IWGB Response to A Framework for modern employment Report by BEIS & DWP Select Committees

Transcription

1 IWGB Response to A Framework for modern employment Report by BEIS & DWP Select Committees 17 November, 2017 Introduction 1. The Independent Workers Union of Great Britain (IWGB) represents, among others, workers in the so-called gig economy. In particular we represent same-day delivery couriers (e.g. City Sprint), food delivery couriers (e.g. Deliveroo), and private hire drivers (e.g. Uber). The IWGB has brought and won many employment tribunal claims against companies in the so-called gig economy, establishing that the people who work for these companies are (limb b) workers and as such entitled to employment rights. 2. Following on from the recommendations of the Taylor Review, the BEIS and DWP select committees have produced a report and draft bill making recommendations for how to protect workers in the so-called gig economy. Some of this report is extremely positive, some of it we believe will not make much difference, and some of it is concerning. This note is the IWGB response to the report. The structure of the note largely follows the structure of the report. Clarity in Primary Legislation 3. It is disappointing to note that this report falls victim to the same general error of law so often seen in the press and throughout the Taylor Review. The report has listed the three main employment statuses as employee, (limb b) worker, and self-employed. This is incorrect because limb b workers are a category of the self-employed. This is a very important point not only in that it is reflected in the tax position, but also because many of these workers strongly identify as self-employed, albeit as self-employed people who should have some employment rights. 4. The error is made despite the fact that there is absolute clarity of the current position, as set out in paras 24, 25, and 31 of the judgment of the Deputy President of the Supreme Court, Lady 1

2 Hale, in her judgment in one of the leading employment status cases before the Supreme Court: Clyde & Co LLP & Anor v Bates van Winklehof [2014] UKSC 32 1 : 24. First, the natural and ordinary meaning of employed by is employed under a contract of service. Our law draws a clear distinction between those who are so employed and those who are self-employed but enter into contracts to perform work or services for others. 25. Second, within the latter class, the law now draws a distinction between two different kinds of self-employed people. One kind are people who carry on a profession or a business undertaking on their own account and enter into contracts with clients or customers to provide work or services for them. The arbitrators in Hashwani v Jivraj (London Court of International Arbitration intervening) [2011] UKSC 40, [2011] 1 WLR 1872 were people of that kind. The other kind are self-employed people who provide their services as part of a profession or business undertaking carried on by some-one else. The general medical practitioner in Hospital Medical Group Ltd v Westwood [2012] EWCA Civ 1005; [2013] ICR 415, who also provided his services as a hair restoration surgeon to a company offering hair restoration services to the public, was a person of that kind and thus a worker within the meaning of section 230(3)(b) of the 1996 Act As already seen, employment law distinguishes between three types of people: those employed under a contract of employment; those self-employed people who are in business on their own account and undertake work for their clients or customers; and an intermediate class of workers who are selfemployed but do not fall within the second class. 5. The report s first recommendation regards clarity of employment status definitions: We recommend the Government legislates to introduce greater clarity on definitions of employment status. This legislation should emphasise the importance of control and supervision of workers by a company, rather than a narrow focus on substitution, in distinguishing between workers and the genuine self-employed

