Changes in employment law expected to tighten up on labour only subcontractors, zero hours contracts and those working in the ‘Gig’ Economy
I recall the first case of worker status crossing my desk in November 2011, days after I had joined THSP as Head of Employment Law from my role as HR and Corporate Services Director at a large construction company. The case in question related to a ‘self employed’ contracts manager. You may recall that the industry had a slow down in late 2011 and, like many other construction companies, one of my clients needed to restructure its management to deal with a reduction in work load. The obvious first step would be to let go the self employed manager, or would it? Seems logical, I here you say. Well, the game had changed somewhat earlier in 2011 when the Supreme Court gave distinction in Autoclenz v Belcher and others that often the intended self employed fall into a category called ‘workers’, as they are legally termed. Workers have similar statutory rights to typical employees, such as 5.6 weeks paid leave, rest breaks, the 48 hour working week, the minimum wage (and now the living wage) and protection of the whistleblowing legislation. But they don’t have rights such as redundancy pay, unfair dismissal and TUPE (the transfer of employment if the services move). Back to the contracts manager, there were some minor contractual matters but principally as he had worked for the same company for the last 8 years he was entitled to something in the order of 210 days leave, at his average day rate in the region of £185 per day. That was a difficult pill to swallow.
Furthermore, and indicative of the turn of attention within the construction industry it was in July 2014 when in Holden v Plastering Contractors Stanmore held that Mr Holden worked almost exclusively for the plastering contractors and for many years, unloading pallets of plasterboard and doing general work on site, should be granted worker status. Mr Holden was a self-employed sub-contractor with a CIS card. It was put forward by PCS that there was no obligation on him to accept work when offered and no obligation on PCS to offer Mr Holden work. It was argued that there was no mutuality of obligation sufficient enough to find worker status, and there were subsidiary arguments as to control, right to use a substitute and degree of integration in the workforce. However the Employment Appeal Tribunal ruled that there was mutuality obligation and that PCS had a visible amount of supervision, direction and control of Mr Holden, how he worked and the restrictions placed on him being able to substitute someone in his place.
To put this in some context in relation to the construction industry, it is highly unlikely that any claim for worker status will be successfully contested when there has to be high levels of control and direction not only of employed operatives, but sub contractors and other groups of operatives including agency workers. It is uncommon that workers operate on a price basis, usually engaged on an hourly or day rate. Therefore they are never under financial risk if they fail to perform. Health, safety and security parameters prevent workers from sending friends or family in their place if they are unable to work. In any case any warranted substitution would be restricted based on qualifications, competence and references. While labour only working perhaps has a place in low skilled and low risk environments it is unlikely it will ever exist without contravening the legislation design to protect such A-typical operatives.
Away from construction
In October this year Aslam and others v Uber conferred that taxi drivers working for the online calling service were under sufficient control and direction when attending to requested call outs that the drivers were afforded worker status. The drivers had complained to the Employment Tribunal that they had not received the national minimum wage and holiday pay. This first hearing held the drivers were entitled to claim worker status, but Uber are expected to appeal.
Claims are being prepared on behalf of workers of Amazon who believe the online retailer has breached working time laws, in not providing opportunity for rest breaks and by exceeding the 48 hour working week limits.
Earlier this year workers on zero hours contracts voice public anger against their employer Sports Direct as a consequence of their believed unfair treatment and pay penalties that effectively took their earnings under the national minimum wage.
These civil liberties are not new, the rights afforded workers is found in the 1996 Employment Rights Act, the 1998 Working Time Regulations limits the amount of time work can be undertaken without breaks and the National Minimum Wage Act of 1998 governs the lowest limits and parameters which an employee or worker can receive. A-typical workers are revolting in mass, given the encouragement of much publicised decisions handed down in Autoclenz, Fulton and Uber to name but a few. The law society, Citizens Advice Bureau and ACAS are all reporting an increase in registered complaints associated to holiday pay, working hours and wages, probably due to the growing expectation of further workplace equality when compared with employees, with whom they often work side by side.
Time for change?
It is not now surprising that the Commons Select Committee on Business, Energy and Industrial Strategy (previously BIS) has launched an inquiry into the future world of work, focusing on the rapidly changing nature of work, and the status and rights of agency workers, the self-employed, and those working in the ‘gig economy’.
The Inquiry also looks at issues such as low-pay and poor working conditions for people working in these non-traditional employee roles. The full terms of reference are:-
1. Is the term ‘worker’ defined sufficiently clearly in law at present? If not, how should it be defined?
What should be the status and rights of agency workers, casual workers, and the self-employed (including those working in the ‘gig economy’), for the purposes of tax, benefits and employment law?
2. For those casual and agency workers working in the ‘gig economy’, is the balance of benefits between worker and employer appropriate?
3. What specific provision should there be for the protection and support of agency workers and those who are not employees? Who should be responsible for such provision – the Government, the beneficiary of the work, a mutual, the individual themselves?
4. What differences should there be between levels of Government support for the self-employed and for employees, for example over statutory sick pay, holiday pay, employee pensions, maternity pay?
How should those rights be changed, to ensure fair protection for workers at work?
What help should be offered in preparing those people who become self-employed (with, for example, financial, educational and legal advice), and who should be offering such help?
5. Is there evidence that businesses are treating agency workers unfairly, compared with employees?
6. Should there be steps taken to constrain the use by businesses of agency workers?
7. What are the issues surrounding terms and conditions of employees, including the use of zero-hour contracts, definitions of flexible contracts, the role of the Low Pay Commission, and minimum wage enforcement?
8. What is the role of trade unions in representing the self-employed and those not working in traditional employee roles?
Being slightly cynical, Her Majesty’s Revenue and Customs couple the review on workplace equality with an opportunity to close many of the tax loopholes used, in their opinion, to avoid the payment of taxes at the correct level. For years HMRC have been chipping away at the uncertainty in tax laws by imposing greater employment obligations on agencies and intermediaries and this year it imposed that labour only subcontractors had to be ‘filed’ on a monthly bases on the Real Time Information database, typically used to record employee pay data.
So, what could this all mean?
It is likely that the definition of worker status will become clearer and extend further, particular in terms of pay, so further limiting the potential to legitimately engage labour only subcontractors on a direct basis. This will result in the further use of payroll agencies or the engagement of these workers as employees, either way it will increase direct and indirect wage costs. There are strong economic reasons to preserve a great deal of flexibility in the working relationship, particularly in industries where work is fluid and opportunities are transient, such as construction. Any curtailment of these practices will render projects unviable and will detract investors, so regulators will balance both equality with national economic objectives.
Agencies and payroll bureaus are largely obliged to engage operatives as employees, yet the nature of the construction industry rarely triggers any further statutory employment rights, such as unfair dismissal and redundancy pay that are only rendered available after 2 years of continuous service.
Ultimately changes in worker pay, protection and rights are expected to extend, somewhat akin those afforded to agency workers in terms of equality of treatment to comparable workplace employees. Clearly such provisions will improve working standards and lives, but at a cost?
Andrew Wilson LL.M, MBA, PgDip, BSc (Hons)
Consultant Director at THSP Risk Management