The gig economy: uncertainties of calculating holiday pay

The decision from the European Court of Justice (ECJU) in the case of King v The Sash Windows Workshop Limited, handed down on Wednesday 29 November 2017, may lead to further “worker” claims of the sort already given prominence through the widely publicised Uber case heading to the Supreme Court.

Believed to be self-employed, Mr King was not given any paid holiday. However upon dismissal, he brought a tribunal claim in which it was held that he was a worker and therefore entitled to 5.6 weeks’ paid annual leave. The employer relied on the Working Time Regulations 1998 (WTR) to argue that if holiday is not taken in the year that it accrues, then the right to take and be paid for it, is lost. When the case was decided in the CJEU it found that under EU legislation, by not granting any, the employer had effectively prevented Mr King from taking paid holiday and therefore Mr King was being prevented from exercising EU Rights. Further, the CJEU found that in such circumstances the Working Time Regulations are incompatible with EU law and must be disregarded.

The CJEU found that employers who fail to grant workers their holiday entitlement should not benefit from time limitations under the WTR and that back pay for claims such as King’s could go back to 1996 (when the original WTR were brought into effect). This could have costly ramifications for gig economy companies such as Uber, Pimlico Plumbers and CitySprint, whose ‘self-employed’ contractors have, subject to the pending appeals, been reclassified as ‘workers’.

It is in this context that the stakes of the Uber case just got a lot higher. In contrast however, Deliveroo won their case against classifying their riders as workers. In this case, the riders sought recognition as workers in order to gain union recognition, as well as other workers’ rights such as paid holiday and entitlement to the national minimum wage. However the Central Arbitration Committee (CAC) found that, due to the genuine substitution right of riders which enable them to substitute themselves both before and after they have accepted a particular job, they are genuinely self-employed and not workers. Importantly, the CAC had also heard evidence of this right being used in practice. This is inherently different to the case with Uber where drivers have no right to send and substitute to do a job and are compelled to accept a certain percentage of trips.

The CAC decision may be seen by gig economy employers as a means of escaping the burden of providing worker benefits; the Deliveroo case was swung by the introduction of the substitution clause just 11 days before the CAC hearing. By introducing similar substitution rights for their contractors, companies could escape having to pay holiday pay or minimum wage.

The divergence in the rulings found in the Uber and Deliveroo cases, as well as the potential impact of the King case, are a reminder that the legal framework regulating the gig economy is far from settled and that if businesses are to have any hope of certainty they must seek good legal advice.

If you have any questions regarding this topic or any employment issue, please contact Head of Employment, Linky Trott, or any member of the Edwin Coe Employment team.

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