3 6. The first problem with this recommendation is that like the Taylor Review it reads as an endorsement of the proposition that a lack of clarity is the problem. We say the real problem is not a lack of clarity but a lack of enforcement of existing law (more on which below). 7. Placing less emphasis on the requirement to work personally would be welcome. Indeed the way the personal service requirement has been interpreted has often led employers in the so-called gig economy to focus on a purported right of substitution as their main line of defense, our case against Deliveroo being a prime example 2. Although in general companies that have tried to use bogus substitution clauses have been caught out for the same and lost their tribunal cases, the recent CAC decision in favour of Deliveroo has shown that in some circumstances it might be possible for these companies to game the system We are against shifting the focus of determining worker status away from the current multifactorial test and towards a focus on control. Control should undoubtedly be one of the issues looked at, but so should the question of whether the putative worker is integrated into the operations of the putative employer, whether the putative worker markets his/her services to the world in general or rather just to the putative employer, etc. The fundamental question that courts and tribunals should continue to ask when distinguishing between independent contractors who are in business on their own account and workers is: is the individual carrying out a business undertaking or profession on his/her own account, of which the other party is client or customer, or is he/she carrying out their work as part of someone else s business. This casts a wider net than a test which places greater emphasis on control. This can be seen in part in Lady Hale s judgment in Bates, in the context of a partner in a law firm claiming to be a worker under the Employment Rights Act 1996: 38. Maurice Kay LJ pointed out (at para 18) that neither the Cotswold integration test nor the Redcats dominant purpose test purported to lay down a test of general application. In his view they were wise not to lay down a more prescriptive approach which would gloss the words of the statute. Judge Peter Clark in the EAT had taken the view that Dr Westwood was a limb (b) worker because he had agreed to provide his services as a hair restoration surgeon exclusively to HMG, he did not offer that service to the world in general, and he was recruited by HMG to work as an integral part of its operations. That was the right approach. The fact that Dr Westwood was in business on his own account was not conclusive because the definition also required that the other party to 2 For example, see 3 It is important to note however that the CAC decision in the Deliveroo case is problematic to say the least and may not be the final word on the matter. 3

4 the contract was not his client or customer and HMG was neither. Maurice Kay LJ concluded, at para 19, by declining the suggestion that the Court might give some guidance as to a more uniform approach: I do not consider that there is a single key with which to unlock the words of the statute in every case. On the other hand, I agree with Langstaff J that his integration test will often be appropriate as it is here. For what it is worth, the Supreme Court refused permission to appeal in that case. 39. I agree with Maurice Kay LJ that there is not a single key to unlock the words of the statute in every case. There can be no substitute for applying the words of the statute to the facts of the individual case. There will be cases where that is not easy to do. But in my view they are not solved by adding some mystery ingredient of subordination 4 to the concept of employee and worker. The experienced employment judges who have considered this problem have all recognised that there is no magic test other than the words of the statute themselves. As Elias J recognised in Redcats, a small business may be genuinely an independent business but be completely dependent upon and subordinate to the demands of a key customer (the position of those small factories making goods exclusively for the St Michael brand in the past comes to mind). Equally, as Maurice Kay LJ recognised in Westwood, one may be a professional person with a high degree of autonomy as to how the work is performed and more than one string to one s bow, and still be so closely integrated into the other party s operation as to fall within the definition. As the case of the controlling shareholder in a company who is also employed as chief executive shows, one can effectively be one s own boss and still be a worker. While subordination may sometimes be an aid to distinguishing workers from other self-employed people, it is not a freestanding and universal characteristic of being a worker. 40. It is accepted that the appellant falls within the express words of section 230(3)(b). Judge Peter Clark held that she was a worker for essentially the same reasons that he held Dr Westwood to be a worker, that she could not market her services as a solicitor to anyone other than the LLP and was an integral part of their business. They were in no sense her client or customer. I agree. 9. The problem with too much emphasis on one individual factor is that the putative employer focuses all their energies on disguising the true nature of that factor, and other nuances of the working relationship between putative worker and putative employer are disregarded. Already, 4 These passages refer to subordination rather than control. We understand the term subordination, at least as an EU law concept, to be wider than that of control which makes our point all the more poignant. 4

