UK: gig economy developments, including important ECJ ruling on holiday pay, Uber and Deliveroo rulings on worker status, and delay to government proposals

The ECJ has agreed with the Advocate-General's opinion in King v Sash Windows that workers denied paid holiday can carry over their 4 weeks' statutory holiday entitlement indefinitely and be paid in lieu of the entire accrued untaken entitlement on termination.  The ruling has significant financial implications for employers with staff potentially mis-categorised as self-employed, particularly where they have a stable and long-serving workforce.

The UK Working Time Regulations expressly do not permit carryover of the 4 weeks' EU-derived statutory holiday.  Case law has established that, to comply with EU law, the UK regulations should be purposively construed to permit carryover where a worker has been prevented from taking his entitlement due to sickness absence or family-related leave.  However, this can be subject to a time limit on when the carried over holiday can be taken, and a limit of 18 months after the end of the holiday year in which it accrued is lawful.

The ECJ has now expanded the circumstances in which carryover must be permitted.  In Sash Windows the employer wrongly classed Mr King as self-employed and therefore maintained that he had no right to paid holiday;  as a result he did not take most of his holiday entitlement from 1999 to 2012 (over 24 weeks' entitlement was untaken).  The ECJ ruled that a refusal to provide paid holiday amounted to 'preventing' the employee from taking their leave entitlement, as it would deter a worker regardless of his financial situation.  Where an employer had wrongly refused to pay for leave, it was irrelevant that the worker had not actually put in holiday requests and equally irrelevant that the worker could have taken up an offer to move onto a different contract with the right to paid annual leave.  Significantly, it was not appropriate to limit carry over as, unlike long-term sickness cases, the employer had not suffered any organisational difficulties due to absence but on the contrary had benefited from the individual's continuous work.

The ruling significantly increases an employer's potential liabilities if workers treated as self-employed succeed in establishing worker status.  These could now include pay for holiday which they have been deterred from taking, accrued over the entire period of their engagement, either in the form of permitting the carried-over holiday to be taken while still engaged or pay in lieu on termination.  The case now returns to the Court of Appeal to decide if the UK regulations can be interpreted consistently, probably by reading words in.  The judgment deals with holiday which has not been taken (rather than holiday which has been taken but underpaid);  it therefore does not directly address the question of compatibility with EU law of the domestic rules limiting claims for underpayment of holiday to two years' back pay and a series of deductions without a break of more than 3 months (which it has been suggested may breach the EU principles requiring an equivalent and effective remedy for breaches of EU rights).

[Update: the case settled before being heard by the Court of Appeal.]

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The EAT has dismissed Uber's appeal against the tribunal decision that its drivers are workers entitled to working time and national minimum wage rights once they have signed into the Uber app and are able and willing to accept assignments. The EAT agreed that the tribunal was entitled to look behind the contractual documentation and rejected the argument that Uber was simply a technology platform acting as agent for the drivers in relation to their contracts with passengers.  It was entitled to take into account that drivers could not grow their businesses, the scale of the operation, the lack of negotiation between driver and passenger, the imposition of Uber terms, and the degree of control exercised, including in excess of regulatory requirements.  The potential penalties for not accepting at least 80% of offered assignments while signed into the app meant that drivers should still be treated as available and working while waiting for assignments, notwithstanding the theoretical ability to accept other work. Uber's application to appeal straight to the Supreme Court has been refused, so its appeal will be heard by the Court of Appeal next year.

In contrast, Deliveroo succeeded in persuading the Central Arbitration Committee that its riders were not workers for the purposes of an application for statutory recognition of a union.  The decision in that case hinged on the finding that riders had a genuine, largely unfettered right to substitute before and after accepting a particular job, supported by evidence that this right was actually exercised, albeit only occasionally. That negated the required element of personal service.  It was irrelevant that there was no need for riders to appoint substitutes (given their total flexibility to decline or abandon jobs) and that the use of unsupervised substitutes might create regulatory and reputational risks for Deliveroo.  The CAC noted that this unfettered right to substitute clearly distinguished Deliveroo from the facts in Uber and other recent cases.There is no right to appeal a CAC decision, although it can be subject to judicial review.  However, unlike EAT rulings, it does not have any precedent value for tribunals.  Claims against Deliveroo have been issued but are yet to be heard by the employment tribunal.  The issue of worker status is destined to remain a focus of the courts for some time, with the Supreme Court due to hear the Pimlico Plumber case in February 2018.

[Update: see our blog posts on the Supreme Court judgments in Uber and Pimlico Plumbers.]

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In the meantime, the government is continuing to consider reform.  The Work and Pensions and Business, Energy and Industrial Strategy Committees have published a joint report and draft Bill suggesting a new presumption of worker status which employers would have to disprove, along with other recommendations.  The Autumn budget announced a consultation on the case and options for longer-term reform to make the employment status tests for employment rights and tax clearer. The consultation forms part of the government's response to the Matthew Taylor review of modern working practices.  The timing of the consultation has not been specified;  ministers had stated they would respond by the end of 2017, but it has recently been reported that this will be delayed until 2018 due to Brexit and fears of parliamentary opposition.