Worker status: the saga continues

Background

This case involved delivery couriers working for Stuart Delivery.  The couriers’ contracts stated they were self-employed.  However, scrutinising how they worked in practice, it was found the couriers would sign in and agree to delivery slots via the company’s app.  It was possible for a courier to “release” a slot they had previously accepted; however, if another Stuart Delivery courier failed to volunteer for that slot then the original courier would remain liable to perform deliveries during that slot or be subject to penalties. 

Status test

Under section 230(3) of the Employment Rights Act 1996, a “worker” means:

“An individual who has entered into or works under… – 

(a)    A contract of employment, or 

(b)    Any other contract .…. whereby the individual undertakes to do or perform personally any work or services for another party to the contract who’s 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.”

When determining whether someone is self-employed or is a worker, a Tribunal will consider primarily:

1. Whether the individual is obliged to do the work (or provide the services) personally; and
2. Whether the person they are working for is a client/customer of a business run by the individual (i.e. are they in business on their own account or not?)

Tribunals should consider whether an obligation for personal service is the “dominant feature” of the contractual arrangement.  Whether the individual is able to delegate work to a substitute will be relevant when assessing whether they are required to perform work “personally”. The Tribunal will therefore look at whether any right to substitute is genuine and how limited it is. For example, if the individual can send anyone they wish as a substitute, there will be no right to perform work personally and the individual will be self-employed.

However, if the individual can only send a substitute approved by the employer, the right to substitute is limited and is more likely to be consistent with a requirement to perform the work personally - as a result the individual is likely to be a worker.

Decision

The Court of Appeal highlighted the importance of considering each case on its own facts.
In this case the Court of Appeal found that the ability to substitute by “releasing” delivery slots back to other couriers using the app was limited and not sufficient to remove the obligation on the original courier to perform work personally. The Court of Appeal therefore upheld the decision of the Employment Tribunal that the courier was a “worker”.

Why is this decision important?

This decision reinforces the test for worker status as set out in earlier cases, particularly the Court of Appeal in Pimlico Plumbers, and demonstrates how an unfettered right to substitute is required to be, in order to prevent a Tribunal from finding individuals have worker status.

Workforce status determinations of this kind can have a powerful impact on how companies who rely on contractors operate their business models. A finding of worker status will mean the individuals have the right to paid holiday, pension auto-enrolment, be paid the National Minimum Wage, and have unfair dismissal rights including being able to bring claims for unlawful deductions from wages for failure to pay holiday, NMW and/or pension contributions.

There are also tax implications for the company as they could be liable for unpaid income tax and national insurance contributions on behalf of their workers.  This is particularly a concern for those employers caught by the IR35 regime (for further information on IR35 click here).

Other upcoming cases in this area

This decision follows a string of successful challenges to contractor status as seen in Addison Lee, Hermes, Uber and Pimlico Plumbers cases, and it is clear that the trend is in favour of finding contractors are actually workers.

Deliveroo is one of the few recent status challenges that has been unsuccessful and this was due to Deliveroo being able to demonstrate a genuine right to substitute through specific examples of riders subcontracting and taking a cut of the fees made by the substitute.

Other upcoming status challenges include:

• Post Office postmasters and sub post masters 
• Purple Bricks estate agents 
• Amazon delivery drivers 

Next steps

In light of the increasing and often successful challenges to status, businesses who use contractors should review their business models and where possible seek legal advice on whether the way it is using contractors in practice makes it likely that worker status would be found in the event of a challenge.

For help and advice on employment status issues, please contact the Employment team at [email protected]. To keep up to date with developments in employment law, sign up to our newsletters or join us for our next webinar: Legal Cases and Legislation update.