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Workers, employees, the gig economy and the future of employment status- The Taylor Review

1st August 2017

The law sets out various rights with the different types of status that an individual may have at work. Complications and problems for individuals and businesses (real or simply perceived) can arise when developments in reality change faster than the relevant legislative and legal framework   The nature of the workplace has changed significantly for many people over recent years, and the rate of change is likely to increase. Recent years have seen a large growth in self-employment. Business models used by the likes of Uber and Deliveroo have been under scrutiny in the last couple of years, as has the way they engage the services of their staff.

The Government commissioned a review at the end of 2016 into the implications of new models of working on the rights of workers and the obligations of employers. The review was conducted by Matthew Taylor. The findings were reported on the 11th July 2017.

The review proposes a number of significant and wide- ranging changes to employment law, including a proposal to rename a category of “worker” that applies at present, and rename it as “dependent worker”. It proposes that the Government introduce primary legislation to establish the main criteria that define “employee” status.

 Among the recommendations are the following:-

 -Retaining the distinction between “employee” and “worker”, but renaming the worker status as “dependent contractor”.

-Introducing legislation to set out the definitions of each category – so that the existing case law is consolidated into legislation.

-Extend the right to a written statement of terms to workers as well as employees.

-Require written statement to be given on the first day of employment.

-Extend written statements of terms to include a description of the statutory rights.

-Retain the need for personal service in employment contracts.

-Remove the requirement for workers to have a contract to perform work personally.

-Treat workers as “employed” for the purposes of tax status.

-Preserve continuity of employment where any gap in employment is less than one month (rather than one week, as applies at present).

-Allow holiday pay to be paid on a rolled- up basis.

Give staff the right to return to work following long-term sickness absence (in much the same way as currently applies at the end of a maternity leave period)

-Give agency staff the right to request a direct contract with the end -user after 12 months on an assignment.

On the status of “workers” the report proposes that a worker need not be someone that is required to perform the work personally. At the moment the status can sometimes be defeated with a genuine substitution clause. The report suggests that a broad “control” test is more appropriate in determining real status, and it indicates that this itself should not be viewed merely through the question of who controls the day-to-day activities.

On “Zero hours contracts,” which have proved to be controversial both politically and in the workplace, the report suggests that too many employers now rely on this form of contractual arrangement with their staff. A number of recommendations are made with regard to zero hours contract workers. These include requesting the Low Pay Commission consider a higher hourly rate of pay in the National Minimum Wage for hours which are not guaranteed in a contract. The proposed higher rate should be set at a level that provides the employer with an incentive to schedule guaranteed hours as far as possible. So, for example this would work in such a way that a person that is contracted to work 8 hours per week but in fact goes on to work 10 hours will be entitled to receive the first 8 hours at the prevailing NMW for their age, and the additional 2 hours at the higher rate of pay. The idea is clearly to encourage employers to contract their staff for the actual anticipated number of hours required at the very outset.   

From the view of other casual workers, the proposed extension of the concept of “continuity of employment” would help them in gaining certain employment rights.

The concept of using rolled -up holiday pay would in effect raise the standard minimum wage by roughly 12%. This would see a rise from £7.50 to £8.41 for anyone effected by such a measure, but would of course result in them still being able to take holiday, but that holiday period would not itself attract further payment from their employer. The report also proposes that HM Revenue and Customs should be the body that enforces the payment of holiday pay to some lower paid staff, rather than it be a matter for an Employment Tribunal.   

While in the main the report deals with individual employment rights, there are other matters covered, such as widening the scope for collective rights of consultation under the Information and Consultation of Employees Regulations 2004 – which currently only applies to employees. The report proposes extending the regulations to cover workers that are not strictly employees, and introducing a lower percentage of the staff in favour of such a consultation process to bring it into effect.         

We have concerns over exactly how much will be achieved by simply re-naming “workers” as “dependent contractors”. This would obviously require a time-consuming search through the relevant regulations that use the term “worker” and re-naming them. But, unless there is a clear benefit it seems a rather pointless task!  We also note that on the matter of status the Employment Tribunals have already on a number of occasions noted and ruled that the inclusion of a substitute clause will not prevent them from finding as a matter of fact that a person is in fact an employee or a worker. A focus on control in the working relationship may not actually make the position any clearer, as case law indicates that subordination is not an essential ingredient of “worker” status. While it is true that many observers are frustrated that the apparent confusion over the definitions of employee and worker and independent contractor can cause uncertainty, the law as it stands does enable the Employment Tribunals and courts to examine the actual relations, and the actual day-to-day operation of a contract, in order to help it decide if the person doing the work is an employee, or a worker, or neither.

The review does note that a major factor in the use of certain labels for workers is the current tax system. National Insurance premiums are lower for the self-employed, and as a consequence many employers have been keen to structure their workplace so that it relies on self-employed individuals doing the necessary work. The report therefore highlighted the need to make the taxation of labour more consistent across the various forms of employment.  An attempt to introduce that type of measure met with a sticky end very recently!

For all its failings the current system does give Employment Tribunals the flexibility to examine the actual working arrangements between an employer and an individual in order to assist in deciding which employment law rights the individual actually has, and can is also our experience that simply introducing new labels and new legislation behind that rarely helps to clarify the law, but simply invites the opportunity for different or additional areas of uncertainty- with the scope for litigation that can follow.

There are a number of interesting proposals in the report, which do have merit, but at the moment it is difficult to see the Government taking much action to bring the proposals to fruition (particularly as the mind of the Government will now also be focused on dealing with the implications of the ruling of the Supreme Court over Employment Tribunal fees!).  

If you need any further advice on any matter raised in this article do not hesitate to contact us at Hallett Employment Law Services Ltd.

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