“Zero-hours contract” is not a legal term. The CIPD’s Labour Market Outlook survey – winter 2013-14 , in partnership with SuccessFactors, definition  reflects the basic foundation of a zero-hours contract. However, the exact nature of zero-hours contracts may differ from organisation to organisation. For example:
-    Individuals on zero-hours contracts may be engaged as employees or workers.
-    In some zero-hours contracts, the individual will be obliged to accept work if offered, but in others they will not.
-    The pay arrangements and benefits provided may differ.

In May 2015, section 27A of the Employment Rights Act 1996 came into force. This made exclusivity clauses in zero-hours contracts unenforceable, meaning that employers cannot prevent an individual from working for another organisation. In this context, this provision defines a zero-hours contract as a contract of employment or other worker’s contract under which:
1.    the undertaking to do or perform work or services is an undertaking to do so conditionally on the business making work or services available to the worker, and
2.    there is no certainty that any such work or services will be made available to the worker.

Because “zero-hours contract” does not have a specific meaning in law, it is important for employers to ensure that written contracts contain provisions setting out the status, rights and obligations of their zero-hours staff. The UK government has produced guidance for employers on the appropriate use and employment rights arising from zero-hours contracts.

The CIPD’s 2015 policy paper reports that most employers of zero-hours contract staff (67%) classify them as employees, whereas only just less than a fifth (19%) describe them as workers. Only 5% of employers classify their zero-hours contract workers as self-employed. Perhaps reflecting the confusion that surrounds the employment status of zero-hours contract staff, 6% of employers have not classified their status and 1% don’t know.

For convenience, this guidance uses the term “employer” to mean the hiring party in a contract for work, whether or not the individual being hired is an employee, a worker or a self-employed person.

-    “Zero-hours contract” does not have a specific meaning in law.
-    Contracts referred to as zero-hours contracts may differ from organisation to organisation.
-    Zero-hours staff may be engaged as employees or workers.
-    It is important for organisations to ensure that written contracts contain provisions setting out the status, rights and obligations of their zero-hours staff.

-    “Zero-hours contract” does not have a specific meaning in law.
-    If you are unclear about your status, rights or obligations under a zero-hours contract, you should ask your employer for clarification.

This section describes the legal tests for employment status, including the types of obligations that employees, workers and self-employed individuals are owed and owe.

There are three main types of employment status:
1.    employee
2.    worker
3.    self-employed.

Almost all working individuals will fall into one of these three categories. In principle, an individual on a zero-hours contract could be an employee, worker or self-employed (although in practice it is unlikely that an individual on a zero-hours contract will be self-employed).
The correct category will depend on what the contract says, how the working arrangements operate in practice and whether any statutory tests on employment status are satisfied (see Section 6, “How to decide what contract to use” ).
Here are summaries of the legal tests for each type of employment status. The terms in bold are explained below.

Employee

An individual will likely be an employee if:
-    there is an obligation to provide personal service; and
-    there is mutuality of obligation; and
-    the employer controls the way in which work is done; and
-    other factors are consistent with employment (for example level of integration into business, label applied by the parties, nature and length of engagement, benefits received by the individual).

Self-employed

An individual will be self-employed if they are not an employee or a worker. This will be if:
-    there is no obligation to provide personal service; or
-    there is no mutuality of obligation; or
-    they are carrying out a business and the other party is the customer.

Whether an individual is carrying out a business and whether the other party is a customer of that business will depend on various factors being established, such as: 
-    The employer does not exert a high level of control over the individual.
-    The individual is not integrated into the employer’s business.
-    The individual actively markets their services to the world in general.
-    The engagement is relatively short in duration.
-    The individual is providing specialist services.
-    The individual invoices for fees.
-    The individual supplies the equipment needed to perform the service.
-    The individual carries a level of risk (for example, if the work is not done, the individual does not get paid).

Worker

An individual will likely be a worker if:
-    there is an obligation to provide personal service; and
-    there is mutuality of obligation; and
-    they are not carrying out a business and the other party is not a customer; and 
-    they do not otherwise meet the test for being an employee.

“Worker” is the hardest category to identify. This is because workers tend to exhibit characteristics of both employee and self-employed status. One way to understand what a worker is, is to think of workers as a “sweep up” category that ensures that individuals who would otherwise be self-employed, but who show some characteristics of employees (for example control), have meaningful legal rights (see Section 4, “Summary of legal rights and protections ”, for more information). It is important to remember that all employees are workers.

