The financial crisis in 2008 saw a huge expansion of the gig economy in the UK, with companies increasingly relying on self-employed labour as an alternative to taking on people on a permanent basis.
With this came a flurry of legal claims where the overarching argument by the Claimants was the same – Despite being described as 'self-employed' on paper, in reality they were actually workers or employees, and therefore entitled to additional employment rights, such as holiday pay, maternity pay, and national minimum/living wage.
The increase to employers' National Insurance contributions in the Government's recent budget will undoubtedly increase the financial pressure on businesses. Some are projecting that we may now see a trend back towards the gig economy, and a surge in businesses adopting self-employment models as a way of avoiding these additional costs.
However, a recent case involving this issue of employment status re-emphasises that this strategy must be approached with a degree of caution, because there are expensive risks with engaging individuals on a self-employed basis, if the reality is, they're not genuinely self-employed.
Drivers v. Bolt
With echoes of the Uber case in 2018, Bolt is a well-known app that offers ride hailing, grocery and food delivery services. 15,000 Bolt drivers brought Employment Tribunal claims for unpaid holiday pay and National Minimum/Living Wage. Bolt defended the claim on the basis that the drivers were genuinely self-employed, and therefore did not qualify for these employment rights.
Earlier this month the Employment Tribunal disagreed and held that the drivers were workers and therefore entitled to holiday pay and minimum wage. Bolt set the fares, controlled driving assignments, and imposed penalties on drivers for their non-compliance with its rules, leaving them with little autonomy in their work. Bolt's level of control over the drivers tipped the scales firmly in favour of them being workers, rather than self-employed.
It is anticipated that the 15,000 drivers are now in line to receive over £15,000 each, meaning that the total initial cost of this case for Bolt could be upwards of £225m. However, it could have much wider implications, as all of Bolt's UK drivers, which is over 100,000 people, are now classed as workers and could now join the claim.
Comment
The Labour Government had proposed to remove 'employee' as an employment status category, leaving everyone with being classed as either a worker or self-employed. However, that change didn't find its way into the Employment Rights Bill, albeit the Government has suggested it will consult on the issue at some point. For now at least, the distinction in employment law between whether someone is an employee, worker, or self-employed remains significant.
Whilst businesses may be tempted to utilise self-employment models to save on costs in the short term, it carries risks that can lead to significant costs in the long term. Including liabilities for unpaid tax, holiday pay, sick pay, and National Minimum/Living Wage. All the case law demonstrates that whether an individual, or class of individuals, is self-employed or not will turn on the facts; and will depend on the specific nature of the arrangement in place. Describing them as 'self-employed' in a contract has little effect, if the practical reality of the arrangement is very different. In the Bolt case, the individuals were being described as 'self-employed' but they ultimately had very little say over the work they were doing or how they were doing it. Bolt's role went beyond that of a neutral app that was acting as a go-between between the driver and member of the public. Bolt had significant influence over how the drivers operated, and that was ultimately their undoing.
Any business considering entering into self-employed engagements should consider obtaining legal advice on the risks beforehand. Please contact a member of our Employment Team, and we should be happy to assess the employment status risks arising out of any specific self-employment arrangement you are considering entering into.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