5 gig economy employers go to great lengths to disguise or minimize the nature of control, e.g. insisting they do not determine the route that a courier takes. 10. In sum, removing any potential for companies to use substitution clauses to defeat worker status claims is a good idea, but the rest of the matter should remain untouched. 11. The second recommendation regards burden of proof for putative workers: We recommend the Government legislate to implement a worker by default model, as set out in Part 2 of our draft Bill. This would apply to companies who have a self-employed workforce above a certain size defined in secondary legislation. 12. On the face of it this recommendation sounds great, but the proof is in the pudding. The draft legislation referred to states: Where in any complaint made to an employment tribunal any question arises as to whether an individual is a worker, it shall be presumed that the individual is a worker unless the contrary is established. As we read it therefore, it seems to simply say that when a tribunal claim is made over worker status that the burden of proof will be on the company to show the claimant is not a worker. This seems to be the same as Taylor s recommendation from Chapter 8 of his report: The burden of proof in employment tribunal hearings where status is in dispute should be reversed so that the employer has to prove that the individual is not entitled to the relevant employment rights, not the other way round subject to certain safeguards to discourage vexatious claims. 13. Whilst this one may sound good to a lay audience, in practice it would not achieve much. Employment status cases rarely turn on the burden of proof. Especially in cases in the so-called gig economy, they are usually a dispute as to whether the putative worker is truly in business on his/her own account with the other party as client or customer, or whether they are carrying out their work as part of the gig economy company s business. The written contract will of course say the individual is truly independent and in business on their own account, the individual will say the written contract is bogus, the Tribunal will engage in an Autoclenz investigation of what the true obligations are, find the relevant facts, and apply the law. The facts will often be disputed but once found the judge will apply the law without much consideration as to who has to prove what. The facts either constitute a working relationship which falls within the definition 5

6 of a worker or they do not. The same exercise would need to be undertaken no matter with whom the burden of proof lay. 14. The third recommendation regards pay for non-contractual hours: We recommend that the Government work with the Low Pay Commission to pilot, for workers who work non-contracted hours, a pay premium on the National Minimum Wage and National Living Wage. The Low Pay Commission should be responsible for identifying suitable companies to be included in this pilot, based on workforce size and turnover. 15. This one has the potential to be an improvement, though the devil will be in the detail. In the case of employees- as opposed to workers- we believe 0 hours contracts should be banned due to the massive power imbalances between employee and employer which all too often lead to exploitation. However, in the absence of a ban a higher minimum wage would be better than nothing. Higher minimum wage for limb b workers would also be welcome. 16. The fourth recommendation regards continuity of service for accrual of employment rights: We recommend that the Government extend the time allowance for a break in service while still accruing employment rights for continuous service from one week to one month. 17. This would be a slight improvement though probably not a game changer. In any case, impact on the so-called gig economy would be minimal: it is rarely ever asserted that these people are employees who need to accumulate length of service in order to claim unfair dismissal (as opposed to workers or micro-entrepreneurs). 18. The fourth recommendation attempts to make the employment tribunal system more effective: We recommend that the Government creates an obligation on employment tribunals to consider the increased use of higher, punitive fines and costs orders if an employer has already lost a similar case. We further recommend that the Government takes steps to enable greater use of class actions in disputes over wages, status and working time. 19. To the extent that this recommendation means tribunals using higher and more frequent punitive fines than they are currently enabled to do, then this is definitely welcome. One of the biggest problems with employment rights in the so-called gig economy is the total impunity with which companies have been allowed to act and the minimal financial consequences for them when they are found to have behaved unlawfully. Punitive fines should, however, not be restricted to companies which have already lost a similar case. 6

7 A large punitive fine of say 20,000 for every individual limb b worker who a company deprives of employment rights in the first instance would lead to companies thinking much more carefully about who they choose to misclassify. The fines should be larger and effectively hit the bottom line more than the associated employment costs of limb b workers otherwise the cost-benefit analysis of bogus employment status classification will fall down on the side of depriving workers of rights. 20. With regard to the second half of the proposal, facilitating the ability of judgments to be read across to a wider group of workers, and minimizing the need for more and more workers to take out litigation, is definitely a welcome move. 21. The fifth recommendation is fantastic; it proposes killing the Taylor recommendation that should have never been born: We recommend the Government rules out introducing any legislation that would undermine the National Minimum Wage/National Living Wage. This refers to Taylor s proposal that as long as gig economy companies can demonstrate that the average worker working averagely hard clears 120% of minimum wage they would not be liable to ensure that any individual worker actually earns the minimum wage. Hardly has such a bad idea been presented with such self-congratulatory praise by its author for its supposed brilliance. The proposal would be a massive step back and rip minimum wage protection out of the hands of many who most need it. The report is right to recommend it never see the light of day. Improvements in Secondary Legislation 22. The sixth recommendation is based on the one Taylor Review recommendation that we could agree with in its entirety, and with which we still agree today: We recommend that the Government extends the duty of employers to provide a clearly written statement of employment conditions to cover workers, as well as employees. We further recommend that this right apply from day one of a new job, with the statement to be provided within seven days. This change should be made by secondary legislation under s23 (4)-(5) of the Employment Relations Act