Control means the employer has power to decide what, how, when and where the work is done. The focus is on whether the employer has a contractual right to control, rather than exercising day-to-day supervision over the individual.

Mutuality of obligation is normally taken to mean that there is a written or oral contract between the employer and individual under which the employer is obliged to provide work, and the individual is obliged to accept the work in return for pay. However, it can also mean simply that there is a written or oral contract between the employer and individual. Therefore, even if the contract does not include an obligation on the employer to provide work nor an obligation on the individual to accept work in return for pay, the individual will still be an employee or worker if that contract is in all other respects consistent with employee or worker status (see Section 6, “How to decide what contract to use”,  for more information).

Personal service means that the individual agrees to perform the work or services personally (that is, by themselves). If the individual is free to send substitutes instead, this is inconsistent with a worker or employee relationship. However, the right to substitute must be genuine (and ideally used in practice) and not significantly restricted.

The appendix  gives examples of cases where individuals who were ostensibly self-employed, workers or employees were held by the courts to have a different status based on the tests summarised above.

The CIPD’s 2015 policy paper reports that more than half of employers surveyed (58%) give zero-hours staff the contractual freedom to turn work down and say they honour this in practice. However, 21% of employers say that contracts give workers the right to turn down work when, in practice, they are always or sometimes expected to accept all work offered. A further 14% say their zero-hours contracts do not allow staff to turn work down. 

There are three main types of employment status: 
1.    employee
2.    self-employed
3.    worker.

-    Individuals on zero-hours contracts will usually be employees or workers.
-    The individual’s employment status will depend on what the contract says and how the arrangement operates in practice.
-    The tests to establish the correct status of employee, worker and self-employed are established by case law.

-    Under your zero-hours contract you may be an employee or worker.

Your employment status will depend on what your contract says and how the arrangement operates in practice.

This section sets out the legal rights which attach to each category of employment status.

Employment status is important because it determines an individual’s legal rights. An employer can give an individual additional rights in the individual’s contract. However, the legal rights referred to below cannot be taken away.

Employees benefit from the most protection, including the right not to be unfairly dismissed, the right to statutory minimum notice and statutory redundancy pay, family-related rights and certain other rights to time off, and protection against discrimination and whistleblowing.

Workers have fewer rights than employees. Essentially they are given statutory protection which recognises that even though they are not employees, they are in a subordinate position to the person for whom they work and that some basic protection is required.

As such, workers have certain rights relating to pay, rights under the working time and whistleblowing legislation, and protection from discrimination.

Self-employed individuals generally only have contractual rights but may be protected from discrimination and are protected under the data protection legislation as “data subjects”.

The general categories of rights and protections and the extent to which they are enjoyed by employees, workers and the self-employed are set out in Table 1.

Table 1: General categories of rights and protections

Following the Taylor Review, the UK government committed to a review of one-sided flexibility. In December 2018 the UK government published its policy, the Good Work Plan. One of the aims of the  Good Work Plan is to ensure that both employers and individuals have clarity to understand their employment relationships, including the rights that are available.

Two changes that have been implemented as a result of the Good Work Plan include the expansion of certain rights to workers that were previously only available to employees, such as the right to receive itemised pay statements and a written statement of employment particulars when they start work (setting out certain information including pay, holiday entitlement and working hours).

However, other changes are yet to be implemented. The Good Work Plan set out the intention to introduce legislation that will give zero-hours staff the right to request a more predictable and stable contract that guarantees a certain amount of hours after 26 weeks’ service. This would purely be a right to request a change, rather than a right to receive such a change of contract. The UK government is expected to introduce this right in a forthcoming Employment Bill. (Note that care providers in Wales must offer domiciliary care workers on zero-hours contracts the option to move to a permanent contract after three months, reflecting the hours they have worked.)

The UK government intends to extend the gap in employment that can break continuous service from one week to four weeks, but again, no timescale for this reform has yet been announced.

The UK government is also considering whether to introduce a new right to reasonable notice of work schedules and compensation for shift cancellation. Its consultation was launched in summer 2019 and the response is awaited. A recent EU Directive includes similar EU-wide rights but the UK does not need to implement this.

