While Uber’s decision to reclassify its drivers as workers in response to the recent Supreme Court ruling will be welcomed by those working for the company, it will do little to resolve the ongoing confusion over employment status.
The fact that the final ruling was the culmination of a four-year battle, shows how difficult it can be for the courts to determine employment status using the current legal framework.
The Supreme Court's ruling on Uber and worker status
The decision certainly reminds businesses to consider carefully how they classify the people that provide work for them and could prompt some organisations to make changes to how they categorise employment status.
However, the courts make decisions on employment status on a case-by-case basis and consider carefully how the tests that decide status are applied in light of the specific circumstances and context in front of them. Consequently, while the Uber ruling is a useful and important addition to case law on employment status, it fails to resolve the ongoing ambiguity over the issue faced by both organisations and individuals. It will often remain fiendishly difficult for the courts to decide legal arguments over employment status under the current system.
This means that it is crucial that Government follows through with its pledge in 2018 to legislate to improve the clarity of the employment status tests and to take action to align the employment status frameworks for the purposes of employment rights and tax.
Is worker status necessary?
The CIPD believes an effective way to do this would be to abolish worker status altogether which would provide a clearer distinction between self-employment and employed status.
This view is underpinned by a significant piece of CIPD research Reforming employment status published in November 2020. The research was informed by a literature review, data from a large-scale employer survey and contributions from HR directors, employment lawyers and public policy experts.
A further strong argument for abolishing worker status highlighted by the research is that only a minority of organisations use worker status at all, and many smaller employers don’t even know that it exists as a separate category, distinct from employee status.
Overall, just a third of employers (35%) report they use worker status, falling to just 11% of micro firms with up to 10 people and 21% of small firms with up to 49 staff - according to a survey of 1,000 employers cited in the research report. It is perhaps not surprising so few small and medium-sized businesses use worker status, as many owner managers rely on advice and guidance from financial advisors such as bank managers or accountants who will typically lack knowledge on more complex employment matters.
The fact that the vast majority of employing businesses represented by micro and small firms in the UK don’t understand or use worker status, further questions its value and supports the case for its removal. This would create clearer differentiation between self-employment and employment and make it easier for employers and individuals to understand.
What can the UK Government do?
However, our recommendations for reform recognise that abolishing worker status would not be straight forward, so we have suggested that a first step would be for Government to form an expert stakeholder commission to define employed and self-employed categories.
The commission would be tasked with creating a statutory definition of the binary categories and informing the development of non-statutory guidance and indicative tools, which would make the test of control the main determinant of status.
At the same time government should move to more closely align taxation and benefits between the self-employed and the employed to reduce incentives for false categorisation of self-employment and ensure that those who are genuinely self-employed receive improved access to benefits, such as Statutory Sick Pay, for example.
We also recommend that the government should give the proposed new Single Labour Market Enforcement Body the role of resolving disputes in status, with tribunals used only for appeals against their decisions. Finally, we believe there is a strong case to increase Acas’ budget to enhance its information, guidance and support on employment status – with enhanced powers of mediation in status disputes.
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