Employee, worker or self-employed?

In UK employment law a person’s employment status determines both their rights and responsibilities. An individual can be an employee, a worker or self-employed.  Whilst traditionally individuals were employees or self-employed there has been a significant rise in “worker” status.  The recent reported case of Aslam and others v Uber BV considered whether drivers had rights as workers or were self-employed.  This case could have a significant impact on all workers in the “gig” economy.

A worker under UK law is defined under section 230(3) Employment Rights Act 1996 as an individual who has entered into or works under a contract of employment or any other contract…whereby the individual undertakes to do or perform personally any work or service and the employer is not a client or customer of that individual.

There have been a number of cases looking at the difference between self-employed individuals, workers and employees and tests such as the level of control imposed, whether personal service is required (or whether, for example, there is a right to “substitute”) and mutuality of obligation are applied. However, with modern working relationships the boundaries between the different statuses have become blurred and some of the “tests” may be less appropriate.

In this case, Uber claimed that the individuals are self-employed and that Uber simply provides a technology platform to facilitate the provision of taxi services. The individuals provide their own vehicles and are responsible for running costs etc, and are not required to commit to work.  However, the claimants alleged that they are workers and as such should be entitled to rights not available to self-employed individuals, including the right to the national minimum wage and holiday pay.

The Employment Tribunal found that the individuals are workers. In reaching this conclusion it looked  at the reality of the situation rather than just considering the documents themselves. Some of the points it considered included:

  • The drivers are not in a position to negotiate with the customer, they are offered and accept the trips on the terms set out by Uber.
  • Uber sets the route and sanctions may apply if the driver departs from it.
  • Conditions are applied, for example on the choice of car.
  • Uber accepted some of the financial risk.
  • A rating system applied which amounted to a performance management/disciplinary procedure.

It should be remembered that this is a tribunal decision and is therefore not binding on future cases. It is also possible that another company in the “gig” economy may in fact appoint individuals who do come within the ambit of the self-employed. The tribunal itself pointed out that Uber could have devised a business model that would have led to a different decision. Other cases referred to in the judgement provide examples of this. Uber has also indicated that it will appeal the case.

Many commentators have pointed out that people should be careful what they wish for. Some individuals operating in the “gig” economy want the flexibility in their working lives and therefore want to be viewed as self-employed.

The Department of Business Energy and Industrial Strategy has launched an inquiry into the future world of work. One of its terms of reference is whether the term ‘worker’ is defined sufficiently clearly in law at present. It will also consider the status and rights of agency workers, casual workers, and the self-employed (including those working in the ‘gig economy’), for the purposes of tax, benefits and employment law.

In addition, the Prime Minister has asked Matthew Taylor to lead an independent review into how employment practices need to change to keep pace with modern business models. This includes the extent to which the growth in non-standard forms of employment undermine the reach of policies like the National Living Wage, maternity and paternity rights, pensions auto-enrolment, sick pay and holiday pay.

Whilst we wait for these reviews to consider the ever changing world of work, we also wait to see any further claims and appeals for those working in this “gig” economy.

 

 

Back to the Future for Federal Public Service Labour Relations Regime? 

The federal government has moved one step closer to making good on its promise earlier this year to restore the pre-2013 public service labour relations regime.  On November 28, 2016, the government tabled legislation to repeal parts of Conservative Bill C-4 (Economic Action Plan, No. 2, Division 17), dealing with essential services, collective bargaining, and processes for grievances and dispute resolution in the federal public sector.  The new legislation, if enacted, will restore the federal public services labour relations regime that existed for decades prior to Bill C-4.

Bill C-4 has proven contentious from the outset. The Harper government enacted it without consultation as part of a massive budget bill.  Labour groups have widely decried it as significantly diminishing the power of federal unions and blunting the right to strike. In 2014 the Public Service Alliance of Canada launched a widely reported legal challenge to Bill C-4, alleging that it violated union members’ rights to freedom of expression and association under the Canadian Charter of Rights and Freedoms.  Further, in January 2015, the Supreme Court of Canada struck down essential services legislation in Saskatchewan that included provisions very similar to essential services provisions in Bill C-4.