8 23. The seventh recommendation will do no harm but will certainly not achieve its aim of getting workers voices effectively heard : We recommend that people on worker contracts, as well as employees, be counted towards the 50 workers needed before a company is covered by the ICE regulations. We also recommend the threshold for implementation of the regulations be reduced from 10% to 2% of the workforce. This would require amending secondary legislation under s42 of the Employment Relations Act We are one of the few trade unions that has actually used the Information and Consultation of Employees (ICE) Regulations 2004 as a deliberate and central part of our collective organizing strategy. This was not by choice but rather because a loophole in the collective bargaining laws prevented us from obtaining statutory trade union recognition in a couple workplaces 5. And from this experience we can say just how useless the ICE Regs have been. In addition to the percentage threshold required to trigger the Regs which the Review has identified, the Regs suffer from the following problems: a. When given the choice by the EU to apply the Regs to undertakings or establishments, the UK chose undertakings. This means that rather than having the ability to be based at the workplace level, as the collective bargaining laws allow for, the ICE Regs occur at the company-wide level. Even if one lowered the number of workers required to trigger an ICE request, there are other number thresholds which come up in the Regs which would make company-wide organizing challenging without significant reform. For example, once negotiating reps have been elected, if an ICE agreement is not approved by all of them then the deal is put to a ballot of the entire workforce 6. For a group of workers to try and campaign in favour or against an ICE agreement when the voting population is in the thousands and spread across the entire country, is a tall order. b. The ICE Regs do not naturally facilitate workers being represented by trade union officials in negotiations. Having a seat at the table with the bosses is good, but often people want the backing of an official whose job it is to know the relevant employment law and who has experience negotiating and advocating on workers behalf. 5 The loophole is paragraph 35 of Schedule A1 to the Trade Union and Labour Relations (Consolidation) Act 1992 which blocks a trade union from obtaining statutory recognition if the employer already recognizes another trade union, regardless of membership levels. In the case where the recognized union has a certificate of independence and was recognized voluntarily there does not exist a de-recognition procedure by which a worker can compel derecognition of that union. We are currently challenging this as a breach of Article 11 of the European Convention of Human Rights. 6 See Regulation 16(4) 8

9 c. The ICE Regs take forever to implement, a problem made all the more acute by the high turnover which characterizes work in the so-called gig economy. As an example, we made a valid employee request under ICE at the University of London in December, 2014 and over two and a half years later the first ICE consultation meeting has still not taken place. Granted this particular process was made slower by the UoL stitching up the elections (later found to be unlawful in tribunal), but the main point remains: each step of the Regs can take a very long time. d. The Regs do not mandate collective bargaining. If a group of workers overcomes all of the considerable hurdles set out in this legislation and obtains an ICE agreement with an employer, the employer at a bare minimum needs to inform them and consult them on key issues 7. However there is no link between this consultation and any action by workers if views are not taken on board. In our experience, employers rarely take on suggestions by workers which weaken their bottom line without the threat of action. 25. Making the ICE Regs more accessible, and applying them to workers and not just employees, will not change much. And they are no substitute for better collective bargaining arrangements. There is no doubt that the current workplace collective bargaining regime could be improved, in particular with the so-called gig economy in mind. By way of example, in our bid for trade union recognition on behalf of Deliveroo riders in Camden and Kentish Town: a. Deliveroo was not straight about the number of riders in our proposed bargaining unit - it came out in cross-examination in the Central Arbitration Committee (CAC) that Deliveroo s numbers had included riders who might not have performed a single delivery in the previous six months. b. We were not given access to the workers- we had to stand outside waiting around to speak to people when they were in between jobs and just guessing when they were most likely to show up- rather than being facilitated in communicating with riders. c. Deliveroo ran a campaign of misinformation- calling riders in Camden and Kentish Town and threatening them with taking away their flexibility, forcing them to wear uniforms, and other unattractive propositions if the IWGB won its case (ironically much along the lines of the Taylor Review s explanation for its minimum wage proposal). Deliveroo also told riders they would lose their self-employed status if we won our case (which was not true as limb b workers are a sub-category of self-employed). d. Deliveroo took advantage of the fact that the CAC needs to look at the situation at the time of the hearing rather than at the time the application was submitted, and issued entirely new contracts to riders, with substitution clauses they had no intention of allowing to be implemented on mass-scale (which they successfully used to game the system and defeat the claim in the first instance) just weeks before the hearing. 7 See Regulation 20 9

