Impact of Uber ruling on the gig-economy.

In February, the Supreme Court unanimously dismissed Uber’s appeal, meaning Uber drivers would be classed as workers rather than being self-employed and Uber would be subject to paying holiday and sick pay, the national minimum wage, and VAT.

What impact will the ruling have for other ‘gig-economy’ businesses? And how can a solicitor help? Phillip Vallon and Mona Gholami discussed this with The Law Society live earlier today, below are the questions asked and answered.

I operate zero-hour contracts to staff my business, could I be liable to pay compensation in terms of holiday and sick pay?

Unfortunately, yes. Agreeing a zero-hour contract with an individual will not necessarily mean that they are self-employed rather than being a worker or even an employee. Those on a zero-hour contract who are classed as workers or employees and not self-employed, are entitled to holiday pay and may also be entitled to sick pay.

For an individual under a zero-hours contract to be eligible for statutory sick pay they must be:

  1. Classed as a worker or employee and have done some work for the employer;
  2. Earning an average of £120 per week or more in the eight weeks prior to the sickness absence; and
  3. Sick, self-isolating or shielding for 4 days or more.

A business who fails to pay its eligible individuals holiday and sick pay is at risk of receiving employment tribunal claims and may have to pay compensation. The business could be liable to pay the National Minimum Wage as well as facing claims for holiday and sick pay.

Are there any circumstances where I have used zero-hour contracts but would not be exposed to past or future claims of this nature?

Yes, where the individual working under a zero-hour contract is genuinely self-employed, you would not be at risk of successful claims for compensation in terms of holiday pay, sick pay and other benefits that come with the ‘worker’ or ‘employee’ status. However the Supreme Court has confirmed that tribunals and courts should look beyond the label of ‘self-employed’ to see what the true working relationship is in practice.

How far back could I be liable for any similar claims or compensation awards?

If the claim is framed as being for unlawful deduction from wages then the worker can seek compensation as far back as two years prior to the date of the claim. However there is a complication that claims brought under the Working Time Regulations can potentially go back further, provided the worker can show a continuing series of deductions. The tension here is yet to be satisfactorily resolved.

What risk and employment status assessments should I be carrying out as a result of the ruling?

The Supreme Court took into consideration Uber’s degree of control over its drivers however there are a large number of factors that may be taken into account when considering status.

The decision confirms that businesses cannot solely rely on written agreements and signed contractual documents as the tribunals and courts will also consider the conduct and the course of dealings between the parties to determine the working relationship between the two. Concerned businesses should consider undertaking a status audit looking at relevant factors such as degree of control, mutuality of obligation and whether the individual can and does provide services for other organisations.

What steps should I take to avoid any future claims or investigation from HMRC as a result of using a similar business model?

Make a fair and honest assessment of whether individuals engaged by your business are workers/employees or self-employed, ensure that their contracts reflect the realities of the working relationship and review these contracts and the circumstances periodically. Those with similar business models to that used by Uber should make an assessment, including considering the level of control the business has over those providing its services. If that assessment does not reflect the contractual position then thought should be given to whether adjustments can be made, for example giving individuals more control over their work so that the self-employed status is more likely to apply. Alternatively, if that is not possible a business should look to appropriately alter the arrangement so that individuals are formally brought on as workers/employees in order to retain the level of control required by the business model. There are potentially significant costs to that approach, but if it reflects the reality of the situation then such steps are likely to be needed to avoid similar future claims or potential investigations.

If you need assistance determining the status of those engaged in your business do get in touch.

The contents of this article are intended as guidance for readers. It can be no substitute for specific advice. Consequently we cannot accept responsibility for this information, errors or matters affected by subsequent changes in the law, or the content of any website referred to in this article. © Mundays LLP


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