It engaged two competing issues: economics and basic fairness. On the one hand, the cost to the state of a rise in self-employment should not be under-estimated. If two people are doing the same task and earning the same basic remuneration on average earnings, the total tax paid to the state for the employee is about £2,000 a year more than for a self-employed contractor. On the other, self-employed status can be deceptively broad. For every budding entrepreneur there are many who are economically subordinate to a taskmaster and yet deprived of basic protections: holiday pay, sick pay or the right to be free from discrimination. For an individual to be bereft of rights yet subject to tax liabilities bearing little relation to the true nature of his or her work is invidious to say the least.

Services are delivered in the modern workplace in a host of different ways – far removed from the orthodoxy of ‘master’ and ‘servant’. The rate of self-employment has doubled from 8.7% of the workforce in 1975 to 15% today. This is a global phenomenon: it is expected that by 2020 40% of the US workforce will be freelancers. As readers of Counsel will attest, there are many advantages to self-employment. The rapid take-up of freelance work by older people and women in particular suggests that it can serve as a positive means of facilitating access to the labour market. But there is an alternative story. Whilst the number of self-employed in 2008 has increased, average earnings have decreased. ‘Flexibility’ is a rubbery concept: freedom for the body corporate can amount to exploitation of the individual in limbo under a zero-hours contract.

Statute and judicial intervention have often felt many steps behind these changes but a suite of cases this year including the Court of Appeal judgment in Pimlico Plumbers v Smith [2017] IRLR 323 (PP), demonstrate statutory interpretation is being reconciled with reality.

A question of status: the framework

Employment rights hinge upon status. Absent the status of employee or worker, an individual has no protection. ‘Employee’ status is the golden ticket and a passport to claims such as unfair dismissal. An employee is defined as an individual ‘employed under a contract of service’ (s 230(1) of the Employment Rights Act 1996 (ERA 1996)). The threefold test as expounded by MacKenna J in Ready Mixed Concrete [1968] 2 QB 497 remains the lynchpin. Is there a mutual wage/work bargain under which the individual provides personal service? Is there a sufficient degree of control over the performance of that service? Are other provisions of the contract consistent with its being a contract of service?

The silver medal is awarded to those who achieve ‘worker’ status as defined in s 230(3)(b) ERA 1996 (the so-called ‘limb b workers’) engaged under ‘any other contract, whether express or implied… whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual’.

As Baroness Hale put it in Bates van Winkelhof [2014] ICR 1004 (at para 25): ‘[There are] two different kinds of self-employed people. One kind are people who carry on a profession or a business undertaking on their own account and enter into contracts with clients or customers to provide work or services for them… The other kind are self-employed people who provide their services as part of a profession or business undertaking carried on by someone else.’

The latter category enjoy those basic rights such as paid breaks, the minimum wage or holiday pay. The former category go empty-handed subject to the bronze medal – beyond the scope of this article – namely the extended worker definitions found in, for example, the whistle-blowing protections afforded by s 43K of ERA 1996.

Courts grapple with quirks of the gig economy

The focus of this year’s decisions has been on worker status and grappling with two quirks of the workplace. One is a new arrival, namely the delivery of services through online platforms such as Deliveroo and Uber (those scenarios which generate the ubiquitous shorthand of the ‘gig economy’). The other is the long-standing feature considered in PP: a casualised workforce where there is no umbrella contract between individual and ‘employer'.

Uber ‘doth protest too much’?

The world’s largest taxi company owns no vehicles. It does, however, operate an app by which fare-paying passengers can make a request for a trip and which calculates the bill with minimal input from the driver. Uber’s terms with both passenger and driver seek to maintain the stance that Uber does not provide transportation in London but instead comprises ‘a mosaic of 30,000 small businesses linked by a common platform’.

For 11 discrete reasons, the Employment Tribunal (ET) in an exemplary judgment (Aslam and others v Uber BV and others [2017] IRLR 4) found this to be ‘faintly ridiculous’ and concluded instead that Uber drivers are workers for the purposes of a test claim under the national minimum wage provisions. As the ET put it in a telling passage at para 87: ‘Any organisation (a) running an enterprise at the heart of which is the function of carrying people in motor cars from where they are to where they want to be, and (b) operating in part through a company discharging the regulated responsibilities of a PHV operator, but (c) requiring drivers and passengers to agree, as a matter of contact, that it does not provide transportation services…, and (d) resorting in its documentation to fictions, twisted language, and even brand new terminology merits, we think, a degree of scepticism. Reflecting on the respondents’ general case… we cannot help being reminded of Queen Gertrude’s most celebrated line: ‘‘The lady doth protest too much, methinks.’’’

The reality of the situation was clear: Uber is a transportation business whose services could only be delivered through its drivers. They were accordingly workers. An appeal to the Employment Appeal Tribunal (EAT) is outstanding.

Similar sentiments can be found in Dewhurst v Citysprint ET 2202512/2016. D typically worked four days a week from 09:30-18:30; her tasks were allocated by way of the Citytrakker system; her rate of pay was stipulated; she wore a uniform. Did a contractual provision on a right to substitute preclude worker status? The ET concluded not: in reality it amounted to little more than a right to swap jobs within the courier cohort. The clause on its face was said to be ‘contorted and self-destructive’ and did not defeat her holiday pay claim.