10 e. Deliveroo claimed to have eliminated opps codes, the method by which riders are assigned to different zone, e.g. Camden and Kentish Town, just weeks before our hearing as well, in an obvious attempt to defeat our claim (by saying our bargaining unit was no longer viable). f. Deliveroo rocked up to the hearing with no fewer than eight lawyers. The above provides a flavour of what we are up against. If one wants to focus on giving workers more voice, it would be more effective to think about how to make it easier for unions to gain access to workers and enter into collective bargaining agreements, and how to make it harder for companies to game the system. Effective Enforcement 26. Given that the fundamental problem of employment rights in the so-called gig economy is a lack of enforcement of existing law, it is extremely refreshing to see that in stark contrast to the Taylor Review s half-page mention of government enforcement, the select committees have made it one of their principle areas of focus. 27. The eighth recommendation is a case in point: We recommend that the Government brings forward stronger and more deterrent penalties, including punitive fines, for repeat or serious breaches of employment legislation, and expand naming and shaming to all non-accidental breaches of employment rights by businesses and supply chains. 28. Increasing and improving the effectiveness of penalties is spot on and would go a long way to solving the problem. We look forward to seeing more detail on how this will be done. 29. Whilst we are skeptical about how effective naming and shaming will be, it would certainly do no harm. 30. Although unclear from the above recommendation how far-reaching it will be, we would want to see the areas of employment law which, in theory, are enforced by government, expanded far beyond the currently narrow remit. The Government needs to be given a mandate to enforce employment status and the associated rights. Minimum wage enforcement alone, even if made more effective than it has previously been, will not be enough to prevent companies from bogusly classing their workers as people in business on their own account in order to deprive them of rights. 10

11 31. The final recommendation would also be an improvement: We recommend that the Government provides the Director of Labour Market Enforcement and the main enforcement agencies with the resources necessary to undertake both reactive and proactive roles, including deep-dives into industrial sectors and geographic areas, and supply-chain wide enforcement actions. Where extra resources are needed, they should be funded through higher fines on noncompliant organisations. We also recommend that the Government sets out, in response to this report, how it intends the powers and resources of the Director of Labour Market Enforcement will develop over the next five years. 32. This again would be a big improvement on the current situation. Although to be truly effective the range of rights that could be enforced would need to be expanded (as above). If the Government had the resources, motivation, and power to take a deepdive into the so-called gig economy, when they come up for air the problem may be half-way sorted. 33. Allowing enforcement actions against lead firms for labour abuses against other firms further down the supply chain would definitely be a welcome improvement, though one that is difficult to imagine without further legislation. Conclusion 34. This report gives a welcome focus to the issue of government enforcement of employment law. The recommendations in that regard would definitely be a step forward though are not enough to solve the problem. 35. This report is right to recommend killing the Taylor Review s minimum wage proposal. 36. The report makes some other recommendations which could be helpful, e.g. higher minimum wage for non-guaranteed hours and getting rid of the personal service requirement for limb b worker status. 37. The recommendation to have worker status tests focus on control as the main ingredient is of grave concern and should be dropped immediately. 38. The rest of the recommendations are unlikely to lead to a major improvement in the lot of workers in the so-called gig economy. 11

12 39. We are disappointed to see that the report does not call for the extension of more employee rights- in particular unfair dismissal and statutory sick pay- to limb b workers. 12