Over recent years, employment status and zero-hours contracts have continued to remain hotly contested political topics and the subject of much scrutiny and lobbying.

The COVID-19 pandemic has brought a renewed focus on such working arrangements. The House of Lords COVID-19 Select Committee report, published in April 2021, called on the UK government to legislate to reduce insecurity in employment and clarify employment status. The Trades Union Congress has also lobbied on zero-hours contracts, because of the impact of the COVID-19 pandemic on individuals in insecure work.

-    Your employment status is key to the legal protections you will benefit from while working.
-    If you are not clear what your status is, you should ask your employer for clarification.

This section looks at the advantages and disadvantages of different types of status in practice.

Tables 2 and 3 illustrate the pros and cons of employee and worker status from a practical perspective. The pros and cons will not apply to every employee or worker, but are likely to apply in most cases.

Table 2: Pros and cons of employee and worker status from the employer’s point of view

-    Engaging individuals as workers has advantages. In particular, workers may be cheaper to employ and give the employer a greater degree of flexibility in responding to business demands. However, worker status has downsides for the employer. For example, workers may not be available when needed, they may feel less invested in the employer’s future and administering certain aspects of worker relationships (for example pay and holiday calculations) can be complicated.

-    Employee status also has advantages for an employer, specifically a stable and motivated workforce over which the employer has a greater degree of control. The main downside to employment status is the potential expense of employing (and ultimately terminating) employees.

-    Remember that employment status depends both on what the individual’s contract says and how the working arrangement operates in practice (see Section 6, “How to decide what contract to use”,  for more information). If working arrangements change over time, this could lead to uncertainty over employment status, that is, if a worker is still a worker or has become an employee.

-    Workers typically have more flexibility than employees, in that they have more scope to dictate their own schedule and balance their work commitments around their personal lives. However, there is typically more uncertainty about when workers will get work and over what period they will be required to work.

-    An employee is normally part of the employer’s core workforce and receives the fullest range of benefits. They also benefit from more career development opportunities. The main disadvantage is that there is a lack of flexibility about when you work, as employees usually have set hours or a set pattern of work.

-    Remember that employment status depends both on what your contract says and how the working arrangement operates in practice (see Section 6, “How to decide what contract to use”,  for more information).

Individuals on zero-hours contracts may be engaged as employees or workers and the employer should decide what employment status to use.

The best practice approach to deciding what employment status to use is for the employer to consider how it wants the relationship with the individual to work in practice, and to apply the employment status that most closely matches that.

To decide what employment status most closely matches the reality of the relationship, the employer should consider the various employment status tests (see Section 3, “Employment status: where do zero-hours contracts fit in?” , and Section 5, “The pros and cons of status”,  for more information).

For example, if the employer wants:

-    the zero-hours individual to provide personal service, to be fully integrated in to its business and to receive a range of benefits, and
-    to control the way in which work is done and provide work to the individual for a prolonged period 
the individual is likely to be an employee, not a worker.

It is important for the employer to determine the employment status of its zero-hours staff based on how the relationship will work in practice. and whether that satisfies the statutory definitions on employment status. The reason for this is that if the contract with the individual does not match the reality of the situation (for example the contract says the individual is a worker but in reality they are working as an employee), the law will treat the individual as having a different employment status (for example employee status), regardless of what the contract says.

Ideally, managers should receive training on the different types of status, so that they understand:

-    that an individual will either be an employee, a worker or self-employed
-    how the rights of employees, workers and the self-employed differ
-    that the way they treat an individual could change that individual’s status.

Relationships should be reviewed regularly to check that individuals are being managed in line with the status specified in their contract.

It may be that, over time, the way the relationship works in practice changes so that an individual’s status changes from one type of status (for example, worker) to another

(for example, employee). This would typically happen where an individual is not being managed consistently with their status. For example, the individual was originally engaged as a worker but over time has become increasingly integrated into the employer’s business, such that they now bear many characteristics of an employee, for example, by having increasingly regular working hours, taking on some form of management responsibility or having a company email address and business card.

If an individual’s status does change, it would be best practice to issue a new contract to reflect the new status. Issuing a new contract ensures that both the employer and individual are clear about their respective rights and obligations and avoids problems arising at a later date.