Although the existing provisions of Bill C-4 will remain in force until the new legislation is passed, the Government of Canada stated in its News Release that it is committed to working with public sector unions to ensure that current practices are in line with the intent to repeal the Bill C-4 provisions at issue.

Judgment on the qualification of a “payroll company” and a “temporary agency contract”

On 4 November 2016, the Supreme Court in the Netherlands issued an important judgment  that will impact on the use of payroll companies. In this judgment, the Supreme Court held that no “allocation function” is needed to qualify as a temporary employment agency contract (uitzendovereenkomst). This e-Alert provides a summary of the judgment and further background on its impact and scope.

Court case C4C vs StiPP

In this case, the main legal issue was the interpretation and scope of a temporary agency contract. StiPP operates an industry wide pension fund that is mandatory for temporary agency workers. StiPP argued that the business activities of Care 4 Care (C4C) fall within the scope of StiPP and that C4C therefore should have joined the mandatory pension fund. C4C provides qualified medical specialist staff to clients, i.e. hospitals, care institutions and home care. Employees of C4C work on a permanent employment contract with C4C and are seconded to clients for long periods, from three months to a year, or longer if required.

C4C claimed that to qualify as a temporary employment contract the employer must fulfil an ‘allocation function’.  Such a function could be bringing together supply and demand for (temporary) employment, or – more specifically – bringing together supply and demand of (temporary) work during illness or other absence, absorbing peak time work requirements or similar sudden work needs. As this allocation function was not present, C4C argued that instead it should qualify as a payroll company which would prevent it from mandatory participation in StiPP. When a business decides to operate payrolling, it hands over the legal and administrative aspects of its role as an employer to a payroll company. The client recruits and selects the employees, and the payroll company makes them available to the client exclusively and – in principle – for the longer term.

The Supreme Court did not agree with C4C, because the concept of “payrolling” is currently not recognised under Dutch law. Article 7:690 of the Dutch Civil Code defines a temporary employment agency contract as an employment agreement under which the employer, within the framework of his business or professional practice, places the employee at the disposal of a third party in order to perform work under supervision and direction of that third party. According to the Supreme Court, the scope of this Article does not require the employer to fulfil an allocation function or require the work performed for the third party to be temporary. The application of the rules suggested by C4C would lead to results that cannot be reconciled with what the legislator had in mind. Consequently, C4C could therefore be regarded as a temporary worker agency and is therefore required to participate in StiPP.

Conclusion

As a result of this judgment, the legal scope of a temporary employment agency contract has been broadened, because the allocation function is not required. As a consequence, payroll companies and other companies that supply workers on a large scale, will have more financial obligations (e.g. pension premiums and employee insurance schemes). Operating a payroll company will therefore become more expensive. However, using a payroll company remains less expensive than hiring through a temporary worker agency. Another important consequence of the judgment is that the temporary employment agency has the flexibility to offer more definite term contracts. If you make use of a payroll agency, we suggest you review and monitor the terms of the relationship.

For any advice in this respect or further questions in respect of the above, please feel free to contact Thomas Timmermans

Texas federal judge puts the brakes on the DOL’s new overtime regulations

Employers who had been searching for a way to best  implement the Department of Labor’s new overtime regulations (the “Final Rule”), which are set to go into effect on December 1, 2016, received an early holiday gift on Tuesday, and from one of President Obama’s appointed jurists, no less.  On November 22nd, Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas granted a nationwide preliminary injunction against implementation of the overtime regulations.  As a result, the Department of Labor will not  be able to enforce the regulations as of  December 1, 2016.

The Final Rule, issued on May 18th of this year, under the direction of a memorandum signed by President Obama, has been controversial since its inception. Changes under the new regulations  were set to raise the minimum salary threshold for the FLSA’s white-collar exemptions from $455 per week ($23,660 annually) to $913 per week ($47,476 annually).  The DOL  was also set to update the salary threshold every three years to reflect the 40th percentile of full-time, salaried wage earners in the lowest-wage Census region, with the first update being on January 1, 2020.  These changes were set to affect more than 4 million workers  nationwide.  Although the new regulations  did not modify the FLSA’s duties test, they significantly changed the scope of the white-collar exemptions.

