Issue: May 2018

UNITED KINGDOM - Good Work If You Can Get It: UK Government’s Response to Modern Working Proposals

By: Nicola Whiteley & Charlotte Oliver

Some seven months after the publication of Matthew Taylor’s independent ‘Review of Modern Working Practices’, the UK Government has finally issued its response to the Taylor proposals: the “Good Work” response (the “Response”). Big news, you might think – but it’s fair to say that it promises more than it delivers.

Some of the headlines in the UK press would have you believe that there has been a large-scale reform on UK employment rights and this was certainly the expectation– but this just isn’t the case, at least for now. The Government has stated that it is in agreement with 52 of the 53 recommendations from Matthew Taylor’s commissioned review, which considered how employment practices need to change in order to keep pace with modern business models (the “Taylor Review”), and it has acknowledged that, “all work should be fair and decent, with scope for development and fulfilment” – but the major points in the Response are all subject to further consultation and we are far from having concrete plans in place to effect change.

A key focus of the Taylor Review was, of course, the gig economy – and this was perhaps the area in relation to which the Government’s response was most eagerly awaited, particularly as regards employment status considerations and rights. Although the Response covered a number of other atypical and/or “modern” working topics, like agency, casual and zero hours work, improving transparency of information and rights, calculation of continuous employment and enforcement of tribunal awards, this blog primarily focuses on the gig economy questions and their impact on the Tech sector.

Is it a bird? Is it a plane? No, it’s (still) a worker…

There has been much discussion in the employment law eco-system, both before and after the Taylor Review, of the need for some sort of change to the current three-tier approach to employment status: that of employee, self-employed and the rather confusing hybrid status of “worker”. Up to now, the well-publicized gig economy employment status cases have argued (and largely won) the case for gig service suppliers to be considered “workers” rather than employees. However, this still causes controversy on both sides of the argument – the pro-employee contingent believe that this doesn’t go far enough and that there should be a greater level of basic minimum protection for individual rights (although not necessarily going so far as to classify them as full employees, recognizing the need for flexibility on both sides); whereas the pro-“employer” argument believes that the issue is unnecessarily complicated and uncertain, with no clear defined rules on who is or isn’t an employee/worker and an unreasonable constraint on individual choice and business flexibility.

Sadly, the Government seems largely to have dodged this bullet in the Response and the current system will remain for now, with no plans to create an additional status of “dependent contractor” out of the current worker category – although the Government is consulting on the benefits (or otherwise) of renaming one of the worker definitions as “dependent contractors” (pursuant to the Taylor Review recommendations).

On a slightly more positive note, the Government does appear to be committed to fleshing out existing legislation in order to provide more helpful definitions of employee and workers (potentially to be renamed “dependent contractors”) and to tally the employment and tax frameworks for employment status more closely– but whilst we would all welcome clarity on this point, the extent and scope of this “codification” is currently unknown and will (again) follow further consultation.

In his twitter feed, Matthew Taylor has been quite gracious about this, noting that any move on employment status issues would require new legislation (and therefore would explain the consultation).

Possibly. But still, the Government appears to be reluctant to ‘stick its neck out’ with a firm proposal until it sees what the tide of opinion would support. It has stated that it intends to develop an online tool that could be used to determine employment status for each individual but while this may sound like a laudable idea, we are sceptical of a ‘one size fits all’ test, given the range of nuances under current case law rules. Plus, we still don’t have any details of how this would work, so we won’t hold our breath just yet.

The Element of Control

One reassuring element of the Response is that the Government will consider “control” to be of greater importance in the proposed new employment status test, with less emphasis on personal service.

In recent employment status litigation, employment tribunals have repeatedly emphasised the significance of personal service in labelling an individual as self-employed, with the right of unfettered substitution being almost determinative in itself in that argument. In the real world, the importance of the right of substitution has always seemed somewhat questionable and at odds with the commercial sense of providing a consistent and quality service.