As noted above, zero-hours contracts can no longer prevent an individual from working for other organisations due to section 27A Employment Rights Act 1996 coming into force. This section sets out that any provision of a zero-hours contract which prohibits a worker from doing work under another contract or prohibits a worker from doing so without the employer’s consent is unenforceable.
An employer should make sure that a zero-hours contract contains the following basic terms (please note that this list does not include all the terms that are mandatory in an employment contract, nor all clauses which are advisable for inclusion in an employment or worker contract, such as place of work, working time opt-out, governing law provisions):

The employer should decide whether an individual is an employee or a worker based on how the relationship will operate in practice (see Section 3, “Employment status: where do zero-hours contracts fit in?”  and Section 6, “How to decide what contract to use” ).
If the individual will be a worker, rather than an employee, it is good practice to include confirmation that the contract is not an employment contract and does not confer employment rights on the individual.

The contract should state why a zero-hours arrangement has been adopted. For example, it could state that the employer has engaged the individual as a zero-hours worker/ employee because of fluctuating demands of the business. This is a useful provision because:
-    It helps the individual to understand how the arrangement will operate.
-    It helps to show that the zero-hours arrangement is being used for legitimate reasons.
-    It evidences the parties’ intentions when entering into the contract, which may be relevant when determining issues such as whether there is an umbrella contract (see below).

Typically an individual on a zero-hours contract will be paid an hourly rate. However, other arrangements may be used.

Zero-hours employees and workers have the right to paid holidays. Employees and workers are entitled to a statutory minimum of 5.6 weeks’ holiday per year (including bank holidays). For a full-time worker, this amounts to 28 days. Zero-hours employees and workers are treated as part-time workers, and so will usually be entitled to a pro-rated number of days’ holiday (see Section 7, “Difficult issues”,  for more information). However, because zero-hours workers work irregular hours, it can be difficult to calculate the appropriate number of days’ holiday entitlement.

The difficulty arises from the fact that the legislation calculates holiday in terms of “weeks”, providing for accrual of holiday in the first year as being at a rate of 1/12 of the annual entitlement each month. However, where hours worked are irregular and the annual entitlement cannot be predicted with certainty, this formula is of little assistance.

Working out holiday accrual

A zero-hours worker is entitled to a statement of particulars which sets out their holiday entitlement. However, as it is not known in advance for how long a zero-hours worker will be engaged and they do not have regular working hours, it can be difficult to work out the amount of holiday to which they are entitled. Holiday entitlement under the Working Time Regulations 1998 is calculated in weeks, and it is difficult to know how many days or hours are in a week’s holiday when the worker has irregular working hours. As a result, it is difficult to know what proportion of a week’s leave is used up when the worker takes a day’s annual leave.

A commonly used rule of thumb for calculating holiday entitlement for a casual worker was to base it on 12.07% of the hours worked in that holiday year (because the standard working year is 46.4 weeks (i.e. 52 weeks less the statutory 5.6 weeks holiday entitlement) and 5.6 weeks is 12.07% of 46.4 weeks). However, this approach, although common, is unreliable. It will sometimes result in an employee receiving more than their statutory entitlement, and sometimes less. The Court of Appeal has ruled that this approach is not compatible with the Working Time Regulations 1998 (in the case of Harpur Trust v Brazel [2019] EWCA Civ 1402).

In Brazel, capping a zero-hours worker’s holiday pay at 12.07% of her annualised hours resulted in unlawful deductions from her wages because that calculation only takes account of periods of work. Brazel confirmed that holiday accrues under the legislation where a contract subsists during periods of non-work, so the correct calculation should have resulted in holiday pay amounting to around 17.5% of her annual earnings (she was an hourly paid music teacher who mainly worked during school terms and received no pay during school holidays when she did no teaching).

Employers using set percentages to calculate holiday pay should consider conducting an audit to ensure that these fixed rates do not result in workers receiving less than their statutory holiday entitlement. The UK government has produced guidance on how to calculate statutory holiday entitlement for workers on different types of contract.

Timing of holidays

The timing of when accrued holiday can be taken is a separate question and can be decided by the employer. Despite the zero-hours worker or employee accruing holiday entitlement, the employer may not be willing to allow individuals to take holiday during an assignment. An employer can decide both the length and timing of holidays taken by its employees or workers, provided that:

1.    the employer does not prevent the individual from taking the holiday for the entire holiday year
2.    if the employer wants the individual to take holiday on specified dates, it must give the individual notice of at least twice the length of the period of leave the individual is being required to take.

