November 27, 2018

Employee, worker, or self-employed?

There are differences between whether a person is a worker, employee or self-employed which can have a significant impact on a business. The classification of a person’s employment status will determine whether they are entitled to Statutory Sick Pay (SSP), holiday entitlement or if they are eligible to bring a claim against the employer.

The Uber Case

In 2016 two drivers took Uber to the employment tribunal arguing that they exercised significant control over them and therefore they could not be defined as self-employed. Consequently, they would be entitled to receive the national minimum wage, amongst other employment protections and benefits.

The tribunal decision upheld the decision, and therefore Uber was not able to classify their drivers as self-employed. The two drivers stated that they were under pressure to work long hours and to accept jobs under Uber’s terms or risk facing repercussions. Uber proceeded to take the case to the Court of Appeal where the hearing commenced on 30 October 2018.

Uber maintained that drivers were self-employed because they used their own car, and see to their own expenses which gives them a desired element of flexibility. Therefore they were not entitled to the same benefits as a worker.

If Uber accept the ruling that their drivers are not self-employed, it will be necessary to make changes to the contracts of employment. However, this may cause issues as many drivers do not want to be classified as self-employed as this will impact the flexibility of being their own boss. 

Why does a person’s employment status matter?

There are three classifications of person in the workplace: an employee, a worker and someone who is self-employed. Each of these have different entitlements and levels of protection within a Company. 

1) An Employee
Employers and employees both have mutual obligations; the employer must provide work, and the employee has a duty to accept it. Employees have the highest level of legal protection which can include being able to claim for unfair dismissal, the entitlement to redundancy pay and statutory notice periods and the right to request flexible working from the employer.

2) A Worker
Despite a worker entering into a contract with a Company, they are not a full employee, and therefore they have fewer employment rights.

An example of a worker would be a person who has entered into a zero hours’ contract with a Company. This is because there is no obligation to give a worker hours each week or to pay them if work is not available, and therefore there is no obligation for the worker to accept the hours that have been offered.

Workers are still entitled to Statutory Sick Pay, holiday accrual and breaks within their working day, but they are not protected by employment law to bring an action for unfair or wrongful dismissal.

3) Self-employed
Those who are self-employed have far fewer rights as employment law only relates to employees. The flexibility of this classification means that there are no fixed hours, or guaranteed income and there is no obligation to give rest breaks throughout their working day.

A self-employed person is entitled to the protection of health and safety within the workplace, and the right not to be discriminated against.

When employing members of staff, it is essential to consider the actual relationship rather than just the written agreement. Having an employment contract that states a person is self-employed will not on its own be enough to classify the employment status.

To determine if a person is self-employed or not the following will be considered;

  • The level of control a Company has over that person;
  • Can the contractor send a substitute to complete the agreed work if they are unable to complete it;
  • Whether the relationship between the person and the Company lacks mutual obligations. 

An example of where a contract states that a person is self-employed but may in fact not be, is if the contract states that there are set hours and a restriction stating that they cannot work for another Company. This could be seen as a Company exerting significant control, and it may be that they are a worker rather than self-employed.

However, when a Company exerts significant control over someone who is self-employed, it may be argued that they could be classed as a worker because they lack freedom. Therefore, they will have additional rights in the workplace.

What does this mean for Employers?

An employer will need to be clear on the classification of the people that are contracted to the Company. Failure to grant each type of person their rights could expose the Company to claims, for example, backdated holiday pay for accrued entitlement.

Workers are:

  • Able to receive SSP for sickness related absence after the qualifying period;
  • Entitled to statutory annual leave;
  • Legally permitted to have rest breaks.

Self-Employed Persons:

  • Maintain flexibility within their work;
  • Are not being restricted to whether they could work for another Company;
  • Protected by health and safety procedures and discrimination legislation. 

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About the author 

James Rowland

James is the Commercial Director at Neathouse Partners and regularly writes articles surrounding issues in HR & Employment Law. Outside of the office, James is a keen Cricketer, playing in the Cheshire League for Nantwich CC. He also loves going to watch his football team, Crewe Alexandra. Feel free to connect with James on LinkedIn.