Worker or independent contractor in the modern economy?

Tue 16th May 2017

The lines between “employee”, “worker” and “independent contractor” have become blurred, particularly over the last year following a number of key cases in this area and the emergence of the gig-economy. The recent cases of interest are Autoclenz Ltd v Belcher [2011] UKSC 41, Windle v Secretary of State for Justice [2016] EWCA Civ 459, Aslam & ors v Uber BV & ors ET2202551/2015, Dewhurst v CitySprint UK Ltd ET2202512/2016 and Pimlico Plumbers Ltd & anor v Smith [2017] EWCA Civ 51.

This has made it difficult to advise clients whether a particular individual might be categorised as a worker (with the benefits of worker status) or an independent contractor. The starting point is the statutory definition of “worker” which many argue is no longer fit for purpose when applied to the gig-economy.

A worker is defined in regulation 2 (1) of the Working Time Regulations 1998 as someone who works under a contract of employment or other arrangement whereby the individual undertakes to do or perform personally any work or services for another party to the contract, provided they are not a client or customer of the individual’s profession or business.

In order to be categorised as a worker pursuant to the statutory definition an individual must satisfy two criteria:

  1. Personal Service;
  2. No business arrangement;

In terms of personal service the individual must be under an obligation to perform the work themselves. The Court of Appeal in Pimlico Plumbers has recently provided guidance on what this means, namely:

  1. an unfettered right to substitute another person to do the work or perform the services is inconsistent with an undertaking to do so personally;
  2. a conditional right to substitute another person may or may not be inconsistent with personal performance depending on the conditionality. It will depend on the extent to which the right of substitution is occasional or limited.

In terms of a business arrangement the individual must not be providing services to a customer or client of their own independent business or undertaking. A commitment to work a minimum number of hours each week and/or a restriction on working for others are relevant factors together with the individual’s tax or accounting arrangements. There must not be an imbalance relationship so that the individual does not have the power to bargain on an equal footing or the right to reject work that is offered once it has started, without being disadvantaged.

In the Uber, CitySprint and Pimlico Plumbers cases the worker did not receive payment directly from the customer but from the business that supplied their services.

The question of worker status will always be a very fact-specific assessment, but one has to question whether a narrower statutory definition of “worker” is now needed. On 26 October 2016 the inquiry, “The Future World of Work and Rights of Workers” was launched and there have been a large number of submissions from interested parties on a broad range of topics, including whether the term “worker” was defined sufficiently clearly in law at present. The vast majority of the responses do not believe it is sufficiently defined and it is highly likely that a change to the definition is on the way.


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