More than four months after the final rule was announced and only two and half months before it was set to go into effect, Nevada and Texas, along with  19 other states, sued the Department of Labor in the Eastern District of Texas to challenge the new overtime rules in Nevada v. U.S. Department of Labor.  The state plaintiffs alleged that the new regulations, which more than double the minimum salary threshold,  obliterated the text of Section 213(a)(1) of the FLSA and congressional intent to exclude employees who work in a “bona fide executive, administrative, or professional capacity.”

The Department of Labor, on the other hand, argued that it had the authority to define and limit the scope of the white-collar exemptions, that the new salary threshold was reasonable, and the regulations warranted deference under the U.S. Supreme Court’s 1984 decision in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.  In October, the state plaintiffs moved for an emergency preliminary injunction during the pendency of the litigation.

On November 22nd, Judge Mazzant  issued an order granting the state plaintiffs’ motion for a nationwide preliminary injunction.  Judge Mazzant concluded that the FLSA  did not grant the Department of Labor the authority to supplant the FLSA’s duties test by focusing instead on a  minimum salary threshold.  The injunction effectively  precludes the Department of Labor from implementing and enforcing the new regulations against employers.  That being said, the Department of Labor has stated that it is considering all its options and thus may appeal  Judge Mazzant’s Order  to the U.S. Court of Appeals for the Fifth Circuit.

Because of the intervening Thanksgiving holiday and the fact that the new rule’s implementation date was set to take place in eight (8) days, employers need to be vigilant for any developments from the Department of Labor during the early part of next week.  Employers also need to understand that Judge Mazzant only issued a preliminary injunction – not a permanent one – so it is difficult to predict how long the rule will be stayed or whether the overtime rule will actually be overturned.

Employers who were waiting and had not yet implemented a compensation plan to comply with the proposed rule are in the best possible position since they can refrain from implementing those plans until the 5th Circuit or possibly the U.S. Supreme Court reach a decision on the matter. However, employers who have already implemented their new compensation plans in a real quandary.  Do they leave such plans in place, in order to avoid a loss of employee morale and retain the best talent, or do they rescind them – especially if their competitors are doing the same?  That is a business consideration, rather than a legal decision, companies will have to make, depending on their respective circumstances.  Norton Rose Fulbright’s employment and labor team will continue to closely monitor every development in this area and provide additional updates.

Arbitrator makes further determinations regarding influenza vaccination policies in hospitals.

With the cold weather setting in, flu season is officially in full swing.

Last year, Arbitrator Jim Hayes considered whether hospitals could implement policies requiring nurses to either get the flu shot or wear a mask. In the test case decision of Sault Area Hospital and Ontario Nurses’ Association (“Sault Area Hospital”), Arbitrator Hayes found that the controversial ‘vaccination or mask’ policy (“VOM Policy”) that required nurses to wear surgical/procedural masks throughout the flu season if they have not received vaccination for influenza, was an unreasonable exercise of management rights:

Absent adequate support for the freestanding patient safety purpose alleged, I conclude that the Policy operates to coerce influenza immunization and, thereby, undermines the collective agreement right of employees to refuse vaccination.  On all the evidence, and for the reasons canvassed at length in this Award, I conclude that the VOM Policy is unreasonable (para 13).

Since the release of this decision, the Ontario Hospital Association and the Ontario Nurses’ Association (“ONA”) have reached agreements regarding appropriate influenza vaccination policies with almost all hospitals bound to the 2014-2016 Collective Agreement. Earlier this month, Arbitrator Hayes ruled on the two remaining issues in dispute between William Osler Health System (the “Hospital”) and the ONA.  

