Employment status – why it matters

If you work in the gig economy, you may not be sure whether you’re classed as an employee, a worker or self-employed. Lance Baynham, our discrimination caseworker, explains the key differences and sets out what rights you have, depending on your status.

What does ‘employment status’ mean?

Recently, a number of different working models have come into existence with lots of new terminology. We talk about the ‘gig economy’, the ‘sharing economy’, the ‘platform economy’, ‘casual workers’ and ‘zero hours contracts’ without necessarily being precise about what we actually mean by these terms. But the important thing is that, in law, if you are working you fall into one of three categories:

  • employed
  • self-employed
  • a ‘worker’

This is called your ‘employment status’.

Why is it important?

Which category you fall into essentially determines what employment rights you have. There are a set of rights that employees have, that workers do not, and then there is a smaller number of rights that workers have that self-employed people do not. However, whilst your employment status is really important, it’s unfortunately also very complex and very uncertain.

Why is it so complicated? Can’t it be made simpler?

Unfortunately the law in this area is very complicated and not really fit for purpose. Recently there have been a lot of calls for reform. The Labour Party, for example, has called for there to be a single ‘worker’ status with a range of employment rights from day one. There have also been some recent reports on this area which have made recommendations, most particularly the Taylor Review and Good Work Plan, but so far these haven’t led to any real change. So, change may be on the horizon but for now it’s important to understand how employment status works today.

So what is the situation today?

Firstly, a lot of legal protections only apply to employees, for example, only employees can have:

  • the right not to be unfairly dismissed
  • the right to receive a statutory redundancy payment.

So, if you’re a worker, and the company you work for terminates your contract in a way that you feel is very unfair, unfortunately you can’t do much about it. However, an employee might have the right not to be unfairly dismissed and so might be able to challenge the unfair decision to terminate their contract.

What rights do workers have?

It’s true that a number of important rights are only enjoyed by employees. However, workers also benefit from a number of other really important rights that self-employed people don’t have, such as:

  • the right to the national minimum wage
  • the right to paid annual leave
  • protection against unlawful deductions from wages.

This is why your employment status matters. These different statuses existed before the emergence of what we now call the ‘gig economy’.

What do you mean by the ‘gig economy’?

This basically means a market where companies engage workers on a flexible, ad hoc basis, to fulfil individual short-term contracts with consumers. This is often facilitated by technology, such as an app. The company will pay the worker just for the work they do.

What does this mean in terms of employment law?

The problem is that the existing legal framework does not fit particularly well with the relatively recent gig economy. This can lead to all sorts of issues, confusion and not to mention the significant risk of labour abuse.

If you think about it, you get a lot of employment rights as an employee, a few as a worker, and none if you’re self-employed. This means companies operating in the gig economy are likely to want the people working for them to be considered self-employed, and the people doing the work would want to be considered a worker or even an employee. In the gig economy, it’s unlikely someone will be an employee, and so normally the difficulty is working out whether they’re a worker or self-employed.

So how do I know if I’m an employee, a worker or self-employed?

Unfortunately there is no one test that will tell you the answer to that question. Instead, there are a range of factors which the courts and employment tribunals use to try and decide which category someone falls into. There are three key factors which point towards someone being an employee:

  • Firstly, employees are required to provide work personally – i.e., they can’t subcontract.
  • Secondly, employees are under the control of their employer – i.e., their employer can decide what work is to be done, how it shall be done, when it shall be done and where it shall be done.
  • Thirdly, there is a mutual obligation between the employer and employee – the employer has an obligation to provide work and the employee has an obligation to accept it. Compare this, for example, to someone who might be a worker on a zero-hours contract – in that case, there’s no obligation on the company to provide work, nor for the worker to accept any work offered.

This can help show if someone is an employee but, like I said, the main issue in the gig economy is differentiating between a worker and someone who’s self-employed.

Hasn’t this been in the news lately?

Last year there was a Supreme Court case on whether Uber drivers are self-employed or workers. Uber’s view was that their drivers were self-employed. They said they were essentially self-employed taxi drivers, and Uber was their booking agent, just there to connect them to their client. However, the Supreme Court disagreed and said that Uber drivers are workers. As a result, Uber drivers are entitled to paid holiday and to receive the minimum wage.

In its ruling, the Supreme Court said the key factor was the degree of control that Uber had over their drivers. Uber controlled:

  • the fare and, therefore, how much their drivers earned
  • how their drivers were to operate
  • (in some cases) whether a driver could accept or decline an individual ride
  • how much drivers could communicate with passengers

Compare that to someone who is genuinely self-employed. A self-employed person can choose:

  • how much they charge for their work
  • how that work is done
  • what work they take on and what they don’t

The other key thing that the Supreme Court said in the Uber case is that, when it comes to determining employment status, the contract is not the starting point. What that means is that even if your contract says ‘you are self-employed’ that does not necessarily mean that you are self-employed – you might still be a worker, like Uber drivers.

To take a couple of other examples that have been in the news, the courts and tribunals have also found that:

  • Pimlico Plumbers are workers
  • Addison Lee drivers are workers
  • Deliveroo riders are self-employed

This last example might seem quite strange, given that you’d probably think of a Deliveroo rider as doing the same kind of job as an Uber driver. The reason was that Deliveroo riders can get someone else to do the work for them and pay them directly to do it.

Aren’t people in the gig economy vulnerable to exploitation whether or not they have worker status?

The fact remains that those working in the gig economy are subordinate to and dependent on a company who has a large degree of control over their work. That’s where the issues remain and where the calls for reform are so important.

A charity called FLEX (Focus on Labour Exploitation) recently did some research in which they looked at labour abuse in the gig economy. They found that the main issues workers were facing were around:

Access to their employment rights

Workers often did not have access to holiday pay or sick pay and there was often very little transparency over the terms of their work. This meant there was no clarity over the circumstances in which their contract could be terminated, and so they were often frightened of suddenly having to stop work without warning or explanation.

Issues with pay

Workers were often paid below the minimum wage as they were not paid for their time waiting for orders or travelling between jobs. The rate they were being paid depended on an algorithm they had no control over or access to, with what they were paid depending on factors such as demand, the number of couriers available and even weather conditions. This meant they had no idea how much they were going to have to work to make ends meet.

Safety concerns and violence

Many didn’t have access to toilets and amenities, and experienced threats of violence. A majority of the women or non-binary participants in the research had experienced sexual assault whilst working. They often didn’t report this as they feared it might mean that they’d lose their work.

To summarise, although the status of ‘worker’ is meant to be there to cater for ad hoc flexible working relationships, the FLEX research found that all of that flexibility is currently very one sided.

Where can I get advice on my employment status?

If you want to know more about your employment status, there is some information to help you available online from:

However, it is a complicated area of law and so if you think the company you work for has got your employment status wrong, or you think they aren’t giving you the rights or protections you think you’re entitled to, then we would encourage you to seek legal advice.

The above article is intended for information only and should not be relied on as legal advice.