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Contractual Abuse: What Can Employees Learn from Uber's Mistakes?
We speak to Paul Stevens from Judge & Priestley who sheds light into contractual abuse in employment law. With over 25 years of experience, he touches on where employees often raise concern regarding their employment contract; what should employees be aware of and how should they handle the situation if they think their rights have been abused? Touching on Uber’s tribunal, Paul expands below.
In your experience, can you share where employees often raise concerns regarding their employment contract?
The core issue that concerns most workers is job security. Most workers want control over continuity and reward. Some have specific issues; regarding the Equality Act discrimination, harassment or remuneration, etc.
Employees question their contract terms when signing them because, other than remuneration, they rarely have real bargaining power, unless they have a unique, highly sought after skill set. They are in their honeymoon state of mind: they are too pleased to get the job to criticise the terms of entry and reward. They raise them usually after being terminated, or when they realise they have been disadvantaged with regard to employment rights or have concerns about the fairness of termination or post-termination restrictions.
When can ambiguity arise as to terms and conditions, both in terms of the nature of the contractual terms and the status of the employee when regarding employee’s rights and expectations at their workplace?
S1 of the Employment Rights Act 1996, requires employers to serve written terms and conditions of employment within two months of the contract commencement. If it is a compliant employment contract, these terms should not be ambiguous. Many contractual provisions, such as holidays, notice provisions and salary have statutory minimums. The problems come when the contract is an elaborate construct with complex provisions for working hours and remuneration, such as zero hour contracts, or complex calculations for base pay, bonuses, commissions and overtime. This is furthered if there are no written terms and conditions at all, or they are varied by other policy documents or the service agreement purports to be a self-employed arrangement for the provision of services for reward. This results in the entire status of the service provider’s status being in question, giving rise to the Uber line of cases and Pimlico Plumbing. Is the service provider self-employed, a worker or employed? Each can have different consequences with respect to the rights and obligations of the employee and the control of the employer over them.
From this, how can employers use different types of legal structures and ambiguity in the wording of terms and to their advantage?
Many employers try to gain economic advantage by freeing themselves of statutory burdens to an employee or a worker. For example, freedom from paying tax and national insurance, administering sick pay or maternity/paternity, shared parental leave, pensions, working time regulations (etc.) or unfair dismissal or redundancy obligations. The easiest way to do this is to set up a self-employed or consultancy agreement, which is almost entirely governed by its own terms.
But there is a down-side. You can’t exercise the same control. Self-employed contracts are task orientated: you define the service you want provided and the self-employed service provider determines how it is done, and controls every substantial aspect of the management and delivery, and does not have to deliver it personally.
However, some job specifications are not suited to this and all too often, employers try to have their cake and eat it; they try to retain control yet free themselves of the burden of the regulations covering employees and workers. Pimlico Plumbers and the Uber cases are examples of this.
Are plumbers who have to comply with performance requirements and management directions self-employed? The management, in effect, exercises a real but not total control. Similarly, cab drivers, who may have a certain freedom in the performance of their role, are ultimately subject to the control of the management, should they choose to exercise it.
If the grip on their day to day activities is less than you might expect from people managing employees, they may be workers, instead of employees. So long as the management muscle can be flexed and there are other factors more consistent with employment, such as personal service, on balance they may not be self-employed, even if they are paying their own taxes and national insurance.
Many employees may believe that bringing up a case with their employer can be a lost cause; can you share when you would advise employees to seek legal action against contractual abuse?
This is a complex question, because it involves questions as to both merits and economics. Once you have identified the merit of a case, you have to decide how to fund it.
Most conditional fee arrangements are disadvantageous to the employee because they involve a mark-up, which cannot be passed on to the respondent, and in any event, it only benefits employees if they are awarded costs, which is relatively rare in Employment Tribunals. The majority insurers exclude employment cases (although sometimes an existing insurance policy may fund, it but this is rare). Therefore, costs to trial can be high. They can sometimes overwhelm the damages recouped.
Merits are also tricky. A careful sifting of the terms and conditions of the contractual arrangements may show a finely tuned balance of considerations. There are many factors to weigh in the balance, control being significant.
Each case is decided on its own facts. You may think, for example, that a couple who lived in and took care of a property without interference from the owners, and virtually on their own terms, were self-employed, but they were held to be workers because the owners could have taken back control at will.
In the end, the tribunal will look at your swan and try and undertake a species evaluation: if it quacks like a duck and walks like a duck, it is probably not a swan, despite the feathers. What would ordinary right-thinking people consider to be the reality on the ground?
When, however, you have a highly meritorious case and the client has the money or backers to fund it, there is likely to be a settlement. So it is worth pushing the claim as far as you can. You only have three months, in most cases, to bring the claim in the Employment Tribunal and you have to undertake mandatory ACAS early conciliation with the Respondent (which fortunately extends the time limit).
In your opinion, why do you think Uber has lost its third case regarding their employment contracts?
They lost because workers and employees have a significant body of statutory rights and self-employed services providers only have statutory rights of universal application. The Tribunal will only find that those rights are denied to service providers if the self-employed contract is an arms-length negotiated contractual relationship, where the service provider contractually binds him/herself to provide a service but determines the manner in which the service is provided and has substantial control over the day to day mechanics as to how that service is provided, including who provides it.
Uber’s working business model simply doesn’t suit that. To provide an efficient and popular cab service, and dominate the market, it has to exercise real control over its drivers: they don’t just find customers on their own recognizance without any concern for brand, efficiency and client care; they [the drivers] must be subject to very real management control, or the potential for it. That, at the very least, makes them workers, if not employees, with some statutory rights. The Employment Tribunal jealously guards the statutory rights of service providers. However, careful consideration must be given to the type of remedy being sought-just because, for example, they may not be self-employed does not mean they are entitled to bring a claim for unfair dismissal, if they are found to be workers.
From this, can you share what employers can take from these proceedings?
If you want to avoid complex and costly proceedings, be honest about what your goals are when taking on service providers. If the reality is that your business model requires you to exercise real control, or you reserve the right to do so, a self-employed contract may not be enforceable. Shedding the responsibility for statutory rights comes at the cost of control of the mechanism for delivery of the service. Let the buyer of these services beware.
Article first published in last month’s edition of Lawyer Monthly (page 24).
Please contact Paul Stevens if you would like more information about the issues raised in this article, or any aspect of employment law.