Beware of unintended employment consequences

Events in the UK relating to Uber and Deliveroo could have profound implications for Irish employers and current practices with companies unwittingly acquiring new employees as a result.

The practice of hiring self-employed contractors for short-term and sometimes quite long-term engagements is an established norm for companies which require flexibility in their operations. However, companies in Ireland could now find that these so-called independent contractors might actually be deemed to be employees so that the option engaging contractors may be closed to them. This may be as a result of events in the UK which could end up with many of contractors acquiring employment rights. The consequences of this could be far reaching but certainly employers will have to tread carefully before hiring what they previously regarded as independent parties with quite limited legal rights who could in fact be employees who have extensive legal recourse available to them.

The GMB union in Great Britain is fighting a potentially landmark Employment Tribunal case against the Uber taxi ride-sharing organisation in the UK. Uber basically contends that its’ drivers are self-employed individuals or “partners” with no employment rights whatsoever and that it is simply a technology company that does not provide a transport service rather it just connects passengers with drivers. The GMB contests this claiming that the drivers do not fit within the definition of a self-employed person as their drivers are penalised for not responding to customer alerts, and are not allowed to pick and choose the jobs they want to do as the destination of the hires are not revealed until the job has been accepted by the driver.

That case continues. More recently, drivers with the Deliveroo food and drinks delivery service went on “strike” in London when a new payment structure was imposed upon them. Despite their seeming self-employed status and doubtful legal grounds for striking under UK law, the drivers crowd-funded £10,000 to support their action and quickly won the support of a broad cross-section of society for their claim for treatment as employees.

Interestingly, the Tory government also sided with them and told the company it should pay the drivers the minimum wage. In a face-saving move the company offered drivers the option of choosing the new payment structure or the minimum wage.

It is probable that the UK government’s response was informed by a desire not to have another case arriving in the courts which could potentially extend employment rights to hundreds of thousands if not millions of workers in the rapidly expanding “gig economy”.

The gig economy is an environment in which temporary positions are common and organisations contract with workers for short-term engagements – it has come about as a result of the rip-roaring success of technology companies such as TaskRabbit, Deliveroo and AirBNB and is rapidly re-shaping the landscape for businesses.

Employment law has not yet caught up with this fluid, evolving economy and the need for clarity in this area has been apparent for some time. The case against Uber has employment lawyers waiting eagerly on an outcome that could finally clear up the murky definition of the term “worker” in the UK and potentially set a precedent for future employment tribunal cases across large sectors of industry in Ireland.

The victory by the Deliveroo drivers may also embolden other groups to seek employee status.

Legal Implications for Businesses in Ireland

It is possible that the outcome of the Uber case, whenever it is concluded, could have some influence on future determinations by authorities including the Department of Social Protection, the Revenue Commissioners and Irish employment tribunals when determining whether or not a worker is an employee or a contractor.

In the absence of a specific test for establishing whether an individual is an employee in Irish legislation, the courts and tribunals have developed criteria over the years to try to determine employment status which attempts to consider the reality of the relationship between the parties.

Decisions are made on a case-by-case basis. A recent decision in Ireland saw workers defined as ‘employees’ on the basis that they were provided tools and clothing for the task they are undertaking, and importantly, that the individuals were not in control of the hours they worked or the type of work they performed.
The Irish legal interpretation of what constitutes an employee is close to that of the UK, in which case the UK Uber case could be persuasive in future Irish decisions and may have huge implications in not only the gig economy, but across the board, particularly in healthcare and the care services industries where much of the work is carried out by individuals who are quite often independent contractors.

If GMB win their case, there could be an immediate impact on Irish technology companies looking to take advantage of the gig economy across Europe. Business models may have to be developed to comply with employment law changes in the UK should they want to roll out their business in the UK territory.

There could also be profound impacts for Irish based multinationals, the construction sector, and many other companies which rely on self-employed contractors. A change to the employment status of contactors could fatally undermine certain business models.

With the recent increase in self-employment in this country and the expansion in the gig economy, the requirement for more clarity as to what constitutes self-employed versus employed is overdue. The outcome of the Uber case could help to trigger much needed development in this area of law.

Anne O'Connell is a partner with Sherwin O’Riordan in the Employment Law Department and has over 15 years of Employment Law experience.

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