Background
In an employment context, a working individual can be categorised in one of three different legal statuses:
- Employees – who work for a business under a contract of service/ of employment
- Self-employed/ independent contractors – who work for a business under a contract for services
- Workers – who are neither a fully-fledged employee, nor fully independent, and a hybrid of both employment and self-employed status.
Employee status provides core workplace rights, including a right to a minimum notice period, redundancy pay and not to be unfairly dismissed.
However, there are also several benefits associated with the worker status (compared to being self-employed) such as the right to national minimum and living wage, statutory holiday pay and statutory sick pay.
In assessing the appropriate employment status of an individual, a tribunal will consider a range of factors, including:
- Personal service – is the individual required to provide their services personally to the business, or can they appoint a substitute?
- Mutuality of obligation – is the individual required to provide the work, and is the business required to provide the opportunity for work?
- Right of control – is the individual subject to a degree of direction and control by the business?
What happened in Stuart Delivery?
The EAT was asked to consider if a right of substitution, in a delivery courier’s (Mr A) contract with Stuart Delivery (SD) meant that, by default, he couldn’t be considered a worker. On the facts of this case, the tribunal answered no.
As a courier, Mr A would work in fixed-hour slots for SD, during which he would:
- be under the control of SD
- not be able to leave the zones he’d agreed to work in
- carry out his instructed deliveries on a guaranteed hourly wage, and
- not be able to hold himself out as being available to other delivery companies.
However, he could release his slot back into the pool of SD’s approved couriers through their online app. SD argued this amounted to Mr A’s right to appoint a substitute, and that therefore he did not have worker status.
The first-stage tribunal found that the arrangement of releasing slots via the app did not amount to a substitution right, which would prevent him from achieving worker status – and the EAT agreed when SD appealed.
Their rationale was that Mr A would only be released from his obligations if another courier signed up to take over his slot – but Mr A had no control over who (if anyone) would pick up the slot. If another courier couldn’t pick up the job, Mr A would still be obliged to undertake the delivery personally, and would face sanctions if he didn’t carry out the work. On that basis, he didn’t actually have the “right” to substitute, and therefore had to provide his services personally to SD.
The tribunal also found (and the EAT agreed) that Mr A wasn’t in business on his own account (i.e. a self-employed business), and that SDL wasn’t a “customer” of his.
As such, Mr A’s status was found to be that of a worker.
What does this mean?
This isn’t a legally ground-breaking case, but it is yet another reminder that an individual who may initially look like an independent contractor, may in fact be working in the capacity of a worker (or even an employee). Particularly here, the decision highlights that the ability to substitute (as an indicator of self-employment) must be largely unrestrained, in order for it to wipe-out a claim for worker status. More generally, it also confirms that a tribunal will always look beyond any contractual wording and the formality of a working arrangement, to assess what happens in practice on the ground.
How we can help
If you’d like advice on assessing the employment status of your workforce, or any other matter, please in get in touch. Keep an eye out too on our 2020 employment law updates – we’re planning a session on the recent developments on employment status and the associated tax/ IR35 implications, which will be significantly reformed in April 2020.
