Uncertainty around employment status has created challenges over the years for individuals and businesses alike. There is no precise and uniformly applied legal definition of a contract of employment. In practice, it’s clear enough in the vast majority of cases whether someone is an employee, worker or self employed person but there is a grey area between these categories which has given rise to a vast amount of case law.
The starting point adopted by courts or tribunals for establishing the status of a person within an employment context is to apply a multiple test. This sees the court or tribunal weigh up several different factors to determine whether the following exists between the parties:
- A contract (between the worker and alleged employer)
- Obligation on the worker to provide work personally
- Mutuality of obligation; and
- An element of control over the work by the employer.
The courts and tribunal have determined that the question of status depends on both fact and law in the individual circumstances (Lee Ting Sang v Chung Chi-Keung and Anor 1990).
Given the complexity of this area, the Government’s new guidance on employment status may bring some much needed clarity. Launched at the end of July 2022, this self-styled ‘one-stop shop’ guide is intended to help people and businesses understand which status they are and therefore, which employment rights apply to them.
One recent area of contention, which has been gaining a lot of press coverage, in respect of establishing an individual’s status at work is the status of individuals who work in the Gig Economy. Sector giants such as Uber and Deliveroo have been locked in legal battles over the status of their drivers and riders for the last several years. There are many more Gig Economy employers and ‘workers’ who have initiated litigation to determine their employment status.
The Government’s guidance for HR professionals helpfully sets out the statutory rights and protections that apply to people with each type of employment status. The guidance makes clear that the relationship between the employer and the individual is paramount to determining status, regardless of what the contract says. It is the application of the broad rules (outlined above) to an individual’s situation which makes the determination of employment status notoriously difficult.
The guidance assists by providing situational examples where an individual may be self-employed, a worker or an employee. It brings the idea of ‘financial risk’ (usually indicative of self-employed status), and ‘control’ to life through real-life scenarios (and within the context of different sectors).
In its section on Gig Economy, the guidance describes how the idea of ‘control’ operates in this business context, with the example of an employer/engager exerting control (a factor that would point towards worker, rather than self-employed status), through the use of an app. For example:
- ‘The engager restricts communication between the passenger and the driver to the minimum necessary to perform the particular trip and takes active steps to prevent drivers from establishing any relationship with a passenger capable of extending beyond an individual ride;
- Although drivers have the freedom to choose when to work, once a driver has logged onto the engager’s app, a driver’s choice about whether to accept requests for rides is constrained by the engager; and
- The engager exercises a significant degree of control over the way in which drivers deliver their services (vets the type of car and uses the technology to exercise control over the drivers).
The guidance will certainly help further embed the principles of status, and clarify how they operate in relation to individuals who work in the Gig Economy. That said, this is just guidance and cannot provide definitive answers on the complex question of employment status. However, the guide does provide a good overview of the rights available to each employment type and provides a steer on status categorisation.