In this way, an employer can decide whether to allow a zero-hours employee or worker to take any accrued holiday during the assignment, or to pay the employee or worker in lieu of the accrued but untaken holiday at the end of the assignment.

Calculating holiday pay

If the holiday is being paid for in lieu on termination, the calculation method for the amount payable will often be set out in the contract.

In the case of holiday taken during the contractual term (or paid in lieu on termination where no calculation method is set out), an employee/worker with “no normal working hours” is paid based on an average of their earnings in the previous 52 working weeks (or the number of weeks the worker has been engaged, if less than 52 weeks). All remuneration earned during those 12 weeks is taken into account, including overtime and commission. The majority of zero-hours employees and workers will have “no normal working hours”.

(Note that there is some uncertainty around what elements of remuneration should be included in the calculation where the employee or worker has ‘normal working hours’; but this should not normally apply to zero-hours workers/employees.)

Section 7, “Difficult issues”,  looks at some further tricky issues around holiday and holiday pay.

Zero-hours contracts may be structured as overarching contracts (also known as “umbrella contracts”). Under this arrangement, there is a continuing contractual relationship with ongoing obligations between the employer and individual regardless of whether the individual is working at the time. The continuing relationship usually makes it easier for the employer to administer holiday pay (which can otherwise be difficult) and individuals can be provided with benefits, such as health cover, even when they are not working on an assignment.

Even when a zero-hours contract states that there is no continuing relationship between engagements, if, in practice, there is a well-founded expectation of further engagements (which is common in many zero-hours situations), that could be sufficient to create an umbrella contract. The key component of an umbrella contract is mutuality of obligation. However, the tribunals have found that a course of dealing that gives rise to an expecta- tion of work could be sufficient to create a contractual obligation and therefore an umbrella contract between the parties. This could be, for example, if there is an expectation that the zero-hours worker or employee would be given work, even if there is no obligation on the employer to offer a minimum amount of work and the individual is able to refuse to accept a particular offer of work if made.

If the employer does not want a continuing relationship between engagements, it should not create an expectation of further work. The contract should confirm:
-    There is no contract between the parties between assignments.
-    Each assignment shall be regarded as separate.
-    The fact that the employer has offered work does not mean that there is any entitlement to or any expectation of future work.

The existence of a continuing relationship is particularly important for employees, as the length of continuous service for employees is relevant to the accrual of certain statutory rights (see Section 4, “Summary of legal rights and protections” ). It is also relevant to employees and workers for holiday pay purposes (see Section 7, “Difficult issues”,  for further information on tricky holiday issues).

The arrangements for notifying work will vary widely between employers. For example, it may be that the employer will contact the individual to offer work, or it may be that the individual is expected to make enquiries of the employer. Whatever the arrangements are, it is good practice to include a detailed explanation of the notification mechanism so that both parties are clear (see Section 5 “Whether or not the relationship continues between engagements” , above).

In some zero-hours contracts the individual will be obliged to accept work if offered, but in others they will not. If the employer wishes the individual to be obliged to accept work if offered, it must say so in the contract. The drawback of including an obligation to accept work if offered is that it may result in an umbrella contract being imposed.

It is not permissible for there to be a provision in a zero-hours contract that requires the individual to work exclusively for the employer. This ban of “exclusivity clauses” was made law in 2015 in an attempt to ensure that the earning ability of individuals working under zero-hours contracts with no guarantee of work is not restricted by preventing them from working elsewhere.

Zero-hours workers and employees now have the right to protection against suffering a detriment or being dismissed for working for another employer or not asking for permission to work for another employer (depending on whether they are a worker or employee).

Some zero-hours contracts require the individual to be available for work when it is offered. It is not clear whether this could amount to a prohibition on working for others, as, by keeping themselves available, they could be deterred from accepting work from other businesses. There has been little case law on this since the change in legislation. Until this has been tested in the tribunals, it will not be completely clear as to whether such drafting would fall foul of the legislation. In the meantime, businesses should consider giving zero- hours individuals a choice as to whether they accept work or not. This may be a general right to refuse an assignment or limited to a right to refuse a certain number of times within a specified period.

