Critical Essay on Employment Law Chart

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Employment Law regulates relationships between employers and employees. It is subject to frequent legislative and case law developments as employers are at the forefront of social change. It affords different rights and obligations depending on the employment status an individual holds. Therefore, it is vital to determine the different types of employment status in Wales and appreciate why the differences are significant. This report will examine the significance of determining whether an individual is a worker and analyze the extent to which recent cases and government policies have ensured Employment Law is satisfactory. This will be achieved by addressing the current distinction between employees and workers; the growth of the Gig Economy (and its implications; the recent developments in Employment Law; the potential for reform focusing on the 2017 Taylor Review and the Government’s responses to it; and suggestions of further reforms.

What is the difference between employees and workers?

Employees are individuals that work under a contract of employment (section 230(1) Employment Rights Act 1996). In contrast, workers are individuals ‘who work under a contract of employment or any other contract, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not that of a client or customer’. There is a legal distinction between contracts of service whereby individuals are subordinate and dependent on their employer and contracts for service whereby labor is provided by independent contractors (workers).

Currently, all employees are workers but not all workers are employees under ‘limb (b)’ where personal services are provided to third parties who are not customers or clients.

What are the complexities involved in determining one’s employment status?

Distinguishing between employees and workers is vital because each has different rights. Workers have fewer employment rights than employees, albeit the retention of basic protections such as the right to a national minimum wage. Employees have access to a range of employment rights, albeit some rights have qualifying periods. The table below demonstrates the distinction.

Whilst there are three categories used to determine access to employment rights, the legal framework is intricate. The definition of employment is inconsistent across statutes and related branches of law – equity law and social security legislation are prime examples. In whistleblowing legislation, ‘worker’ has an extended meaning. Clyde and Co v Bates van Winkelhof [2014] 3 All ER 225 illustrates this effect. It was confirmed members of a Limited Liability Partnership (‘LLP’) are ‘workers’. The appeal was allowed, holding unanimously the appellant was a worker (Employment Rights Act 1996). Lady Hale, (lead judgment), stated the ‘immediately striking thing’s how much hard work has to be doneâ¦to find that a member of an LLP is not a worker withinâ¦section 230(3)(b) of the 1996 Act.’ The appellant worked under a contract personally to perform work services ‘for’ the LLP, who was not her ‘client or customer’. ‘How then can it be said that she was not a ‘worker’ for this purpose?’ This decision extended the protections afforded to ‘workers’ to partners in an LLP. Consequentially, employers are now required to enroll partners in an LLP into pension-saving schemes.

Aside from the complications of defining work status differently for different purposes, knowing whether an individual has any employment status is a practical challenge. Various judicial decisions contain legal requirements for employment status, creating uncertainty about an individual’s access to employment rights. The leading case is Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497. This concerned a driver who was declared an independent contractor for a mixed concrete company. The issue was whether the driver was an employed person under a contract of service with the company for the National Insurance Act 1965. Mckenna J held a ‘contract of service’ exists provided:

There is a personal service in exchange for remuneration (neither an employee nor a worker has unfettered rights to substitute their work);
The employee agrees to be subject to a sufficient degree of control (making the other an employer); and
There is a mutuality of obligations where the employer provides the work, and the individual accepts and performs the work given.

Mckenna J defined control as the power of deciding what and how a task will be done, the means of doing it, and the time and place where it shall be done. The more freedom an individual has over when, where, and how they perform required services, the more likely it is they are ‘self-employed’. It was held the driver had sufficient freedom in the performance of his contractual obligations regarding the vehicle he used and his labor, therefore, he was self-employed.

Furthermore, Pimlico Plumbers v Smith 2018SC 29 was another Supreme Court (‘SC’) case that focused on whether a plumber holding contract stating he was self-employed was a worker. The Court upheld the decision that he was a worker. Mr. Smith worked for Pimlico for six years. During this time, there was a level of control – he wore a Pimlico uniform, drove a company-branded van, and his movements were monitored via GPS. When Smith parted with Pimlico, he brought a claim for unfair dismissal, discrimination, and that holiday pay was owed. The Employment Tribunal (‘ET’) held Smith was a worker, thus being afforded protection against discrimination and entitled to holiday pay. Pimlico appealed this decision, and the Court of Appeal was faced with the following questions:

Did Mr. Smith have an obligation to provide the work personally?
Was the work for himself or to provide a service to Pimlico as a client or customer or was he providing the service on behalf of Pimlico?

The Court of Appeal found no contrary evidence suggesting Smith could substitute another plumber to provide the service because there would have been difficulty contacting customers outside working hours. Pimlico exercised a high degree of control over Smith; the stringent restrictive covenants dealing with post-termination matters; the ET’s finding he was contractually obligated to work forty hours per week meant the Court of Appeal upheld the ET’s decision that he was a worker. An appeal to the SC meant they had to determine whether Mr. Smith was a limb (b) worker. There was a personal service requirement and Pimlico was not a customer or client. Moreover, the elements of tight operational and financial control; fierce conditions on when and how Mr. Smith received remuneration; restrictive covenants regarding post-termination matters; use of ‘wages’, ‘gross misconduct’, and ‘dismissal’ in the contract and handbook were considered ‘ill-considered lapses’ (incompetence) which supported the overall decision to uphold the findings of the appellant courts and ET. This decision emphasized the importance of the reality of working relationships between an employer and an individual regardless of what the contractual terms state.

