04 August 2017 #Employment
The Taylor Review: proposals and potential impact on businesses and those that work for them
Matthew Taylor’s report into modern working practices has finally been released. It seeks to address the current “one-sided flexibility” in an employer’s favour, specifically as regards the “gig economy.” It makes a number of suggestions across many areas of employment law, many of which could have a substantial impact both financially for firms, as well as the wider employer-worker relationship.
Employment Status - Dependent Contractors
In current employment law, individuals in work fall into one of three categories: employee, worker or ‘genuinely self-employed’. The picture is somewhat complex because employees are one subset of the worker category.
The report advocates replacing this with three distinct categories: employee, dependent contractor and ‘genuinely self-employed’.
It recommends putting the tests for employment status into legislation: possibly the current criteria found in case law if the government is satisfied with these (i.e. personal service, control, mutuality of obligation and whether the individual is carrying on a business) or, if not, the option of creating entirely new ones.
The new “dependent contractor” status would focus more on control and less on the requirement to perform work personally (required to be an employee). Taylor believes this would result in a clearer distinction between employees and dependent contractors, and be more reflective of modern working practices and in particular, the “gig economy.”
It is proposed that dependent contractors would also have enhanced rights greater than those currently enjoyed by workers, including:
all dependent contractors would be entitled to holiday pay, which would be paid via a 12% uplift. In effect, this will allow rolled up holiday pay for dependent contractors.
In addition, where there are questions surrounding employee status, it is proposed that an individual would have the right to bring a claim to the ET to determine employment status as a preliminary issue. The burden will be on the employer to show a prospective claimant is not an employee or dependent contractor.
In all of the recent cases, including the Addison Lee case this week, where ETs have found that delivery drivers, minicab drivers or cycle couriers are workers despite having written terms stating that they are self-employed, the ET decision only applies to the worker(s) who brought the claim, rather than all individuals working on the same terms for the same company. It is proposed that the ET would have new powers to impose punitive penalties to if a business did not apply an ET ruling on status to similar workers
The review also recommends an online tool which would enable individuals and employees to determine employment status by answering a series of questions.
It also suggests giving HMRC responsibility to enforce National Minimum Wage, Sick Pay and Holiday Pay for those on low pay only (rather than going to an ET).
Though these changes would introduce greater transparency and clarity for workers, the changes to sick pay and holiday pay would be an increased cost for businesses found to be engaging dependent contractors. The way in which each relationship would be specifically defined in legislation will also be difficult for government, and even more so if entirely new criteria are designed. There would also be a significant learning curve for many organisations as they adapt to the new tests.
Zero-Hours Contracts and Casual Work
The report did not advocate an outright ban on zero-hours contracts, suggesting they can be a useful tool for students and other individuals who want a more flexible working arrangement. However, it suggested that after 12 months anyone engaged on a zero-hours contract should have the right to request fixed hours. This would be based on an average of weekly working hours over the previous 12 months. Larger companies will have to publish information about how many requests they receive and subsequently grant.
Also, where hours are not guaranteed, Taylor recommends the government consider increasing the National Minimum Wage. This would be to reflect the flexibility enjoyed by employers using these methods and correct an imbalance in the employer/worker relationship – i.e. being able to call in a worker to pick up a shift at short notice or cancel a shift due to lack of demand.
Regarding casual workers, it proposes extending the maximum gap between assignments permissible in order to maintain continuity of employment from one week to one month, making it easier for casual workers to qualify for employment rights.
The review also suggested agency workers should have the right to request a direct contract with the end-user after 12 months on an assignment. It recommends abolishing the “Swedish derogation” from the Agency Workers Regulations. Currently this allows an agency worker whose terms and conditions allow for pay between assignments to be paid less than a permanent member of staff doing the same job after 12 weeks.
As with zero-hours contracts, larger firms that engage agency staff would have to publish information regarding the number of requests they grant and receive by workers to be directly engaged.
Gig Economy and reform to the National Minimum Wage
Besides the changes suggested to employment status, the report makes specific suggestions as regards platforms based upon “output work,” such as Uber and Deliveroo. Taylor believes firms should be allowed to compensate workers based upon output, (i.e. number of jobs done) with a number of caveats.
The platform will have to demonstrate, through data, that “an average individual, working averagely hard, successfully clears the National Minimum Wage with a 20% margin of error.” However, if an individual works during a period of low demand, the National Minimum Wage will not apply to that period, although Taylor suggests government require these firms giving workers “notice” at times when this would apply.
Reforms such as these will be particularly difficult for government to implement for a variety of reasons – such as examination of vast amounts of data to prevent abuse.
What happens next in employment law
The Prime Minister has committed to review the proposals, and the government will publish a response later in the year. She also acknowledged that due to the lack of a Conservative majority in Parliament there will be a need for cross-party engagement to bring about any changes. Given the other legislative challenges faced by the government, such as Brexit, and the lack of enthusiasm of both the Labour Party and the trade unions for the report’s findings, it is possible there will be no massive changes in the near future. In addition, past history of similar reviews would indicate the government is unlikely to respond with superficial rather than wholesale change.
Since the Taylor report was released, Employment Tribunals fees have been found by the Supreme Court to be unlawful. So, one possibility is that the government will seek to rely on the cumulative effect of individuals establishing their rights through ET claims as the appropriate method for ensuring working people are not subject to exploitation. In our view, this is more likely than the government taking the more hands-on approach to the employment relationship advocated by Taylor.