Following a five-year legal battle, The Supreme Court has finally ruled that drivers for Uber are considered “workers” and not self-employed. This means that they are now entitled to receive basic employment rights and the Company could be made to pay out millions in backdated holiday pay to those affected.
So, what can we learn from this landmark ruling?
- The ruling has concluded that, depending on the working relationship, some ‘self-employed contractors’ could be classed as workers and entitled to employee rights such as holiday pay, sick pay, the right to the national minimum wage, and many more.
- In determining an individual’s employment status, the tribunal will not only consider what any contractual document states but will consider the full working relationship in practise.
- They will assess factors including the duration of work, how exclusive it is, the right to substitution, the method of payment, the level of control imposed by the Company, and much more.
In summary, regardless of if there is a contractual document confirming that a Company is engaging with an individual as a self-employed sub-contractor, if the working relationship is found to be under more control by the Company, then there is potential the individual may be deemed a worker, or even an employee. If this is the case, then they could be entitled to receive a number of backdated payments.
This costly case highlights the importance of correctly determining an individual’s employment status from the beginning, with a view of avoiding a costly legal dispute further down the line.
The court explained that the purpose of this legislation was “to give protection to vulnerable individuals who have little or no say over their pay and working conditions” because they are dependent on a person or organisation that controls their work.
“The legislation also precludes employers, frequently in a stronger bargaining position, from contracting out of these protections.”
Under the Government’s Good Work Plan (a document which sets out their vision for the future of the UK labour market) the Government has committed to ‘improve the clarity of the employment status tests, reflecting the reality of modern working relationships’. Therefore, we hope to see some improvement in the clarity surrounding this legislation over the next few years.
Finally, there is an employment status for tax questionnaire on the government’s website, which on completion will help to indicate the employment status of an individual (at least for tax purposes).
If you are engaging sub-contractors over prolonged periods of time and are unsure if there is potential for dispute over their employment status, please do contact your designated HR Advisor for advice.