“False” Self-Employment and the Gig Economy – Where are We Now?

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The question of 'employment status', continues to concern many employers working within today's 'gig economy'. The UK Supreme Court recently provided guidance on the correct "label" to be bestowed on 'gig economy' workers.

Pimlico Plumbers recently lost an appeal in the UK Courts against a finding that one of its plumbers was a "worker" for the purposes of relevant UK employment legislation – not a self-employed independent contractor. Similarly, the UK Employment Appeals Tribunal ruled last week that Hermes couriers are "workers". As a result, those workers are now entitled to certain statutory benefits such as minimum wage, rest periods and holiday pay.

This is not directly applicable in Ireland due to the absence of the hybrid 'worker' status that exists in the UK. However, the persuasive impact of these decisions should not be underestimated. They serve as a warning to employers to review and assess their contractual arrangements with employees and service providers to ensure that they accurately reflect the nature of those relationships in practice.

The latest UK cases explained

Mr Smith worked as a plumber for Pimlico Plumbers. His  contract was terminated in May 2011. He claimed that this was due to a heart attack he suffered in January 2011. He brought proceedings before the UK Employment Appeals Tribunal claiming that: (i) he was an "employee" and the EAT had jurisdiction to consider his unfair dismissal claim; and/or (ii) he was a "worker" and the EAT had jurisdiction to hear his complaints of discrimination, entitlement to holiday pay and unauthorised deductions from his wages.

The UK Supreme Court focused on (i) whether Mr Smith was required to carry out the work personally; and (ii) whether Pimlico Plumbers was a client or customer of Mr Smith's business. Due to (i) the restrictions on his right to appoint a substitute; and (ii) Pimlico's control over Mr Smith (as shown  in its branding and vehicle tracking requirements) the Supreme Court concluded that Mr Smith was a "worker" and not self-employed.

In the Hermes Couriers case, a number of couriers argued that their "self-employed couriers' contract for service" was not an accurate description of their employment status The UK Employment Appeals Tribunal concluded that the contract "was not a true or full reflection of the contractual agreement between Hermes and the couriers". It ruled that the written agreement was designed to inaccurately present the couriers as falling outside the "worker" status.

The Pimlico Plumbers and Hermes Couriers decisions are the most recent examples of the position adopted by the UK Courts. Previous decisions (such as the Uber drivers decision) also concluded that the drivers were "workers". Interestingly, in a test case taken by the Independent Workers Union of Great Britain (IWUGB), the UK's Central Arbitration Committee concluded that Deliveroo drivers were "self-employed" as they could replace themselves with substitute drivers. However, following the UK High Court's decision to permit the union to judicially review this ruling, the Deliveroo drivers' employment status story continues.

Ireland's current approach to correct "employment status"

The legal analysis in these recent UK decisions focuses on the various aspects of traditional legal tests to identify a "contract for services" (independent contractor / self-employed) versus a "contact of service" (employment contract). These tests also apply in Ireland. Factors that were examined included: the ability of an individual to substitute someone else into their role, the level of control applied by the contracting party, mutuality of obligation and the ability for the contractor to carry out an independent enterprise. Ultimately the written agreements between the parties were criticised for not reflecting the actual practical arrangements in place.

In December 2017, Ireland's Workplace Relations Commission (the WRC) concluded in the case of A Plasterer v A Plastering & Construction Company that six plasterers were employed under "contracts of service", rather than being self-employed. Here the Adjudication Officer focused on critical Irish decisions in this area, such as Henry Denny and Sons (Ireland) Limited v Minister for Social Welfare. It ruled that:

"it is necessary to go behind the title of the contract…to uncover its constituent elements and their proximity to the definitions of a contract of service as set out in case law and other authorities".

The WRC was also guided by the Code of Practice for Determining Employment or Self-Employment (2017) which details a number of factors for identifying correct employment status. In this case the plasterers' were confirmed to be "employees" and their complaints in respect of breaches of the Organisation of Working Time Act and the Terms of Employment (Information) Act were upheld.

Unlike the UK, there is no "worker" status in Irish legislation. However, it is important that Irish employers review their contractual arrangements with current employees and contractors to ensure that the paper trail reflects the reality of the relationship. These cases serve as useful reminders to employers in Ireland that only genuine "contracts for services" will stand up to legal scrutiny.

The Irish legal position

As discussed in more detail in our previous alerter, two private members' bills, the Prohibition of Bogus Self-Employment Bill 2018 and the Protection of Employment (Measures to Counter False Self-Employment) Bill 2018 are currently being progressed through the legislative process.

In the meantime, an awareness campaign recently launched by the Department of Employment Affairs and Social Protection encourages individuals who think that they may be incorrectly categorised as "self-employed", to apply to the Department for an assessment of their employment status. This campaign shows  the Government's commitment to resolving situations of "bogus" or "false" self-employment.

Last week RTÉ reported that, following an investigation into its own use of freelancers and contractors, the state broadcaster intends to review and assess the contractual arrangements of over 150 such individuals that have characteristics similar to employment (or a mix of employment and self-employment).

We need to balance the adverse social welfare and employment protection consequences associated with false contracts of service with the need accommodate new and diverse working arrangements. However, as more and more job situations are evolving in line with the "gig economy", the spotlight is now on the issue of the correct employment status.

Once again, we are watching this space!

Click here for our previous articles on employment contracts in the gig economy.

For more information please contact Rachael Evans, Associate, Ailbhe Dennehy, Senior Associate or your usual contact on the A&L Goodbody Employment team.

Date published: 4 July 2018