Ministers have ordered a crackdown on employers in the so-called gig economy who use a high number of self-employed or agency workers amid concerns about poor working conditions and an erosion of worker rights.

Companies’ working practices and the employment status given to workers are hot topics as several organisations have been subject to inquiries, media scrutiny and legal action from their workers.

  • Sports Direct has faced a backlash for its high use of zero-hour contracts.
  • Asos’ use of agency staff and invasive monitoring and surveillance of staff in warehouses has also been criticised.
  • Workers at Deliveroo protested over changes to pay structures this summer.
  • Most notably, legal action has been taken against Uber, Excel, City Sprint, Addison Lee and eCourier over employment status.

Self-employed or not?
The financial secretary to the Treasury, Jane Ellison, announced that a new specialist unit, known as the Employment Status and Intermediaries Team, will investigate companies that use a significant number of self-employed workers and respond to complaints about any alleged employment or tax violations of rules on self-employment.

Recently, HMRC launched an enquiry to investigate the courier company, Hermes, after getting numerous complaints about low pay and poor employment practices. The couriers argue that they are being falsely classified as self-employed. They claim that they are effectively being paid below the National Minimum Wage and fear they will lose their jobs if they are unable to work due to sickness or bereavement.

Hermes refute these accusations and say they will fully cooperate with the investigation.

Status and rights of workers
The Business, Energy and Industrial Strategy Committee has launched an inquiry which will examine the status and rights of agency workers, the self-employed and those working in the “gig economy”.

Iain Wright, Chair of the Business, Energy and Industrial Strategy Committee, said “In recent months we’ve seen growing evidence of agency workers and those working in the ‘gig economy’ being exposed to poor working conditions. This growing trend raises questions over employment status and lack of worker rights. The nature of work is undoubtedly changing. It will change further with growing use of technology and a spreading of automation across the economy. This might provide flexibility and choice for some people, but unleash insecurity and squeezed working conditions for others. With these economic and technological changes shaking up the world of work, it’s vitally important that workers are protected.”

Gig Economy
In recent years, we have seen the phenomenal rise of this so-called gig economy. Companies such as Uber, Deliveroo and TaskRabbit have adopted a new business model, which use apps to connect workers to customers. Rather than recruit workers, the main characteristic of this new model is their use of self-employed contractors. This saves companies significant costs as they do not need to enter into a formal employment relationship with all the employee rights and the employer obligations attached.

However, those who work for companies with this business model have started to take legal action, expressing their concerns over their employment status and the precariousness of their position. In particular, they are arguing that they are being falsely classed as self-employed so that companies do not have to provide them with employment rights. The self-employed do not have any significant employment protections. Workers, however, enjoy fewer rights than employees but still have some key entitlements, such as the right to the National Minimum Wage and holiday pay.

In October 2016, an Employment Tribunal found against the company Uber – which allows people to book and pay for a taxi via an app – in a case regarding employment status. It stated that the people who work for Uber are workers, not self-employed as the company claimed and as such they are entitled to workers’ rights.

Understanding employment status is an extremely complex area of law, so please contact your Employment Law Adviser to find out more about the rights and responsibilities attached to each status. If an employer gets this wrong, it could lead to tax penalties and legal claims.

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