The ‘gig economy’ is a phenomenon gaining momentum in the global economy, as tech-based companies have adapted and adopted the model traditionally used in the music industry for those engaged on an ad hoc basis to do a ‘gig’.

The ‘gig economy’ is now being used more broadly to describe arrangements where people ostensibly work as self-employed contractors and are paid per-job. This gives the contractor flexibility as to when they work and for how many hours, but it also leaves them with very few enforceable worker rights or benefits. According to the McKinsey Global Institute in October 2016, 30% of workers in the gig economy participate out of necessity because they cannot find suitable traditional work. From the perspective of businesses, overheads are slashed because contractors are only paid when they are on the job and are not entitled to the usual worker/employee benefits such as holiday and national minimum wage.

These arrangements are now being challenged. Currently, courts in the UK and the US are considering whether people working in these new commercial structures are genuinely self-employed, or whether their contracts have merely been carefully crafted to give that impression.

On 28 October 2016, an employment tribunal ruled that two Uber taxi drivers providing services through Uber were ‘workers’ under the Employment Rights Act 1996. If this is upheld on appeal, Uber drivers will be entitled to worker rights, which include the right to the national minimum wage and paid holidays. In this dispute, the Uber drivers argued that there was an employment relationship between them and Uber, and Uber maintained that they were a tech company and the drivers were independent contractors using their app. The tribunal found in favour of the drivers. They found the notion that Uber in London was composed of thousands of small businesses run by self-employed drivers ‘faintly ridiculous’. The drivers have little control over the route or the rate, and never know the identity of the passenger. The high level of control Uber has over the driver and the service provided to the passenger meant that the contractual relationships were between Uber and the passenger, and Uber and the drivers. In short, the drivers were workers entitled to holiday and national minimum wage etc.

This is in line with the opinions of the North California District Court, who were considering a similar claim in the US. On 11 March 2015, the California Court roundly rejected the assertion that Uber was a technology company and not in the business of providing transportation services. As in the UK, the US Uber drivers were arguing the model was not a self-employment model and they were entitled to certain employee rights. The court has indicated it is sympathetic to these arguments, as it struck down the proposed class-action settlement of $100 million on the basis of its inadequacy, and said that drivers who signed up with Uber in 2013 and 2014 must go to arbitration to resolve.

Deliveroo has faced similar issues. It is a restaurant delivery firm which uses ‘self-employed’ couriers, who are fighting for worker status but adopting a slightly different route to the Uber drivers. The Deliveroo couriers have joined the Independent Workers Union of Great Britain (IWGB), which is seeking to obtain a collective bargaining agreement to allow the union to negotiate pay and terms and conditions with Deliveroo. If Deliveroo ignores or rejects the request, the union is threatening to take them to a tribunal and ask for a declaration that Deliveroo must engage in collective bargaining. The tribunal decision would then have to rule on the worker status of the couriers to determine if it has jurisdiction to hear the application.

The issues arising around the gig economy have yet to be fully tested by the courts. The law will have to develop as rapidly as the industries they seek to regulate. The Tribunals will look into all the circumstances of a working relationship to determine its true nature, and seem keen to extend statutory protection to any worker who is not genuinely self-employed. Businesses who work with contractors are advised to carefully assess their business relationships and should consider factoring the costs of worker’s rights and benefits into their budgets.

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

Please note that this blog is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.

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