UK: 'Gig economy' employers - business model under threat from litigation and legislative review

Companies engaged in the 'gig economy' should be alive to the threat recent employment law developments could pose to their business model. Where the business involves the provision of a technology platform for a fee, allowing service-providers to offer their services at low cost to customers, this may only be commercially attractive if the service-providers are classified as self-employed. The platform owner may not be in a position to absorb the additional costs of workers' rights (eg, paid holiday, minimum wage while available for work) should the individuals be deemed workers, and increasing the cost of the service to customers may not be sustainable.

Uber

A recent tribunal ruling has highlighted that, where the business proposition involves brand values controlled and imposed by the platform owner, and payment rates set and administered by the platform owner, this increases the risk that in reality the individuals will be held to be the platform owner's workers. This was the tribunal's conclusion in the recent claims brought by drivers against Uber. Uber had put in place complex contractual arrangements between Uber BV (the Dutch parent company) and the drivers, describing Uber as merely acting as agent for the drivers and the drivers as contracting directly with passengers; the tribunal disregarded these arrangements, finding that they did not reflect the reality. Given the controls exercised by Uber, the drivers were held to be engaged by the UK Uber entity as workers for as long as they were in the territory in which they were authorised to work, they were signed into the Uber app and were ready and willing to accept bookings. (Aslam v Uber)

The decision is likely to be appealed; potential areas for challenge include the lack of analysis in the judgment around the test of mutuality of obligation and the strict rules on implying contracts. Although fact-specific, other employers in the gig economy will want to keep a close watch on developments in this and a number of similar cases pending in the employment tribunal.

Gig economy reviews

In the meantime, there is the possibility of legislative developments in the mid-term. October saw the announcement of two domestic reviews into modern employment practices, one an independent review commissioned by the Prime Minister and the other an inquiry by the Business, Energy and Industrial Strategy Committee seeking online submissions by 19 December 2016. Both will focus on the rapidly changing nature of work, including the development of the 'gig economy' and workers' rights. It will be interesting to see whether they consider the possibility of introducing a new status for this type of individual, to enable businesses to increase the support they give individuals without thereby increasing the likelihood of their being held to be workers or employees. This is one of the suggestions mooted in a recent report prepared by the European Parliament, while the International Labour Organisation has also recently called for governments to develop policies establishing, among others, minimum guaranteed hours for on-call workers and giving workers a say in their work schedules, legislation and enforcement to address employment misclassification, and restrictions on abusive uses of atypical workers.

Not to be left out, the Office of Tax Simplification is looking at the area from a tax perspective, and the Work and Pensions Committee has launched an inquiry to consider whether the UK welfare system adequately supports the growing numbers of self-employed and gig economy workers. Meanwhile, the ECJ has ruled that, for the purposes of EU Directives protecting 'workers', individuals do not need to have a contract with an entity to be their worker, as long as they are in an "employment relationship", the essential feature of which is that a person performs services for, and under the direction of, another person for a certain period of time in return for remuneration (Betriebsrat der Ruhrlandklinik gGmbH v Ruhrlandklinik gGmbH). In contrast, the UK law concept of 'worker' is firmly based in contract.

The issue of employment/worker status and associated rights is likely to remain a hot topic for some time to come.