Although not guaranteed, this could avoid the implication that exclusivity is required.
The UK Government has consulted on whether to extend the exclusivity ban to cover those contracts where a worker’s guaranteed weekly income is less than the Lower Earnings Limit. The consultation closed in February 2021 and the response is awaited.

Under UK legislation, all workers (which will include employees) are entitled to 5.6 weeks’ paid holiday each year. This is pro-rated as necessary, where the contract lasts for less than a year.

With zero-hours employees or workers, it can be tricky to work out what “5.6 weeks” of paid holiday equates to, and to work out when the employee or worker should be able to take it. Calculating holiday pay is also tricky because it requires use of a reference period.

For this reason, for convenience, employers often want to “roll up” holiday pay into the individual’s hourly rate. The term ‘rolled-up’ holiday pay refers to the practice of paying individuals inflated basic pay that includes their holiday pay. The worker does not then get paid when they take holiday.

This arguably defeats the purpose of the European legislation that the UK law derives from, as it could deter workers from taking holiday. There were a number of UK decisions on this before it was referred to the European Court of Justice and the decision of Robinson-Steele v PD Retail Services and other cases [2006] IRLR 386.

This case held that rolled-up holiday pay is technically unlawful. However, if an employee or worker makes a claim for unpaid holiday, it seems that an employer should be given credit for any rolled-up holiday pay that has been paid provided that the roll-up arrangement was transparent and it was made clear to the employee or worker which portion of the pay represented holiday pay.

The UK legislation has not been amended to specifically prohibit rolled-up holiday pay, although current government guidance states that an employer cannot roll up holiday pay, and that if a contract includes rolled-up pay, it needs to be renegotiated.

Under UK legislation, employees and workers will benefit from the National Minimum Wage (and National Living Wage if aged 23 years and over), but individuals who are genuinely self-employed will not.

Individuals engaged on zero-hours contracts will typically be paid by reference to the time that they work, often on an hourly rate. They are entitled to be paid the National Minimum Wage or National Living Wage for the time that they have spent working.

Working time for these purposes will include:
-    time spent actually working
-    time spent attending training during normal working hours
-    travel time, but not time spent commuting to and from the workplace (subject to some exceptions, for example if the worker works at home, travelling to the employer’s premises will be working time)
-    time the individual is required to spend at the workplace waiting to find out if they are required to work, regardless of whether they are then given any work or sent home
-    time spent “on call” at a location specified by the employer
-    in general, time during which the individual is required to be available for work at or near a place of work.

Zero-hours employees or workers who spend time at home waiting to hear if they have been allocated work may consider themselves to be “on call”. However, such time should not count as working time. Time spent on rest breaks or away from work, such as holiday or sick leave, should also not count.

Only “qualifying employees” are entitled to SSP. Anyone paying Class 1 National Insurance contributions will satisfy this criteria, regardless of whether they are an employee or worker. In order to receive SSP, in addition to being a “qualifying employee”, an individual must also be absent because of incapacity for work for four or more days in a row and have had average weekly earnings of not less than the lower earnings limit (currently £120 per week)  within the previous eight weeks.

Individuals on zero-hours contracts may find it difficult to satisfy these criteria. In between assignments individuals may not be a “qualifying employee” or may not have sufficient average earnings to qualify for SSP.

The contract could state that the contract comes to an end automatically at the end of each engagement, or by notice given by either party.
Any notice provisions will, in the case of employees only, be subject to the following statutory minimum notice periods:

-    if an employee has been continuously employed for more than one month – a minimum notice period of one week
-    if an employee has been continuously employed for more than two years – one week’s notice for each year of continuous employment
-    if an employee has been continuously employed for more than 12 years – 12weeks’notice. These statutory minimum notice periods will be particularly important if an umbrella contract has been implied and an employment relationship continues to exist between assignments.

The CIPD’s 2015 policy paper reports that 66% per cent of employers that use staff on zero-hours contracts report that they have a provision, a practice or policy on the amount of notice they give zero-hours staff to terminate the company’s relationship with the individual. Less than half (45%) say they have policies or practices in place when it comes to cancelling a shift.

-    Employers should decide how the relationship will operate in practice and ensure that:

1.    they apply the corresponding employment status, and
2.    this is accurately reflected in the contract.
-    Employers should regularly review working arrangements to assess whether the way in which individuals are working has changed and the implications of any changes on status. If status has changed, the employer should consider issuing a new contract to reflect the new status.

