13th December 2023
Written by Qdos Contractor
A month on, we examine the key takeaways from this significant employment status case
Following a seven-year legal battle, Deliveroo last month won a landmark employment law case.
Brought against the company by the Independent Worker’s Union of Great Britain (IWGB), the judgement – issued by the Supreme Court – brings the longstanding case to its conclusion.
The ruling is also significant where employment status is concerned. It means that Deliveroo riders and drivers are recognised as self-employed individuals, rather than holding
worker status, adding further complexity to a subject that is already a source of confusion for many.
The decision was released on 21st November following a two-day hearing in April. While many will have had time to digest the news, almost a month on, some are still wondering what it means.
Let’s take a look…
About the case
In November 2016, the IWGB – which represented “a substantial number” of Deliveroo riders in London – formally requested that Deliveroo recognise the union for collective bargaining. The IWGB intended to negotiate for employment rights, as it considered the riders to be workers, rather than self-employed.
However, Deliveroo rejected the request. The IWGB appealed to the Central Arbitration Committee (CAC); the CAC found that the riders did not fit the legislative definition of a “worker”.
The IWGB appealed this, via judicial review, at the Court of Appeal, arguing that the riders might also qualify as “workers” under Article 11 of the European Convention of Human Rights. However, the Court ruled in Deliveroo’s favour.
But the IWGB appealed again, hoping that the Supreme Court would find these riders to be workers, rather than self-employed individuals. However, the judges found that “the riders were not in an employment relationship” with Deliveroo, and so they will continue to operate as self-employed individuals. Central to this finding was the fact that Deliveroo riders had several freedoms in how they completed their jobs.
For example, they could find a substitute to cover their deliveries, reject jobs and “undertake work for competitors”. The Court ruled that “these features are fundamentally inconsistent with any notion of an employment relationship”.
Of course, this isn’t the first time a gig platform has been challenged over worker status; Uber, Addison Lee, Veezu, and many others have faced challenges from gig workers about employment status.
In each case, the verdicts have varied, demonstrating that there is no one-size-fits-all approach to determining employment status.
Why is this case important for businesses?
Simply put, the Deliveroo case highlights the complexity of employment status and reinforces the importance of making sound employment status decisions from the outset.
Many businesses engage sole traders, but unlike the off-payroll reforms, the dangers of engaging one of these workers under the incorrect employment status aren’t as widely known.
This means that any confusion or uncertainty in reaching a decision can result in costly and reputationally damaging employment tribunals.
… and for sole traders?
Deliveroo successfully argued that the flexible nature of gig work is what attracts so many people to the company. For many self-employed individuals, this is true – flexibility and freedom are key.
But often, gig workers see things differently. Many want and need more security in the form of employment rights. That’s not to say it’s the same for all freelancers and contractors, the majority of whom want to work genuinely self-employed and completely independent from their clients.
Regardless, this case does highlight the importance of getting employment status decisions right from the outset – to help set expectations, meaning that everyone knows what they’re entitled to, or conversely, what won’t be available to them.
Does this ruling mean all gig workers should be self-employed?
No, not necessarily. In the
Uber case, for example, the ruling went the other way; Uber drivers were recognised as workers because of the specific circumstances in their case. This meant they were given access to the statutory rights and protections that ‘workers’ are entitled to, like holiday pay.
Given the judgements reached in different cases, there’s no set template for determining employment status. Each engagement needs to be assessed on its own merits.
What are the risks of getting employment status wrong for businesses?
Apart from the reputational concerns – who wants the headlines associated with significant legal action? – this case also illustrates how long, drawn-out, and costly these disputes can be. However, it didn’t demonstrate the severe tax penalties that can come with an incorrect employment status decision.
If a business were to incorrectly engage a sole trader in a self-employed capacity – when in reality their employment status reflected employment – then it would likely be liable for the missing employment taxes.
HMRC would pursue the business for this, the same way it does when organisations incorrectly administer the
off-payroll working rules.
How can businesses assess employment status?
Firstly, businesses can carry out employment status assessments. They must be fair and consistent, and they should be backed up with robust policies and processes.
Businesses can also use HMRC’s Check Employment Status for Tax (CEST) tool to support your assessment, but it’s worth pointing out that CEST is flawed.
These flaws include – but are most certainly not limited to – its failure to take case law into account all aspects relating to employment status or that it can’t reach a decision around 20% of the time.
You can find out more about the problems with CEST here.
Fortunately, businesses aren’t limited to CEST and can also engage a specialist to carry out trusted employment status assessments – giving you the confidence to continue engaging self-employed individuals compliantly.