If, based on a personal recommendation, you instruct a specific, genuinely self-employed, builder to carry out work on your house and that builder sub-contracts the job entirely to a different builder who has not been recommended to you, you would not be receiving the service for which you had contracted and would not be happy about it. But there would be no question of the builder being your employee or worker, rather than a self-employed tradesperson. So why shouldn’t a business be allowed to be as choosy about their service providers, without risking that service provider being seen as an employee or worker? Equally, in the same analogy, if the original builder did the work, the householder would not expect to manage that builder’s time and duties and would allow him or her to carry out the building work according to their specialism, including the use of additional individuals to assist, as and when appropriate. To do otherwise certainly may suggest that the relationship with the builder was not that of someone in charge of their own business. A shift in focus, therefore, away from personal service and towards the level of control someone has over the actual services they provide seems a much more sensible indicator of status.

For now (and in future), companies should carefully consider how much control they require over individual contractors/service providers and accept that if, for example, they are made subject to set rates of pay, very detailed duties and performance reviews or ratings, the chances are higher that the individuals will turn out to be “workers” with rights.

This shift may also see a reduction in unhelpful (and sometimes artificial) substitution clauses, which to date have played a pivotal role in gig economy agreements and cases. In fact, the consultation goes even further and will ask readers to comment on the relevance of traditional, outdated employment markers (mutuality of obligation, personal service, control) on online platforms. Maybe then, the much-derided “armies of lawyers” will be able to lay down their pens for a rest and gig economy-based agreements can start to reflect reality. Maybe.

What Do Points Mean? – Prizes…

In their recent UK case, we saw Uber come under heavy criticism for a performance rating service that effectively mirrored a performance management process; a process which is usually reserved for employees or, at least, workers (and not self-employed drivers). However, the Response acknowledges the importance of online approval ratings for self-employed individuals who rely on reviews and verified ratings.

The plan is for individuals to take ownership of their approval ratings and carry them across various platforms, acting as a reference for various companies and end-users. Whilst at odds with recent case law, we think this would be a sensible idea…but struggle to see how the technology would allow for transfer across various unrelated app platforms (e.g. like the self-employed builder taking their personal recommendations and referrals with them to different clients). If it could be made to work, it would allow platforms to monitor standards of quality across their service – which is particularly important when the individuals they engage to undertake work; the drivers, the couriers…are largely anonymous, with very little face time. Without the fear of impeding the ‘control’ test mentioned above, platforms could have more control of the service they provide.

Holiday Pay – The Nightmare Continues

For those gig workers who are currently held to be in the more protected “worker” category, holiday pay has caused particular controversy and difficulties. Following consultation, the Response apparently hopes to simplify holiday pay calculations and campaign to increase awareness of holiday pay rights. Here’s hoping.

The specific change that is discussed in the Response is to extend the reference period when calculating holiday pay to 52 weeks, to allow for averaging out over seasonal or varied work. This is not necessarily a new thing – some employers already use a 52 week reference period voluntarily. However, making it compulsory may increase holiday pay costs for employers who see significant seasonal staff changes – but again this is still subject to consultation.

Working Time – What Is It?

Figuring out what constitutes “working time” continues to vex many employment tribunals, as they seem to struggle to apply the traditional employee vs self-employed working model to online platform-based businesses. The concept of working time is crucial to workers, as they will base their national minimum wage calculation on the hours they spend “working”.

However, what constitutes working time will vary across platforms, depending how they operate, and each company is likely to have their own ideas (and monitoring/calculation software) for what should and shouldn’t count towards working time. Will simply logging on to an app count towards working time? Or should workers have accepted a “job” before they are technically working? The situation becomes even more complex if the user is logged in to various different platforms, choosing whether to accept jobs from each of them, at the same time.

No suggestions have been put forward in the Response on how to solve this troublesome question, although the Government does, at least, acknowledge its importance.

So Where Does That Leave Us?

Many commentators do not believe the Response goes far enough. There is still a vacuum of uncertainty surrounding employment, engagement and modern working practices, which is painfully apparent with online platform businesses.

Matthew Taylor, however, remains positive about the outcome of the Response. In another tweet in reaction to the Response, he states that, “I also think that – behind the detail – today marks the important point when better quality work is adopted as a national goal and there is a general acknowledgement of the limits and downsides of greater ‘flexibility’ as a labour market strategy.”

If the Government acts on his recommendations post-consultation(s), he might have something, but until we see the outcome of those four further consultations, we remain largely in limbo.

Nicola Whiteley

Orrick – London

Charlotte Oliver

Orrick – London