-    Employers should ensure that contracts confirm basic terms, including pay, holiday and pay entitlements, notice and other terms which relate to the way work will be managed in practice.

-    You should ensure you have a clear understanding from the terms of the contract what your status is.
-    If the way in which you work in practice differs from what is set out in your contract, you may not be treated in law as having the same status, which will affect your legal protections.

A plumber, Mr Smith, had been engaged by Pimlico Plumbers for six years. He suffered a heart attack and requested to reduce his working days from five to three. The company refused and terminated his agreement. Following this, Mr Smith brought a number of claims, for which his employment status needed to be determined.

Mr Smith had entered into two agreements with the company which stated that he was not obliged to be offered work and was not obliged to accept work. However, the company manual imposed a number of requirements on him, including the obligation to wear a uniform, carry an ID card and use a company mobile phone and van when working. He was expected to work five days a week for 40 hours. There was no express right of substitution in his contract, although in practice he had the right to decline jobs or send another company staff member if he could not attend.

The Supreme Court focused on two tests: whether Mr Smith was obliged to carry out his services personally and whether Pimlico Plumbers was a client or customer of Mr Smith’s business. It found that the contract did involve an obligation of personal performance. Although there was a right to substitution, this was limited. It also found that Pimlico Plumbers was not a client or customer of Mr Smith. There was a degree of control exercised over him which was incompatible with this finding.

The Supreme Court therefore upheld that Mr Smith was a worker for the purposes of the Employment Rights Act 1996 and the Working Time Regulations 1998 as well as an employee for the purposes of the Equality Act 2010. However, as with most employment status cases, the decision was highly fact-specific and does not in itself clarify this area of the law. Despite this, it does again highlight the fact that although the contractual terms may specify one thing, it is essential to look at this in the context of the working reality of the relationship.

In 2016, various Uber drivers brought claims for which they needed to be workers in order to succeed. Uber argued that the drivers were not workers and its terms stated that it acted as an agent for self-employed drivers, although it did impose certain requirements as to how they should provide their services.

The Supreme Court firstly rejected Uber’s argument that it operated as a booking agent for drivers. It then went on to say that, in status cases, individuals are claiming statutory employment rights protection. This general purpose of this legislation is to protect vulnerable workers. The fact that a business can usually dictate contractual terms gives rise to the need for statutory protections in the first place. This means that the task for tribunals is not to identify whether a business has agreed under its contracts to pay, for example, national minimum wage or holiday. Instead, their task is to determine whether individuals fall within the definition of a “worker”, irrespective of what had been contractually agreed. The approach must be one of “statutory interpretation, not contractual interpretation”. It could not be right that a business could use its contracts to determine who qualifies for protection.

The Supreme Court concluded that, although the Uber drivers had autonomy and independence in some respects, the tribunal’s findings justified its conclusion that the drivers were workers. Uber’s control over their remuneration was of particular importance. The drivers’ ability to charge less but not more than the fare suggested by Uber meant that their notional freedom was of no benefit to them. Overall, drivers’ services were in fact defined and controlled by Uber.

The Supreme Court also decided that Uber drivers were working whenever they were logged in to the app. Particular weight was placed on Uber’s practice of logging out drivers who failed to accept bookings and keeping them temporarily logged out even if they were ready to work. This pointed to there being a penalty for drivers who failed to comply with an obligation to accept a minimum amount of work when logged in. The existence of this obligation, even when drivers were not performing a booking, meant that drivers were working whenever logged in.

Like other status cases, this judgment is fact-specific. However, the judgment’s emphasis on the need for “statutory interpretation, not contractual interpretation” is potentially significant. It is likely to sit alongside the decision in Pimlico Plumbers v Smith as the leading guide to judicial decision-making on this topic. We can also expect to see some businesses make adaptations to their models - for example, by providing greater freedom to drivers to reject orders without facing sanctions, or potentially restricting the times when individuals can log in.

Examples of cases where an individual who argued they were an employee or worker was held by the courts not to be an employee or worker

The Central Arbitration Committee (CAC) had to decide whether riders engaged by Deliveroo under contracts describing them as self-employed were actually workers, for the purpose of the right to compulsory trade union recognition. The CAC determined that they were genuinely self-employed.

