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A meander around the Law on employment status

Article by: WBW Solicitors LLP

Do you know your employee, from your worker and your worker from your self-employed?

 Kerry Curd, a Partner with WBW Solicitors LLP, discusses the twists and turns of identifying correct employment status and associated rights.

 The definitions of the three categories of employment status; employee, worker and self-employed, have long been criticised as confusing, and over the years a body of case law interpreting these definitions has developed. Despite this, it remains difficult to set out a definitive list of criteria to use to determine whether an individual’s status is that of employee, worker or self-employed. ‘Employment Status’…. a topic only an Employment Lawyer could love!

The Supreme Court in Aslam v Uber [2021] recently gave useful guidance on the approach that should be taken, emphasising that it is the actual arrangements on the ground that matter and not what the contract says. Prior to this judgment, we knew that the contract terms could not prevail where they contradict what actually happens day to day, but the Uber case goes further and now we must be wary that the contract will not even be the ‘starting point’ when trying to determine employment status.

Some important things to tick off when assessing staff employment status include:

  • How much control the employer has over the individual, such as the hours they must work and how they complete tasks.
  • Is the individual required to provide a personal service, or can they send a substitute in their place.
  • How far integrated into the employer business is the individual, this can include looking at any obligation to wear a uniform and who owns any equipment that is used.
  • Is there an actual obligation for the employer to provide work and for the individual to accept it.

It is generally easier to determine if somebody is truly self-employed, or actually employed, but workers, being the inbetweener or middle child, can be trickier to identify.

Although the Uber judgment gave some clarity in determining worker status, it remains important to apply the rules to specific facts of each situation. A key reason stated by the Supreme Court in finding that Uber drivers were workers, rather than self-employed, was the considerable control exercised by Uber when drivers had the Uber app switched on. In particular, Uber fixes the price, terms and controls all aspects of the drivers’ communication with the passengers.

It goes without saying that employees have enhanced employment rights compared to workers, including the right not to be unfairly dismissed and a right to receive a statutory redundancy payment.  The self-employed have the least employment rights and workers sit somewhere in the middle. In the Uber example, the success in the finding of worker status meant that drivers were entitled to holiday pay. This table shows some other examples of rights that apply to each type of worker:

As well as potential liabilities to HMRC, getting an individual’s employment status wrong can lead to possible employment tribunal claims. For example, you may treat an individual as a worker and let them go without following a fair procedure or giving them notice, but if they can convince an employment tribunal that they were actually an employee, you could face damages for unfair and wrongful dismissal.

Similarly, you may engage someone who describes themselves as self-employed and pay them less than the national minimum wage and not pay them for holidays. If it turns out they are actually a worker, then you could be liable for significant back payments as well as possible damage to reputation.

One significant message from the Uber decision is that the written contract has to match the reality of the working arrangements. It also confirmed that an employment tribunal will not be bound by the contractual provisions in written contracts that wrongly try to classify the individual’s employment status, so may disregard them.

Rights Employee Worker Self-employed
Protection from unfair dismissal Yes No No
Right to receive statutory redundancy payment Yes No No
Statutory sick pay Yes Sometimes No
National Minimum Wage Yes Yes No
Working Time Regulations, including right to paid holiday and limits on working hours Yes Yes No
Statutory minimum notice period Yes No No

We can help determine the status of any specific role in your business, review your contracts and practices to advise on areas of risk and help you to update policies and procedures to ensure that you comply with employment law and reduce the risk of employment status disputes.

Article by Kerry Curd of WBW Solicitors LLP


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