The first issue concerned whether the Hospital could include a recommendation in the policy that unvaccinated staff wear a procedural mask during the annual influenza season. The Hospital emphasized that it would be a recommendation with no requirement or coercion to do so. The ONA submitted that the Hospital’s ongoing recommendation maintained a normative expectation for staff to ‘vaccinate or mask’. Arbitrator Hayes held that there was no reasonable basis for the recommendation and it should be removed from this policy, noting his finding in Sault Area Hospital that there is little scientific evidence showing the use of masks reduces transmission of the virus to patients.

The second issue concerned the language in the policy regarding the requirements that staff be relocated and wear a mask following exposure to an outbreak.  Arbitrator Hayes found that a combination of both the Hospital’s and ONA’s proposed language was appropriate. Regarding when a staff member would be required to wear the mask, he accepted the ONA’s proposal of “while providing direct patient care and/or while in areas of patient care units normally accessible to patients”. Regarding how long a staff member would be required to wear the mask, Arbitrator Hayes rejected the ONA’s submission of a fixed 72-hour period, and accepted the Hospital’s proposal of an assessment approach.

Written with the assistance of Nicole Buchanan, articling student.

High Court clarifies application of reasonable administrative action exclusion for workers’ compensation

The High Court has recently clarified the application of the reasonable administrative action exclusion for workers’ compensation claims under the Safety, Rehabilitation and Compensation Act 1988 (Cth) (SRCA).

The SCRA excludes liability to compensate an employee for an injury or condition suffered as a result of reasonable administrative action taken in a reasonable manner.  Reasonable administrative action includes reasonable performance appraisals, disciplinary action and actions done in connection with an employee’s failure to obtain a promotion or benefit, or to retain a benefit.

In Comcare v Martin [2016] HCA 43, the High Court examined the causal connection required between the condition suffered and the reasonable administrative action.

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Brexit : employment law – parliamentary briefing paper

On 10 November 2016,  the UK Parliament published a Briefing Paper setting out the Government’s position in relation to employment rights of workers following the UK’s exit from the EU.  Whilst the Government may believe that the Briefing Paper clearly sets out its position, on closer analysis it seems to raise more questions than it answers, and has given rise to some misunderstandings.

Key parts of UK employment law are derived from European law which provides minimum standards for domestic employment law. Some EU law has been implemented by way of primary legislation, for example the Equality Act 2010.  These rights are only alterable by primary legislation.  Other EU law, such as agency workers’ and working time rights, has been introduced by way of implementing secondary legislation. These laws can be revoked or amended by secondary legislation which is much quicker and less open to scrutiny. In addition, some EU rights, such as those contained in EU treaties, have direct effect in the UK.  In theory, following withdrawal from the EU, these rights would automatically cease to apply absent any saving legislation.    All EU derived employment rights could be amended or removed following Brexit.

In the 10 November Briefing Paper, the Government has set out its position in relation to four issues.

  • “The “Great Repeal Bill” (which will repeal the European Communities Act), will convert all current EU employment law into domestic law, whatever the future relationship the UK has with the EU.”   In a debate in the UK parliament on 7 November 2016 on “Exiting the EU and workers’ rights”, the Secretary of State for Business, Energy and Industrial Strategy, Greg Clark, made it clear that “all rights derived from membership of the EU will be imported into UK law through legislation in this house.” An example given is that the Working Time Directive will be transposed into UK law so that there is continuity.
  • “The direct effect of relevant EU rights will persist post Brexit”. As set out above the Government wishes to give businesses and workers certainty.
  • “Judgments of the European Court of Justice (ECJ) will be given effect in domestic law at the point of exit.” ECJ case law has interpreted the way in which EU legislation should be applied. For example, case law on the calculation of holiday pay or on the rights to rest breaks for certain workers.
  • “The Prime Minister has confirmed that workers’ existing legal rights will be guaranteed during her period in office.” This is to avoid concern that immediately following Brexit, the Government would seek to amend existing legislation. This means that although the Government is likely to come under pressure to repeal or amend certain laws, there will be no imminent changes to workers’ rights – including on such matters as working time, agency workers’ rights and holidays, which many employers would like to change.

