What is the “gig economy”?

The term “gig economy” predominantly refers to areas of the employment market with the defining characteristic of offering short-term contracts/freelance work in place of more permanent jobs. Depending on the perspective of the onlooker this can be seen as either, an environment offering workers greater flexibility with regard to employment hours, or it could be seen as an exploitation/loophole, used to obtain labour, and in return provide very little in the way of workplace protections.

As a result of this bipolar view, employment tribunal hearings regarding individuals within the gig economy is on the rise.

Recent Employment Tribunal decisions:

Whilst tribunal decisions regarding employment status are by no means novel, there does appear to be a shift in their focus. Decisions historically laid emphasis on whether an individual was classified as an employee or worker. More recently, decisions have been increasingly focused on the distinction between an individual being engaged on a self-employed basis, and that of a worker.

Recent tribunal decisions such as, Aslam, Farrar and Others v Uber [2015], and Pimlico Plumbers Ltd and Mullins v Smith [2018] are clear indicators for the way in which tribunals are beginning to lean towards favouring the individuals bringing claims, rather than their employers. As such it is key that employers understand the potential difficulties they may face when operating within the gig economy.

Risks employers face hiring staff as self-employed contractors:

Since self-employed contractors and employees are at opposite ends of the spectrum in regards to employment protection, the distinction is often more obvious than that of self-employed contractors and workers. The issues regarding the “worker test” that have arisen as a result of UK case law, is that tribunal decisions are often dependant on the facts of the case in question. This in turn can make it difficult to ascertain with certainty whether an individual can truly be classified as a self-employed contractor.

This lack of certainty, alongside the recent run of tribunal decisions in favour of individuals/workers, highlight the risks that employers may face when engaging with individuals hired on an allegedly self-employed basis, then later found to classify as workers, whom would therefore be entitled to numerous employment rights including but not limited to:

• Paid holidays;
• National minimum wage;
• Limitation on working time; and
• Right to seek trade union.

Perhaps the largest risk employers need to consider when hiring staff within the gig economy is that when an individual is successful in claiming workers status the company is potentially exposed to larger claims by their entire workforce. For example, claims in regard to unpaid statutory holiday.

With current estimates of the UK being home to 1.1 million gig workers, it is essential that employers remain informed as to the potential repercussions they may face when dealing with self-employed contractors, and understand that greater levels of clarity are required in regard to arrangements made within the gig economy.