Pimlico Plumbers v Smith

S, a plumber, worked exclusively for PP from August 2005. In January 2011 he had a heart attack: his engagement was terminated four months later. He pursued a number of claims including unfair dismissal, disability discrimination and holiday pay. Both the ET and EAT concluded that S was not an employee and as such his claim of unfair dismissal failed. The ET concluded, however, that he was a worker: the appellate courts followed suit.

PP’s appeal to the Court of Appeal ([2017] EWCA Civ 51) hinged principally on the question of personal service. The terms entitled S to arrange for work to be done either by another PP operative, or with the prior consent of PP, any other person. This right to substitute was, it contended, determinative. (See Sir Terence Etherton MR’s neat summary of the principles at para 84.)

PP could not rely upon general practice to imply an unfettered right to substitute which flew in the face of the express provisions of the agreement. This, combined with a provision in an earlier agreement which defined a normal working week as five days a week and a minimum of 40 hours, pointed inexorably towards worker status. Whilst PP may not have had an obligation to offer S a particular task there was nevertheless an obligation to provide sufficient work to meet the hours of a normal working week.

As Underhill LJ rightly cautioned, resolution of the particular relationship ‘depended on an analysis of the contradictory and ill-thought-out contractual paperwork in the context of the judge’s findings about what happened on the ground’ and as such one should be ‘careful about trying to draw any very general conclusions’ from the decision (para 143). Despite that caveat, a general trend continues: ‘the tribunals will look narrowly at lawyer-drafted documentation which does not appear to correspond to the reality of the relationship’ (para 144). This is particularly so where the fundamental question is not so much the umbrella arrangement but the extent of any obligations between the parties at the time that the work is being performed. There is some prospect of a petition to the Supreme Court on behalf of PP: watch this space.

The Taylor Review and next steps

The beginning of 2017 therefore marks a trajectory of conferring status on those who as a matter of practical reality are integrated into the business. This echoes with recent decisions in the tax arena: thus the litmus test in Dhillon and GP Dhillon Partnership v HMRC [2017] UKFTT 017 became that D was not in business on his own account and entered non-negotiable terms of another. It also accords with public sentiment. The government is alive to this and in October of last year commissioned the review on Employment Practices in the Modern Economy with Matthew Taylor at the helm.

Many are sceptical that the Taylor Review will announce seismic change. And, despite the trend, the process of retrospective, costly and time-consuming preliminary hearings with ample prospect of appeals remains an unedifying means of resolving the question of whether individuals enjoy the basic day-to-day workplace protections which many take for granted. This is particularly so given the stance of Uber and others that the individual litigants have no ability to bring the claim as a representative of the wider workforce. Nonetheless, identifying an alternative test to that presently found on the statute books is no easy task. One thing is clear: the question of status will continue to be asked for some time to come. Leaks in protection remain despite welcome assistance from PP.

Contributor Chris Milsom, Cloisters

Barrister on secondment? employment status advice from the bar council

Secondments are an increasingly common way for barristers to broaden their experience and diversify their practice. However, it’s important to be aware that undertaking arrangements of this type may mean changing from a self-employed barrister to an employed barrister. Crucially, this will often be the case even for those who are legally categorised as independent contractors rather than employees.

The Bar Council’s ‘Retainers, Fee Arrangements and Non-Standard Work Arrangements’ guidance document includes the following key points:

A barrister might be employed by an ‘authorised non-Bar Standards Board (BSB) body’ (ie a solicitors’ firm), a ‘BSB entity’, or a ‘non-authorised body’ such as a large corporation.
This means there are three slightly different definitions of ‘employed barrister’, all of which include supplying legal services as a barrister under a contract of employment.
However, they also all include doing so ‘under a written contract for services which is for a determinate period’. Many fixed-term secondments will therefore be captured too.

What to do next

If you decide that one of the definitions of ‘employed barrister’ will apply to you when undertaking a secondment, the Bar Council’s advice is that you should take the following steps:

  • Leave yourself enough time to ensure that you have the right practising certificate – either one that authorises you to practise exclusively as an employed barrister, or a dual-capacity one – before the secondment starts. You should also familiarise yourself with the scope of practice rules that will apply to you (rS31-39).
  • Ensure your contract clearly sets out the relevant terms so that you (and potentially the BSB) can identify in which capacity you will be providing legal services to that firm or company.
  • Establish the identity of your primary client(s) – when is it the firm itself as opposed to its clients? – for the purpose of fulfilling your professional obligations.
  • Consider whether you could still be directly subject to a negligence claim by the end client, even if you are legally categorised as an employee.
  • Check that the firm or company has appropriate insurance in place to cover all the legal services you will be supplying to the public. You may also want to ask whether it will cover you for disciplinary proceedings as well as actions in law.
  • If you decide to maintain a dual-capacity practice, you must agree a protocol to resolve any conflicts of interest that arise, and must not ‘work in more than one capacity in relation to the same case or issue for the same client, at the same time’ (rS18).
  • If you are of less than three years’ standing, work out how you will meet the rS20 requirement to have (a) qualified person(s) available to provide guidance in your principal place(s) of practice.
  • You will be in breach of the BSB Handbook, and may be committing a criminal offence, if you provide legal services in a capacity which your practising certificate does not permit.

Contributor Ellie Cumbo, Bar Council Head of Policy: Legal Affairs, Practice and Ethics