These cases illustrate the inevitable consequence of the common law approach. Reliance on case law to develop the Employment Rights Act 1996 is contradictory and creates ambiguity. However, it enables flexibility because the Courts and ETs can deploy and develop principles in response to social change. This could be beneficial considering the recent growth of GE following the COVID-19 pandemic.

What is the GE and its implications?

There is no agreed definition, although it is described as a ‘labor market characterized by the prevalence of short-term contracts or freelance work, as opposed to permanent jobs’. Common jobs offered under the GE include couriers, ride-hailing drivers, video producers, taxi driving and many more. As of 2017, it was estimated that 1.3 million people (4% of all in employment) were employed in this type of capacity. This is expected to grow to 7.25 million people by the end of 2022 due to its benefits. It provides flexibility for both parties – individuals have the freedom to choose the ‘gigs’ they do in exchange for remuneration instead of regular work schedules and wages employees receive; employers can pay when the work becomes available instead of incurring unnecessary staff costs. The need to save on staff costs has become significant following the COVID-19 pandemic as lockdown has accelerated the shift to online shopping, reducing the demand for employees in-store. As demonstrated by the chart, total sales values have dropped to 6.5% below their pre-pandemic level in January 2021, suggesting a long-term shift toward online shopping. This is one example of a recent social change that impacted Employment Law.

This year the Assembly Economy Committee has launched an investigation into the economic insecurity in, including the GE. The aim is to understand the implications of the GE on the employment status, pay and conditions of GE workers. Neil Garratt – Chairman of the Economy Committee – has written to the Mayor of on 25 March 2022, explaining the implication. Whilst this structure provides flexibility, for some workers, it is a source of insecure work with irregular hours, few employment rights, and low pay. Many self-employed workers have been negatively impacted by the COVID-19 pandemic and because many did not qualify for government support, they have been forced to work in this capacity. Generally, workers in the GE are independent contractors, meaning there is no protection against unfair dismissal or rights to receive redundancy payments, national minimum wage, paid holiday or even sickness pay. This is concerning in the current climate following the financial impacts of the Pandemic, Brexit and the conflict between Russia and Ukraine which has increased the living costs significantly. The recent growth of the GE has created uncertainty regarding the position of ‘workers’ and increased litigation as claims are brought against businesses such as Uber and Deliveroo. The common argument is whether individuals are limb (b) workers or self-employed. Companies seek to classify individuals as self-employed because they serve their own clients, however, recent case law consistently found individuals working within the GE qualify for worker status.

In Uber BV v Aslam [2021]SC 5, Uber Drivers brought a claim to the ET against Uber in 2016, which was referred to the SC for one preliminary issue – are the Uber Drivers ‘workers’ or ‘independent contractors’? It was unanimously held they were ‘workers’. The SC affirmed to determine an individual’s employment status; different factors must be considered but the employment contract is not the starting point. This was established in Autoclenz Ltd v Belcher (2011)SC 41, where Aitkens LJ stated that: ‘contracts concerning work and services, where one party alleges that the written contract terms do not accurately reflect the true agreement of the partiesâ¦the question the court has to answer is: what contractual terms did the parties actually agree?’ The key consideration is the type of relationship Parliament intended to afford statutory employment protection. In Uber BV v Aslam [2021]SC 5, the Uber Drivers were subordinate and dependent on Uber – they could not substitute their services with another driver because the driver’s name and license plate appear once a consumer booked an Uber. This meant Uber held a level of control as the employer. The Drivers were held to be working when they are available. The SC made comparisons to firefighters or care workers who work during the times they are ‘on-call’ and drew the similarity to the Uber Drivers. On such grounds, the Drivers were held to be workers and the case has been referred back to the ET.

Overall, the definition of a ‘worker’ has been embellished by the GE cases discussed above. Claims brought against organisations such as Uber, Autoclenz and Pimlico Plumbers highlighted the ambiguity of whether individuals were workers or self-employed. Following the Court of Appeal’s decision in the Pimlico case , the firm’s founder confirmed, ‘we can’t get our heads around this word ‘worker’ and what it means’. Nonetheless, since the SC’s decision in Autoclenz , the Courts are willing to look beyond the employment contract and labels applied to each party to determine how the relationship works in practical terms. This was evident in the Uber case. The Law is likely to continue to evolve into modern employment practices due to the Court’s responses to the new working practices typified by the GE and suggestions for reform by the ‘TR’ reported on 11 July 2017.

What is the TR report?

