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27 January 2017

Urgent delivery – Time for change

“May you live in interesting times” is the old Chinese curse. There is no doubt that with history being made before our eyes following the inauguration of President Trump, the Brexit vote and the rise of populism and fevered nationalism, times truly are changing. In most cases the law is slow in its response to change. However, change is what is required if our Government is going to embrace the new methods of working that appear to be led by business and society at large. The impact of the so-called “gig” economy on the labour market uncomfortably stretches and contorts the traditional classifications of employee and the genuinely self-employed.

We have recently seen two significant Employment Tribunal decisions in the Uber and CitySprint cases. In both cases the Employment Judge witheringly dismissed the arguments of the employer that their drivers and (cyclist) couriers were not employees or workers but were self-employed independent contractors.

The different rights available in respect of these classifications are key. Employees enjoy most statutory protections including the right not to be unfairly dismissed. The rights that an employee attracts derive from the days when employment law used to be the law of Master and Servant. The thinking being that, with the clear inequality of bargaining between the Master and Servant, it was important that the imbalance was addressed by statutory protections in favour of the employee.

The grade below employee is that of “Worker”. Able to claim the national minimum wage, statutory holiday and protection under the whistleblowing legislation are some of the rights this category enjoys. Importantly, treated just like employees for tax purposes, the onus is on the employer to make statutory deductions for PAYE and NICs for Workers.

The final category is the independently self-employed. Responsible for their own tax and NICs, they enjoy scant protection other than their common law contractual rights (bar limited anti-discrimination coverage under the Equality Act 2010). The rationale behind this is that these individuals have the power to negotiate favourable terms, choose when or whether to work and enjoy the economic fruits of their entrepreneurial pursuits.

The Employment Tribunal found that the individuals in the Uber and CitySprint cases were Workers as they met the “lower pass mark” for this category. Uber and CitySprint therefore have to re-think their business labour models or hope that the Employment Appeal Tribunal will take a different view. Having considered the judgments, this seems unlikely because the judiciary is hamstrung by service categories that have been formed by case law and statute, which are rooted in a different era and have failed to keep up with modern working practices and business.

That the Law Society (which is far from an example of modernity itself) last week called for reform in this area is telling.  It wants the law to be simplified and has urged for a reappraisal of the classifications. This is good sense. Why stymie business? While the Government undertakes its review of this area we should be optimistic and hope that it urgently delivers a new bargain for employers and the workforce (and, of course, satisfy the exchequer in terms of the tax take): one that allows business to flourish and at the same time attracts sensible modern protections that will stop any ruthless employer from the exploitation of its staff. This is eminently achievable.