The decision centred around the question of whether there was an obligation of personal service. The contract between Deliveroo and the riders allowed the riders to provide a substitute, engaged and paid directly by them, to perform a delivery. Substitution was rare and mostly unnecessary, given their flexibility to decline jobs without penalty. It also carried regulatory and reputational risks for Deliveroo, since the substitutes would not have gone through their selection and training process. However, the CAC found that these factors did not mean that the substitution provisions were not genuine. Neither did it matter if Deliveroo’s reason for including the substitution clause was to defeat arguments as to worker status, provided the right was genuine. The CAC heard evidence of substitution being used in practice. The “almost unfettered right of substitution”, which the CAC found was genuine, was fatal to the union’s argument that the contract was one of personal service.

Consistent with such cases being highly fact-specific, the CAC commented that the circumstances of this case were different to those in other gig economy cases (including the Uber case). Nonetheless, it is a decision that bucked the trend in gig economy cases, which tended to find worker status.

The IWGB lost its judicial review challenge in the High Court.

This case concerned a lap dancer who worked at Stringfellows. The dancer worked to a rota which was determined by Stringfellows, she was required to attend meetings at the club and fines were imposed by Stringfellows if she was late for her shifts or if she didn’t attend meetings. It was clear that the dancer provided personal service and

Stringfellows had control over how she carried out her work, but the question for the court was whether there was sufficient mutuality of obligation to give rise to an employment relationship. The Court of Appeal decided that there was not.

The most important factor was that Stringfellows was under no obligation to pay the dancer anything at all. She negotiated her own fees with customers and risked being out of pocket on any given night. In the court’s view, it would be unusual to find an employment relationship where the individual is paid exclusively by third parties and takes the economic risk. This conclusion was reinforced by the terms of the dancer’s contract, under which she accepted that she was self-employed, and by the fact that she paid tax as a self-employed individual. The dancer was therefore not an employee and was not able to pursue her unfair dismissal claim.

This case also focused on the express contractual arrangements of the parties, although it is important to note that there was no suggestion that the agreement was a sham, as has been implied in other employment status cases.

Professional cyclist Jessica Varnish attempted to bring claims for unfair dismissal and sex discrimination after she was dropped from the Federation’s cycling programme. Ms Varnish argued that she was entitled to bring such claims as she was an employee of the Federation. This was based on the level of control she said was exercised over her.

The EAT upheld the ET’s decision that Ms Varnish was not an employee or a worker.

The Federation exercised control over Ms Varnish. However, there was no mutuality of obligation; Ms Varnish agreed to train in the hope she would be selected for the British Cycling team, but she was not being provided with work. Although she had to personally perform the training, she was not provided with work she had to perform and there was therefore no personal performance consistent with an employment relationship. Ms Varnish was therefore not able to pursue her claims.

The EAT emphasised that the ET’s conclusions were based entirely on the facts before it. The EAT even suggested that a cyclist’s training may amount to work if there is a different contract, or if the balance of services to be provided is different. It is therefore vitally important to scrutinise the particular facts of each individual status case.

Example of a case where individuals who appeared to be workers were held by the courts to be employees

This case concerned the status of two housekeepers who were contracted to run a farm and had autonomy in terms of how they carried out their day-to-day duties. Their employer tended to be absent for the majority of the time and made infrequent visits. When their contracts were terminated, the housekeepers attempted to bring unfair dismissal claims, for which they needed to be employees. The principal issue in this case was to decide to what extent the employer could be said to have control of the individuals in circumstances where they were unable to exercise day-to-day supervision of the individuals.

The EAT held that in order to determine the question of control, the correct analysis was whether the employer had a contractual right of control as opposed to exercising day-to-day supervision over the individual. It emphasised that in general terms many workers are provided with a significant amount of autonomy in the way that they carry out their work but are deemed to be employees. The EAT held that in the present case, the individuals, while autonomous, were employees since their employer retained a contractual right of control.

The Court of Appeal agreed that an employment relationship existed between the parties. It also confirmed that the employment tribunal had made a mistake in finding that the lack of day-to-day control was a decisive factor rather than considering the cumulative effect of the employment contract and the circumstances as a whole. The test of whether or not someone is an employee is about the entire relationship, with the starting point being the written agreement. The key question was whether the “employer” had a contractual right of control, rather than simply about who was in charge of the daily work.

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