Although the Briefing Paper is seeking to provide some certainty for employers and employees, there are points which remain subject to confusion:

  • When the Great Repeal Bill “converts” current EU legislation into domestic law, will this be implemented by primary or secondary legislation?   The Government has suggested that this will be determined by the terms of the Great Repeal Bill. However, it is not clear what EU legislation is being referred to. One of the statements by the Secretary of State during the parliamentary debate was “Of course, the Working Time Directive, like all other directives that are part of EU law, will be transposed into UK law so that there is continuity.” However, the UK already has in place legislation implementing the Working Time Directive into UK law, namely the Working Time Regulations 1998.
  • What if there is a conflict between an EU directive and our own implementing legislation? The current Working Time Regulations are interpreted in accordance with the relevant EU Directive, but, as drafted do not directly replicate the wording of the directive. In addition, the UK regulations differ from the EU Directive in that UK workers are entitled to 28 days’ paid holiday per year (1.6 weeks additional to that required under the EU Directive). Does the Secretary of State mean that the Working Time Regulations should be read in line with the EU Directive (which is effectively the situation now) or that the EU Directive itself should be transposed into UK law?
  • What is the status of past judgments of the ECJ? The Government in the parliamentary debate made it clear that the starting position of the Government is that “EU derived law, from whatever quarter, will be transferred into United Kingdom law in full at the point of exit.” It does not give any further details as to how this will be effected in practice. In addition, following this “transfer” will the Supreme Court in the UK be able to overrule the ECJ decisions?
  • What about cases which have been referred from the UK courts to the ECJ pre-Brexit, but on which judgment has not been decided at the point of exit? Again, there is no further discussion of this point, but is something which must be considered as part of the Brexit negotiations.
  • How can the Prime Minister confirm that workers’ existing legal rights will be guaranteed during her period in office? Although this could apply to amendments to legislative provisions, it is not possible for a guarantee that no court decisions will arise during her time in office which could have an impact on all workers’ legal rights.

Although the Briefing Paper seeks to give assurances to workers and employers alike, much of the detail is unclear. The Great Repeal Bill and further parliamentary discussion is awaited with interest.

Courts Continue to Chip Away at Restrictive Covenants

Powell River Industrial Sheet Metal Contracting Inc. (P.R.I.S.M.) v Kramchynski, 2016 BCSC 883, is a decision from the Supreme Court of British Columbia that dealt with the enforcement of a restrictive covenant in the context of a commercial transaction. The decision stands for the proposition that a court may refuse to enforce a restrictive covenant where an employer fails to satisfy its obligations to the employee.

The defendant entered into an agreement for the purchase of his refrigeration, air conditioning and furnace repair business. In addition to the agreement for the purchase of the business, the defendant also entered into a non-competition agreement with the Plaintiff, requiring that the Defendant not compete or be employed in the refrigeration business in the Powell River area for a period of three years.

After the acquisition, the Defendant was not able to obtain sufficient hours in working for the Plaintiff, which resulted in a significant decline in his earnings. The Defendant wanted to supplement his income with other work in Powell River, but the Plaintiff refused, holding the Defendant to the restrictive covenant.

The Court refused to enforce  the non-competition agreement, holding that the agreement became unreasonable when the plaintiff failed to provide the defendant with sufficient work. The Defendant was entitled to reasonably expect that the Plaintiff would satisfy its obligations under the agreement, which were to be employed at a consistent level with his pre-sale hours.

Written with the assistance of Tyler Raymond, articling student.

 

Tribunal signals a new direction for family status discrimination claims

According to Statistics Canada, there are now more people in Canada aged 65 and over than there are under age 15. As a result, it is becoming increasingly common for employees to request accommodation in order to care for aging relatives. This is exactly what was at issue in the recent decision of the Human Rights Tribunal of Ontario (the “Tribunal”), Misetich v Value Village Stores Inc. Employers should be aware that the Tribunal declined to follow recent case law, and therefore, the law in this area appears to be in flux.

