Navigating the Gig Economy: Two Similar Cases, Two Different Rulings.

What were the differences, and what are the implications for the future?

Over the recent years, there has been significant growth in people working as freelancers/self-employed on behalf of on-demand service companies in what has become known as the ‘gig’ economy. These firms provide on-demand services, whether it be food delivery in the case of Deliveroo or private car hire in the case of Uber. The people who work for these companies enter into an agreement with the platform provider and confirm that they will provide the service that that company offers. In the case of Uber, a customer, through the Uber app, orders a taxi from point A to point B. The platform connects to a driver who is active on the app, and they then provide the service on behalf of Uber.

What makes companies like Uber and Deliveroo different from traditional employers?

The key characteristic is that the firms in the ‘gig economy’ and their respective platforms simply act as an intermediary between a client and a ‘freelance’ worker who delivers the service.  Deliveroo doesn’t own any restaurants or make any food and only organise the delivery of items from their partners to their partners’ customer.

What are the ‘workers’ asking for in the case of Deliveroo and Uber?

Both groups are asking to be classified as ‘workers,’ which would, in turn, grant them greater rights and protections under UK law. Worker status would entitle Deliveroo’s riders the right to receive holiday pay, the national wage, and the ability to form a union to collectively bargain with their ‘employer.’

What were the rulings?

In Uber’s case, on 19th February 2021, the court ruled in favour of the drivers deeming that they should be classed as workers. Consequently, many thought this would be a landmark case for employment rights in the gig economy. However, on 24th June 2021, the English Court of Appeal ruled in favour of Deliveroo and agreed that the riders are self-employed.

What are the key characteristics of the two cases?

On the face of it, both companies deliver their services in a very similar way. Both firms require strict homogenised ways of providing their services. For Uber, there are heavy restrictions on the type of vehicle used. Deliveroo has strict uniform requirements for their ‘riders.’ Both companies restrict the amount of interaction between the client and the ‘freelancer.’ There is no way for a user of Deliveroo or Uber to form a relationship with the person who delivers their service. The fees received by the driver or the rider are both directly controlled by the employer. Also, a fundamental characteristic is that the people who work for these companies can’t contest what is written in their contracts. They cannot contest the individual clauses or what is stipulated in them. These similar characteristics would seem enough for the casual onlooker to say that the cases are, in fact, incredibly similar and should, as a result, have come to similar, if not the same, conclusions.

The fault in the case of the Independent Workers Union of Great Brittan (IWGB) – who were fighting on behalf of the Deliveroo riders – was the issue of substitution. Unlike Uber drivers, Deliveroo riders are not obliged to provide their services personally; they can substitute their delivery to someone else.  In essence, a right of substitution refers to the contractor’s right to send a replacement if they cannot carry out their work on a contract. Because a contractor can send a similarly skilled person in their place, it can be argued that they are not providing a ‘personal service’ and, as a result, are less likely to be classed as an employee or worker.

Section 230 (3) of the Employment Rights Act 1996 illustrates this point. It says:

“(3) In this Act, “worker” (except in the phrases “shop worker” and “betting worker”) means an individual who has entered into or works under (or, where the employment has ceased, worked under)—

(a)a contract of employment, or

(b)any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual.” (our emphasis)

Those working within the field of employment law refer to those falling within Section 230(3) as “limb (b) workers” – an essential requirement is that “the individual undertakes to do or perform personally any work or services …”. Deliveroo riders have the right of substitution in their contracts and with comparison to this definition of “worker” we can see a clear contradiction arising. In the appeal, the IWGB tried to convince the court that although the right to substitute appears in the contract and can be done in practice, it doesn’t “make good business sense” and is very impractical for a rider. Their position was that substituting is impractical for riders and is certainly not a viable money-making decision. As a result, riders do not, in reality, exercise their right of substitution. For the court, however, the fact is that the riders have a right to engage a substitute as this is stated in their contracts, and they can genuinely do it in practice. As a result, the appeal failed.

How will these two rulings affect future cases?

In all likelihood, this will not be the last case involving ‘workers’ in the ‘gig’ economy. When looking at what truly defines someone as self-employed, a key aspect is the enforceability of the contract. The debate in the Deliveroo appeal was about the difference between what rights exist in writing and are theoretically capable of being exercised in practice compared to the true reality and practicalities of Deliveroo riders’ right to engage a substitute. IWGB may need to go further in any future litigation, possibly demonstrating by using statistics how effective the substitution clause is. Watch this space!

Get in touch

Should you have any questions on anything covered in this article or employment matters generally, please get in touch with Dawn Robertson at dawn.robertson@rooneynimmo.co.uk or on + 1 44 (0)131 220 9579.

 

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This article is one of a series intended to de-mystify common legal issues for the non-lawyer and entrepreneur audience – they are designed to foster discussion and is by no means exhaustive. These materials are for informational purposes only. Nothing herein is intended nor should be regarded as legal advice. The distribution of this article to any person does not establish an attorney-client relationship with our firm. Rooney Nimmo assumes no liability in connection with the use of this publication. This bulletin is considered attorney advertising under the applicable rules of New York state. Rooney Nimmo UK is regulated by the Law Society of Scotland and Rooney Nimmo US by the New York rules of professional conduct. All attorneys and solicitors listed in this firm stipulate their jurisdictional limitations. Rooney Nimmo in the USA is a law firm registered as a New York State professional corporation.

 

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