A big day in court for the gig economy – but just one of many until Parliament decides.  We need new technologies but old certainties too.

Published on Jobs, Skills and Pay

Who exactly is self-employed? When is a worker not an employee? And how can you be an employee under employment law but not for tax law?

These are difficult questions, reflecting the fact that the world of work is a complicated beast even before you start to think about how employment law, tax rules and benefit entitlements interact with it.

And they are particularly difficult when the world of work changes, as you can hardly have avoided noticing it has even if (like most people) you’ve never been in an Uber or had a dinner Deliverooed.

That difficulty underpins the Employment Tribunal case that found against Uber regarding whether their drivers are in fact self-employed. Shifts in how we work bring with them genuine uncertainty about how existing rules created for an old world apply. Resolving that uncertainty is a good thing in of itself, both for individuals, firms and customers, even if it doesn’t feel that way for Uber today.

That’s why we should welcome the fact that the case was brought – whether we think the gig economy is an exciting development providing flexibility to thousands of mini-entrepreneurs or a means of dressing up old fashioned precarious work behind a set of very attractive apps.

Specifically this case is valuable in providing more clarity about what degree of control (for example on prices, ability to secure work and choice of what work to accept[1]) over those carrying out work is sufficient to mean someone is not self-employed. Answering those kind of questions is exactly what our courts are for – and there are several other cases in train both in the UK and elsewhere.

The fact that the Tribunal has found that Uber drivers are workers rather than self-employed has significant implications both for the firm itself, but also our wider labour market. It will be very welcome news indeed for the drivers that brought the case and is important for putting down a marker about wider problems with people earning less than the minimum wage or indeed finding themselves classified as self-employed despite not regarding themselves as such. But it is far too early to come to a rounded judgement on this cases impact on the labour market as a whole.

What though does this mean for Uber? They have already said that they are appealing, but if the judgement stands they will need to make direct backdated payments for the likes of minimum wage and paid holidays, not just for the workers directly involved but for the others that will now come forward. But beyond that they have two broad choices. They can treat their drivers as workers and continue to make such payments going forward, while presumably seeing what part of those increased costs can be passed onto customers. Or they can change their business model to respond to the detail of this judgement so they can argue that even if drivers were not previously correctly treated as self-employed they now are.

The accept defeat option seems unlikely – not least given the read-across to Uber’s operating model in other countries – so we should be on the look-out for what tweaks to their approach Uber looks to make. For example they could remove some of features of their platform, such as automatically logging drivers out of the app or stopping drivers seeing where a job will involve driving to before they accept it. That may or may not be sufficient – and crucially that fact would almost certainly also be tested in court.

But it is also worth stepping back to the bigger picture here because this case and the wider debate about self-employment have implications that stretch well beyond the gig economy.

For all the interest in app-based employers, nurses, teachers and hairdressers still make up a far bigger share of the self-employed workforce and could be affected by any changes in the interpretation of employment law.

We also need to recognize that underpinning this debate about the interpretation of existing law is one about whether we have the right law in the first place. The case has highlighted how the self-employed and workers are treated very differently in both employment and tax law. That fact has in many ways been a bigger driver of the growth in self-employment we’ve seen in recent years than a few apps which certainly can’t explain there being nearly 1 million more self-employed people today than before the downturn. One-in-seven people in work is now working in this way.

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There are obviously arguments for treating people differently – after all someone running their own business faces a very different set of risks and rewards than a civil servant. But two big questions stand out as needing resolving.

First, we need to ask whether it is right to have quite such a strong tax incentive for firms to use self-employed labour. An employer currently pays 13.8 per cent employer National Insurance contributions on their employees’ wages, but pays nothing in that regard for payments to the self-employed.

Secondly, we are going to have to decide whether we are happy for an ever growing part of our workforce to be without the safety net that we deem employers owe to their employees – for example to go without entitlements to provide the like of holiday pay or maternity leave.

As a country we have two ways of resolving legal uncertainty – our courts and Parliament. The first of these has done its work today, and will be called up to do so again on this and related topics in the years ahead. But in the end it is Parliament’s job to opine on how our law should be updated to respond to developments in the real world. That’s why it’s good that both the Business Select Committee and the government themselves have launched reviews of existing employment legislation, although as with all reviews it’s what is actually done with them that matters.

New technology is by and large a good thing – but the old fashioned wish for certainty in what the law means for the jobs we do, pounds we earn and tax we pay remains as important as ever. The courts can do their bit to interpret our law in the face of changes, but in the end it is for government and Parliament to give us a law fit for that new world.

 

[1] See page 29 of the reasoning for the judgement https://www.judiciary.gov.uk/wp-content/uploads/2016/10/aslam-and-farrar-v-uber-reasons-20161028.pdf