In Misetich, a retail employee declined a shift change on the basis that its variable work hours would interfere with her ability to care for her elderly mother. The employer requested supporting evidence in line with the test set out in Johnstone v Canada (Border Services Agency). Although Johnstone involved alleged discrimination with respect to childcare obligations, it has been considered the leading authority on family status discrimination. The Johnstone test requires that, in order for a claimant to show that there has been a prima facie case of discrimination for family status with respect to childcare, he or she must demonstrate that:

  • a child is under his or her care and supervision;
  • the childcare obligation at issue engages the claimant’s legal responsibility for the child;
  • he or she has made reasonable efforts to meet the childcare obligations through reasonable alternative solutions, and that no such alternative solution is reasonably accessible; and,
  • that the impugned workplace rule interferes in a manner that is more than trivial or insubstantial with the fulfilment of the childcare obligation.

The Tribunal declined to apply Johnstone in the circumstances. Instead, it expressed several concerns. According to the Tribunal, it is problematic to have a different test for family status discrimination than for other forms of discrimination. It can also be difficult for employees to prove that they have a legal responsibility to provide eldercare. The Tribunal also suggested that the Johnstone test might set the bar too high by requiring claimants to try to “self-accommodate” before they can claim discrimination.

Instead, the Tribunal proposed the following framework for analysing family status discrimination claims in employment. First, the employee must do more than simply establish a negative impact on a family need: the negative impact must result in real disadvantage to the relationship, the responsibilities that flow from that relationship and/or to the employee’s work. Second, the impact of the workplace rule must be assessed in a contextual manner and “may include consideration of the other supports available” to the employee. Third, once the employee proves discrimination, the onus shifts to the employer to establish that it cannot accommodate the employee to the point of undue hardship. Ultimately, the Tribunal found that the employee failed to provide her employer with proper evidence of her eldercare responsibilities, and therefore, the proposed shift modification was not discriminatory on the basis of family status.

Given the tension between Misetich and Johnstone, it will be interesting to see if this decision is appealed. In the meantime, employers should strive to take a more contextual approach when evaluating accommodation requests – one that looks beyond whether the employee has a strict legal obligation to provide care.

Written with the assistance of Jessica Warwick, articling student.

US DOL Persuader Rule permanently benched

Hailed by the US Department of Labor as a regulatory change to promote transparency and to help employees make well-informed decisions about union representation, the Department of Labor’s final rule on reporting union persuader activities has been permanently blocked by Texas US District Court Judge Sam R. Cummings.

The new rule attempted to narrow the scope of advice that would be exempt from the reporting requirements under the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA).

Under the new rule, employers and labor relations consultants, including lawyers, were required to disclose information and report any activities undertaken with the objective to persuade employees regarding their choice for or against a union.

This would include any indirect persuasive activities such as union avoidance seminars for supervisors or a speech written by a consultant to be given to employees by an officer of the employer.

The new rule was expected to take effect and apply to all arrangements, agreements and payments made on or after July 1, 2016.

However, several business groups in Texas, as well as industry groups in Minnesota and Arkansas, challenged the new rule. In March, these groups filed complaints requesting a preliminary and permanent injunction of the rule.

A Minnesota federal judge refused to issue a temporary injunction blocking the rule. But in Texas, Judge Cummings issued a nationwide preliminary injunction barring enforcement of the rule on June 27, 2016, stating that the rule threatened employers’ rights to secure legal advice about union organizing activity. Judge Cummings’ preliminary injunction ruling has since been appealed to the Fifth Circuit.

Subsequently, the business groups in Texas moved for summary judgment and a permanent injunction of the new rule alleging that it was arbitrary and capricious, and that it would impinge the right of states to regulate the attorney-client relationship. On November 16, 2016, Judge Cummings granted the summary judgment and converted the preliminary injunction into a nationwide permanent injunction, thus blocking enforcement of the new rule.

With the appeal of Judge Cumming’s preliminary injunction still pending before the Fifth Circuit and the lawsuit filed by industry groups still pending in Arkansas, the saga of the DOL’s new persuader rule will continue. For now, employers and labor relations consultants may continue with business as usual, and must only report direct persuasive activities where the consultant makes contact with employees.

It is, however, recommended that employers consult with an experienced labor attorney with respect to the determination of reportable activities and information prior to the filing of any reporting forms to the DOL.

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