the Supreme Court to conclude that although Uber contractually calls its drivers self-employed, their actions suggested otherwise and drivers are in fact workers. As a result, this means they were working from the moment they signed onto the app, not just when driving a customer, and should have been paid for that time as well as accrued paid holiday.
Workers are not employees but are entitled to certain employment rights including National Living or Minimum Wage, paid holiday, and sick pay.
Other cases involving worker status
The Uber ruling is a positive step for workers who have been incorrectly classified and denied their statutory rights.
However, the matter of employment status remains complex and each case warrants a true fact-finding exercise to understand the difference between a self-employed person and a worker.
Looking at similar cases can help to clarify this.
Back in 2017, Deliveroo, a well-known food delivery company, faced a similar situation with the classification of its riders. In this example, the Central Arbitration Committee found in favour of Deliveroo concluding that riders are self-employed and not workers.
A key difference between the cases of Uber and Deliveroo is that Deliveroo riders are permitted to send a substitute to carry out work in their place. This allows for a more flexible arrangement than that of Uber and its drivers.
It’s important to note that sham contracts will not offer protection; a court will look at the reality of the situation.
Confusion around worker status
Many employers will determine employment status when using CEST (Check employment status for tax), which provides two classifications: employed or self-employed.
Currently this does not marry up with employment law which includes a third status: worker. This leaves room for confusion on employment status classification.
We believe that clearer guidance is urgently needed for employers to be confident in their classifications, and hope that Friday’s ruling will pave the way for this to happen.
Be confident in your classifications
Until then, the incorrect classification of employment status remains a high-risk area of HR. To be confident in your classifications and contracts, contact your local HR Dept for professional advice.
Local businesses throughout Cambridgeshire, run by people like you, outsource their HR because it is easier and more cost effective. We tell you what you can do, not what you can’t. We are here to give you practical and sensible help to sort out problems whenever you need us. When you are thinking about how to grow for the future, we can help you put together the ‘people plans’ to enable you to be even more profitable tomorrow.