There has been a lot of attention in the media recently about the so-called gig economy, that is, the method of working in which temporary positions are common and organisations contract with independent workers for short-term engagements, as opposed to the traditional employment model. Two recent news items have highlighted the considerable unrest and legal uncertainty in this sector.
App-based taxi provider Uber hit the headlines at the end of October when an employment tribunal held that two of its drivers were not self-employed contractors as Uber claimed, but were ‘workers’. This meant they are entitled to the national minimum wage, paid annual leave and whistleblower protection. Uber’s arguments that it is merely a technology platform as opposed to a transport provider and that its drivers are self-employed contractors offering their services to passengers via the Uber app were rejected comprehensively.
The tribunal was clearly unimpressed with Uber, saying that it resorts in its documentation to ‘fictions’, such as fake invoices that it generates on behalf of its drivers but that are never sent to passengers, and ‘twisted language’ in its contracts with drivers. The tribunal considered that Uber’s case – that the driver enters into a contract with each passenger directly to provide the transportation service – did not accord with reality. Uber exerts a great deal of control over its drivers, which helped tip the balance towards worker status. Uber is appealing, and strictly the judgment applies only to the two Claimants, although it may encourage some of its 40,000 other drivers to make similar claims, with inevitable cost to Uber.
More recently, it was also announced that the Independent Workers Union of Great Britain has written to Deliveroo, the app-based takeaway delivery service with over 3,000 people working for it, asking for recognition in respect of a number of its riders working in a section of London. Whilst there is no suggestion that Deliveroo’s arrangements are anything like as enigmatic as Uber’s, they do treat individual delivery riders as independent contractors, rather than workers.
The novel aspect here is that a union can only be recognised in relation to a group of people if they are workers or employees. If Deliveroo declines to recognise the union, the application will (the union says) be taken to the Central Arbitration Committee (CAC), the body which is empowered to decide these matters. Since the union could not be recognised if the riders are independent contractors (and not workers or employees) the CAC would have to decide what category the riders fall into – potentially bringing a large number of Deliveroo riders into the protection of worker status in one fell swoop – arguably a more far-reaching tactic than in the Uber case, where the judgment strictly applied only to the two drivers who brought the claims.
Since workers are entitled to the minimum wage and holiday pay, this could have a significant impact on Deliveroo’s business model, and other companies who utilise this labour model will be very concerned to see how things progress.
The services offered by the likes of Uber and Deliveroo are very popular, in part because of their convenience – which comes from technological innovation – and also because they are inexpensive, which is in part because of the costs-savings involved in utilising the gig economy model, which is now under threat. Whether customers would pay the extra in order to pay for the employment rights of the ‘workers’ is yet to be seen. It is unlikely that we have seen the end of such activism in this sector.
MH Contact Bob Cordran
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On 8 July 2015, the National Living Wage (“NLW”) was introduced by George Osborne in the first Conservative Budget of this parliament. The NLW, due to come into force in April 2016, will act as a ‘top up’ wage for those aged 25 and over. It has been introduced by the government with the intention of providing a higher wage for ‘more experienced workers’ and raising the UK standards of pay to the levels set by other advanced economies. The ‘top up’ will result in an increase of the total NLW to £7.20. This is set to increase to approximately £9 an hour by 2020 and according to the Office of Budget Responsibility (“OBR”) is likely to result in a pay rise for millions of people. However the OBR also warns that the introduction of the NLW may cost up to 60,000 jobs.
George Osborne has said that businesses will receive help in adjusting to these changes in the form of cuts to corporation tax. Corporation tax will be reduced by 20% to 18% in order to offset what is predicted to be a 1% impact on corporate profits. Small firms will receive extra help by virtue of an increase in the new Employment Allowance by 50%. As of April 2014, the Employment Allowance means that employers can reduce the amount of their National Insurance Contributions by up to £2,000.
The NLW will form part of the remit of the independent Low Pay Commission (“LPC”) which currently reviews and makes recommendations for the National Minimum Wage (“NMW”). In their annual remit for the LPC, the government has requested recommendations on both the NMW and the NLW in the interests of providing businesses with more certainty.
