The UK Court of Appeal has delivered its judgement in another case looking at the issue of employment status regarding those working in the gig economy.

In the UK there are three levels of employment status: Self-employed, worker and employee.  Determining employment status is important for understanding the employment rights to which an individual is entitled.  For example, a worker will be entitled to paid holiday, pension auto enrolment and the National Minimum Wage.  Therefore, making a mistake regarding an individual’s employment status can be costly for a company.

A worker is defined under section 230(3) of the Employment Rights Act 1996 (ERA 1996) as an individual who has entered into or works under (or, where the employment has ceased, worked under):

  • A contract of employment (section 230(3)(a)).
  • Any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual (section 230(3)(b)). (The “limb (b) worker” test.)

In determining the employment status of individuals the court will consider various tests including whether the individual is obliged to carry out the work personally.  This requirement for personal service often includes a consideration of whether the individual is able to delegate work to a substitute.   If the right to substitute is fettered or restricted in any way then this can mean that the individual is required to carry out the work personally and so is more likely to be a worker.

This case involved a delivery courier who worked for Stuart Delivery.  The contract set out that the individual was self-employed.  However, in looking at the reality of the situation, the claimant argued that he should be considered an employee or a worker.  One of the ways to obtain work was for the courier to sign in and agree to certain delivery slots using the company’s app.  If, having signed up for a particular slot, the courier could no longer work at that particular time, then it was open to him to “release” the slot to be taken up by another driver.  However, if another driver did not take up the slot then the original courier remained liable for the delivery and would either have to work or face a penalty.  When the relationship ended, the individual claimed that he was a worker and not self-employed, bringing claims for unlawful deduction from wages and holiday pay.

The Court of Appeal held that the right to release the delivery slots to other drivers was a limited right to send a substitute and so was not sufficient to remove the obligation on the original courier to perform the work personally.  The Court therefore upheld the decision of the ET and the EAT that the courier was a worker.

This decision shows how unfettered the right to substitute has to be.  In this case the individual did not know whether another courier would take up the slot and the courier taking up the slot would be unknown to him.   In addition, the claimant didn’t have the freedom to put forward a given individual.  The court held that this was consistent with a previous Supreme Court decision involving Pilmlico Plumbers where the Supreme Court had held that the dominant feature of the contract was an obligation of personal performance.  The ability of the worker to appoint a substitute where it was subject to a significant limitation did not necessarily negate the obligation of personal service.

In many cases involving substitution the right is not truly unfettered, particularly where the individuals are provided with a uniform or brand, training is provided to set standards of service, or where vetting is required for them to carry out the role, limiting those who can be substituted into the role.  It is therefore rare in practice for a truly unfettered right of substitution which would conflict with the obligation to provide personal service.

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