The TRR was published in July 2017 and had one overriding ambition: to make all work economy fair and decent with realistic scope for development. It recommended various amendments to Employment Law, seeking to build on the distinctive strengths of existing labour markets and framework of regulation. The report highlighted the need to organise national frameworks around the commitment to good work for everyone with the recommendations focusing on three prevalent challenges:

Tackling exploitation;
Increasing clarity in the law and helping people know and exercise their rights; and
Aligning the incentives driving the nature of our labour market with our modern industrial strategy and national objectives.

The following points discuss two key Taylor recommendations on employment status and the responses to them.

Employment status tests should be contained within primary legislation.

Matthew Taylor recommended:

Government should replace minimalistic approaches to legislation with clearer outlines of tests for employment status, setting out key principles in primary legislation, and using secondary legislation and guidance to provide more detail.

Currently, the legal tests for employment status are contained in case law. This enables judges to develop the law as social change arises without constraining effects of statutes, but it creates ambiguity. Incorporating the tests into primary legislation will give Employment Lawyers ‘a clearer target to aim at. However, this comes with the danger of obscuring principles. Taylor recommended incorporating high-level principles in primary legislation to provide transparency whilst retaining flexibility for judges to depart from principles and modify them through secondary legislation. This proposal, prima facie, appears beneficial – it addresses the complexities of determining one’s employment status. Although, primary legislation is not more accessible to laypeople than case law and it will inevitably need interpretation as new case law develops. Many commentators have critiqued this recommendation because careful attention to detail is required to ensure the implementation is effective. Some have suggested this will be difficult to achieve because Taylor has not provided guidance on which principles should be incorporated.

Rename limb (b) workers to ‘dependent contractors’.

Matthew Taylor recommended:

Government should retain the current three-tier approach to employment status as it remains relevant but rename the category of ‘limb (b) workers’ as ‘dependent contractors’.

Taylor suggests the current definition of workers creates confusion and should be renamed: dependent contractors. This is considered controversial, and many commentators have criticised it as renaming an existing category without addressing the issue. Contrarily, others criticise the language, not the concept; ‘dependent contractor’ suggests a degree of subordination which is not a legal test used to determine employment status. Nonetheless, implementation would entitle GE workers to the other rights afforded to workers but it is yet to be implemented. Garratt’s letter addressed to the Mayor stated: The Queen’s 2019 Speech proposed to introduce an employment bill that builds on existing employment law with measures to protect low-paid workers in the GE. This has not been introduced and was not included in the 2021 Speech. Garratt recommended the Mayor lobby the Government and agree on a timetable to introduce the employment bill which should preserve Taylor’s recommendations and clarify workers’ employment status in the GE.

What were the Government’s responses?

The Government responded to the TR in February 2018, agreeing it should be easier for individuals and businesses to determine one’s employment status. Commitments to achieve boundaries between employment and self-employment meant the Government have accepted all except one Taylor recommendation and there has been consideration of legislative reforms. Below is a summary of the Government’s response to Taylor’s recommendations.

What are the recent developments following the Taylor recommendations?

The Government introduced the Good Work Plan and draft legislation in December 2018. Two key developments have followed since. Workers will be entitled to:

a written statement of particulars which will itemise basic terms and conditions , outline probationary periods and family leave ;
an itemised payslip; and
having their annual leave entitlement calculated using the 52-week reference period, (previously 12-week) subject to working variable hours for one year.

Furthermore, workers shall have the right to request predictable and stable contracts after 26 weeks of continuous service. However, the Government drafted rules are pending.

What reforms should be implemented going forward?

One aspect of the GE remains unaddressed – amendments to legislation providing standardised rights for GE workers. Most have rights to national minimum wages, but the rapid expansion of the GE meant new joiners experience poor working conditions andor rights because no standard regulation is in force. Whilst Taylor’s recommendations are being implemented, Employment Law must adapt and develop to provide regulations. Creating a national GE worker wage will address the ongoing concern of workers’ rights to national minimum wages. Furthermore, codification of the law is necessary. Agreeing on unified definitions of ’employment’ and employment status tests to be incorporated into primary legislation will address the complexities that have been examined throughout.

Overall, Employment Law regulates relationships between employers and employees. Whilst the common law approach enables fluidity within the legal system as the Courts and ETs can deploy and develop principles according to social change, reform of the law around ‘workers’ is necessary. Reliance on case law is contradictory and creates ambiguity as evidenced in inconsistent definitions and responses to the decision in Pimlico Plumbers v Smith 2018SC 29: ‘We can’t get our heads around this word âworker’ and what it means’. Moreover, Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497 highlighted the complexities in determining one’s employment status. Employment Law has functional systems for employees; however, society has developed, and the GE has grown into a common capacity of employment following Brexit and COVID-19. For this reason, Employment Law is not satisfactory for workers. Recent SC cases and Government policies implementing change demonstrate the ‘need to strike the right balance between security, flexibility and innovation’ whilst providing transparency, information, and advice about employment rights.

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