Following the announcement of the NLW, on 1 September 2015, the Department for Business, Innovation and Skills announced its plan to introduce tougher measures, such as higher fines and potential director disqualifications to ensure compliance with both the NMW and NLW. The proposed date for the introduction of these measures has not yet been set.
The government is hopeful that the introduction of the NLW will benefit the business sector and boost the economy as a whole. However, there are obvious concerns for employers, and there are likely to be knock-on effects for employee relations. For instance, if the lower-paid end of a workforce, who are currently paid NMW, receive significant pay rises as a result of the introduction of the NLW (and subsequent increases), employees a little higher up the pay-scale are likely to feel hard done by if they are not also given an increase, even if they are not directly affected by the NLW, giving rise to potential employee relations issues and increased costs.
Under the Working Time Regulations 1998 (“Regulations”), workers are entitled to be paid during statutory annual leave at a rate of a week’s pay for each week of leave. Following two recent decisions of the European Court of Justice, the Employment Appeal Tribunal (“EAT”) has held that the UK’s rules on how a week’s pay is calculated do not provide workers with the holiday pay to which they should be entitled to under the European Working Time Directive (from which the Regulations are derived). The Directive requires workers to receive during any period of leave their “normal remuneration” or pay representative of the pay the worker would expect to receive if the worker was not on leave.
UK employers have generally paid holiday pay based on a worker’s basic pay, disregarding any bonuses, commission payments or overtime unless it is compulsory for the worker to perform the overtime and is paid regardless of whether the overtime is performed.
UK employers now need to consider what regular payments they pay to their workers and whether such payments may be seen as part of the workers’ normal remuneration. Normal remuneration can include commission, overtime payments and, in certain cases, work-related travel allowances. UK employers who make such payments should consider the potential impact of these developments on their arrangements for calculating holiday pay and how any potential historic and future liabilities might be minimised.
There were concerns amongst employers that workers could make claims for unpaid holiday pay as unlawful deductions from wages going back several years and perhaps even to 1998, when the Regulations were introduced. The EAT has reduced this risk by holding that such claims will not succeed if there has been a gap of three months or more between holiday underpayments. This means if there is a three month period where a worker does not go on holiday or is not underpaid, the series of unlawful deductions is deemed to be broken.
The Government has also recently implemented a change to the legislation in relation to claims for unlawful deduction from wages in order to rule out any prospect of large back-pay claims. Claims for a series of backdated deductions from wages, including any shortfall in holiday pay, will be limited to a maximum of two years.
Workers can still make claims under the existing legislation until 1 July 2015 when the new rules come into force, although this remains subject to the worker being able to establish that there has been a series of deductions and that no more than three months has elapsed between each deduction, which may limit the potential for substantial claims.
The Government is introducing a new concept of statutory shared parental leave and pay into the existing statutory maternity and paternity leave and pay regime. It is intended to inject more flexibility into how parents choose to structure initial childcare arrangements and to assist in shifting any entrenched view of the mother as the primary carer.
The new right will be introduced on 1 December 2014 and will apply to children expected to be born or adopted on or after 5 April 2015.
Currently eligible mothers are entitled to 52 weeks’ statutory maternity leave, of which 39 weeks are paid. Eligible fathers can take up to 2 weeks’ paid statutory paternity leave. There is also a right for fathers to take additional statutory paternity leave in certain circumstances but this right will be replaced by the shared parental leave right.
The new shared parental leave scheme will allow mothers and fathers to take up to 50 weeks’ shared parental leave between them, instead of the mother’s statutory maternity leave, in the first year of the child’s life and to be entitled to statutory shared parental pay, rather than statutory maternity pay or allowance, for up to 37 weeks.
An eligible mother will be able to end her maternity leave, pay or allowance early and she and the child’s father will be able to opt for shared parental leave instead of maternity leave and pay. The parents will need to meet certain qualifying requirements. The mother will need to be an employee with 26 weeks’ continuous service and her partner will need to have been employed or self-employed in 26 weeks of the 66 weeks before the expected date of birth and to meet certain earning levels. They will need to decide how they divide their total shared parental leave and pay entitlement between them. The leave can be taken by the parents concurrently.
The shared parental leave can be taken in one continuous block or in up to three discontinuous blocks. The employee will have to give their employer at least 8 weeks’ notice before the beginning of a period of leave. Employers have some discretion to refuse or suggest alternatives to an application for discontinuous leave.
