Worker Status & Employee Status – What is the difference?

Posted on: November 27th, 2018

Addison Lee has lost its claim at the Employment Appeal Tribunal (EAT) that its drivers were self-employed, Andrew Egan explains the difference between employee and worker status in relation to this case.

The Employment Appeals Tribunal’s recent ruling upheld a previous decision that the drivers at the taxi and courier company are “workers” and should therefore be paid the national minimum wage and holiday pay. Similar recent rulings against companies such as Uber and Hermes have held that drivers had worker status and therefore basic employment rights.

A number of employment law rights are available to workers who can establish worker status where the individuals work flexibly on short-term engagements in the so-called gig economy. A worker is an individual who has entered into or works under:

  • a Contract of Employment
  • 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.

Three components must be considered to determine worker status:

  • Is there a contract between the parties?
  • Is there an obligation of personal service by the individual?
  • What is the nature of the relationship?

The key concept of mutuality of obligation determines whether a contract exists between the parties. It can be difficult for casual workers, such as the drivers referred to above, to establish whether the contract continues in periods when they are not working, but are available for work.

Employment Tribunals will look at the reality of the working relationship and it is open to the Tribunal to disregard the label that the parties might have stated in their contract.

In the Addison Lee case, Mr Lange and two colleagues worked as drivers for Addison Lee Limited. The company provides private-hire taxis as well as courier services including bicycle, motorbike, car and van couriers. The company provided drivers with induction, training and documentation which indicated how they should do the job. Drivers usually hired vehicles from an associated company of Addison Lee, and were provided with hand-held computers which allocated jobs to them when they logged on.

When a driver was notified of a job via the system, they had to accept it, and if they did not do so, they had to give an acceptable reason. A penalty might follow for not accepting a job.

The company did not promise to provide any specific amount of work but informed drivers that they could generally expect about 50 to 60 hours a week’s work. The drivers could log off whenever they wanted to. Some company customers were account holders and others were not account holders.

Drivers were described as independent contractors in their contracts with the company, and were stated not to be employees, workers, agents or partners of the company.

Drivers could choose when they would be available but the company was not obliged to offer them work nor were they obliged to accept work when it was offered, but they were deemed to be available and ready to provide work at any time whilst logged on to the company computer system.

The Employment Tribunal originally held that Mr Lange and his colleagues were workers within the meaning of the Employment Rights Act 1996, the National Minimum Wage Act 1998 and the Working Timer regulations 1998. They were found not to be genuinely self-employed independent contractors.

The company appealed, but the EAT dismissed the appeal, confirming that Mr Lange and others were workers for the purposes of the relevant legislation. The definition of “working time” was also satisfied when the drivers logged on to the company’s computer systems, and were at the company’s disposal, this satisfied the definition of working time, even if they were not carrying passengers at certain times.

The drivers undertook to perform work or services personally. The work done by the drivers was held not merely to be the result of the pressure of market forces or commercial imperatives. Also, during periods when the drivers were logged on to Addison Lee’s computerised system, they were workers by virtue of those individual periods of duty. The company’s regular offer and the driver’s acceptance of work, so that the drivers worked pretty much continuously, justified the conclusion that the drivers were workers.

The contractual documentation did not accurately reflect the true agreement between the parties.

The government is currently consulting on the topic of employment status, following the commissioning of the Taylor review in October 2016. This may well lead to a change in the existing tests for worker and employment status, based on the continuing lack of certainty surrounding those tests.

If you would like further information please contact our Employment Team.