An Employment Tribunal has decided that an individual was a “worker”, despite being labelled in the contract as self-employed.
Mr B was engaged by EGS as a cycle courier. The written contract between EGS and Mr B described him as a subcontractor. The contract stated that Mr B was engaged on as “as needed” basis. Mr B was registered as self-employed for tax purposes.
Mr B brought a claim for holiday pay. He therefore need to show that he was a “worker”. A worker is defined as "an individual who has entered into or works under (or, where the employment has ceased, worked under) (a) a contract of employment, or (b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual".
The Employment Tribunal’s decision
The Employment Tribunal (ET) decided that the way the relationship between Mr B and EGS actually operated in practice was not consistent with what was written in the contract. The ET found that Mr B was a worker, and it noted the following factors.
Looking at all the circumstances, Mr B was not running his own business, nor providing his services to EGS as a business person. He provided his own bike, phone and protective clothing, however EGS gave him a radio and a palm computer. Mr B actually worked 5 days a week, on average 9 hours a day. Whilst there was some flexibility, he had to tell EGS if he wanted to take time off. The way that Mr B carried out the courier services was largely prescribed by EGS; Mr B was expected to pick up jobs allocated to him and deliver them in set order, and he was on standby in between jobs at a set location. Mr B did not take any financial risk in relation to the services like a business person might; he was paid a fixed rate for the work that he did. Whilst he did not get a payslip from EGS, he got a “memo” each month telling him what he was being paid. Mr B did not have to bear the cost of any damage in transit or pay any insurance. The written contract contained a substitution clause, stating that Mr B could send someone in his place to do the work. The presence of such a clause is often relied on to show the absence of “personal service”, which is required for someone to be a worker under the above definition. However, in Mr B’s case, EGS admitted that the substitution clause was never actually relied upon. Further, the ET found that the limitations on the substitution clause (which required any substitute to pass certain background checks and have the necessary skills and qualifications, and EGS having the final say over any substitute) meant that the clause was so restricted it would not be practicable and was effectively pointless.
What does this case mean for businesses?
This is a further decision in a line of cases regarding the “gig economy”. It is another reminder that a court or tribunal can look behind the label that the parties attach to their relationship if, in reality, the contract does not reflect what is actually happening in practice. Whilst there may be some aspects of a relationship which point away from worker or employment status, a court or tribunal will stand back and look at the arrangement as a whole, and no one factor is determinative. Businesses should therefore bear this in mind when looking to engage individuals on whom they do not wish to confer worker or employment rights. The recommendations made in the Taylor review regarding employment status, which we have summarised in our newsletter, are relevant to this type of arrangement.