The shared parental leave right applies to adoptive parents in the same way as to birth parents.
Pregnant employees are already entitled to paid leave for ante-natal appointments. From 1 October 2014, fathers will also be entitled to unpaid leave to attend up to two ante-natal appointments.
Employers will need to start reviewing their existing maternity, paternity and family leave policies and provisions and to be ready to deal with any requests for shared parental leave that will be made.
The Government is hopeful that the new right will encourage flexibility and reduce gender bias and pay gaps. The soon to be replaced additional paternity leave right had very little take up by fathers and so it remains to be seen how popular and effective the new shared parental leave will be.
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) – the notoriously complex rules which require employers who take over a business, or take over certain contracts from another employer, to take on the employees who worked in the business or the contract acquired – have recently been amended (again).
The changes, enacted by the snappily-titled Collective Redundancies and Transfer of Employment (Protection of Employment) (Amendment) Regulations 2013 came into force on 31 January 2014.
The main changes are:
Service provision changes
For TUPE to apply, the activities carried on after a “service provision change” (broadly, where there is a contracting-out, a second-generation outsourcing or a contracting-in) must be “fundamentally or essentially the same” as before in order to qualify as a service provision change, and consequently for TUPE to apply. This codifies recent case-law and re-opens the door to potentially being able to avoid the application of TUPE where the contracted services are provided in a different way by the new provider than they were by the old provider.
Employee liability information
The “transferee” – that is, the new employer, now has more time to consider the liabilities it will be taking on. “Employee Liability Information” (details of the transferring employees’ terms, contracts of employment, details of grievances and claims, etc.) now normally have to be handed over by the transferring employer (the “transferor”) at least 28 days before the transfer. Before January 31st the relevant period was 14 days.
Businesses employing 10 or fewer employees will from 31 July 2014 be able to inform and consult with affected employees directly, rather than holding elections for employee representatives, who are then consulted on behalf of the transferring employees, as is required for businesses with more than 10 employees. The obligation to inform and consult itself, however, remains.
Following a TUPE transfer, the new employer is now only bound by collective agreements that were in place at the time of the transfer. They cannot be bound by later changes which they were not involved in negotiating. This follows a recent European Court case and is helpful to the incoming employer, particularly when there is a TUPE transfer from the public sector (where terms such as pay are often collectively bargained) to the private sector – the new employer will not be held to changes such as pay rises which are collectively bargained after it takes over the employees. This seems fair if you consider that the new employer is unlikely to be entitled to take part in the collective bargaining process in such circumstances.
Also, terms agreed in a collective agreement can now be renegotiated by the employer. That is as long as the new terms are, overall, no less favourable to the employee and do not take effect until at least one year after the transfer.
Automatically unfair dismissal and variations to terms
Dismissals are now only automatically unfair where the transfer was the reason for the dismissal (and not as before, also where dismissal was for a reason connected with the transfer), unless an “economic, technical or organisational reason” applies.
It is fair to say that this change is obscure, even by TUPE standards and some of employment law’s finest minds have struggled to come up with an example of when it would make any difference.
A similar “change” affects employers’ ability to make alterations to employees’ contracts after a TUPE transfer. Previously, changes could not be made if the reason for them was the transfer itself or a reason connected with the transfer which was not an “economic technical or organisational reason entailing changes in the workforce” (known for short as an “ETO Reason”). As amended, a change is void if the reason for it is “the transfer” but changes can be allowed if: they are for an ETO Reason and the employer and employee agree or if the employee’s contract allows for such a variation. Again, it is perhaps unlikely that this will make much difference in practice.
Redundancies and relocation
A change of location, post-transfer, can now be an ETO Reason. This should make it easier, where a business sale involves a relocation, to make redundancies as a result of the relocation without acquiring liability for unfair dismissal.
Also, in certain circumstances, consultation carried out before the TUPE transfer could count towards any overall 30 or 45-day collective redundancy consultation period (i.e. where 20 or more redundancies are planned). The rules on this, however, are complicated.
BIS has published guidance on the amended Regulations (here:https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/271528/bis-14-502-employment-rights-on-the-transfer-of-an-undertaking.pdf) which will be of great interest mainly to TUPE anoraks and insomniacs.