The Gig Economy – Can Employers Avoid Hiring Employees?
Read Time: 9 mins
Written by Michelle McDonagh
What will I learn about the Gig Economy in this article?
- Increases in the use of zero-hour contracts/low minimum hour contracts.
- The Employment (Miscellaneous Provisions) Act 2018
- Legal differences in contracts of employment for employees and contractors
- Revenue Commissioners Criteria/Guide for Employers
- Court tests to determine employment status
- High Profile International Employment Status Cases
- Two Factors Which Help Determine Employment Status In Ireland
Increases in the use of zero-hour contracts/low minimum hour contracts.
The lines are becoming more blurred each year between traditional ways of working and more flexible arrangements in response to commercial activities and the desire of people for more flexibility in how they manage a work/life balance. In Ireland, companies had moved towards giving employees less security of employment with an increase in the use of zero-hour contracts or low minimum hour contracts.
The Employment (Miscellaneous Provisions) Act 2018
The government responded to this trend by seeking to improve the security and predictability of working hours for an employee on insecure contracts who work variable hours with the introduction on the 4th March 2019 of the Employment (Miscellaneous Provisions) Act 2018. This sets the tone for how the government expects employers to behave when balancing the competing priorities of commercial realities and employee interests.
Legal differences in contracts of employment for employees and contractors
When contracting for these arrangements there is a legal difference in contracts of employment, where one is known as a contract of service and the other a contract for service. A contract of employment applies to an employee-employer relationship. A contract for service applies in the case of an independent or self-employed contractor.
Employees have contracts of service
Contractors have a contract for service
A worker’s employment status is not a matter of choice. It depends on the terms and conditions of the job. When looking at the criteria, you must consider the working conditions and employment as a whole. The main question will always be whether they work ‘as a person in business on their own account’. This will help decide if the person is a free agent with economic independence from an employer.
Revenue Commissioners Criteria/Guide for Employers
The Revenue has outlined key criteria to guide employers in the consideration of the appropriate status as laid out below and encourage employers to contact them if they are unclear. Read the Revenue’s Criteria here.
The Courts have developed tests to determine employment status
There are no definitive rules in statute, or in contract law which can be relied upon to determine employment status. However, it is clear from case law that the courts will look past the label the parties themselves have given the contract and will consider all factors relating to the working relationship to ascertain its true nature. In this regard, Nolan J. comments in UK High Court decision of Hall v Lorimer  S.T.C are useful: “the object of the exercise is to paint a picture from the accumulation of detail. The overall effect can only be appreciated… by viewing it from a distance, and making an informed, considered, qualitative appreciation of the whole.”
A number of tests have evolved through case law which can be used to determine the true status of the relationship and are still the most influential factors in determining whether or not a person is an employee. These tests can be broadly summarised as follows:
- Control test – Historically, the extent and degree of control, exercised by one party over the other in the performance of work was regarded as decisive. This test goes back to the old master/servant relationship. However, it is less decisive nowadays, in circumstances where it is far too simplistic a test to apply to senior staff with professional skills and qualifications.
- Enterprise test – This test examines whether the person is performing services in a business on his or her own account and has an opportunity to make a profit. If so, then he or she will almost certainly be regarded as an independent contractor. It originated in the UK decision of Market Investigations V Minister for Social Welfare  2 Q.B. 173.
- Mutuality of obligation– This test examines whether the employer is obliged to provide work for the employee and whether the employee is obliged to perform that work. It was considered recently in the case of Minister for Agriculture and Food v Barry  IEHC 216;  1 I.R. 215.
- Integration test – This involves an examination as to the extent to which an individual has been integrated into a workforce. The general position set down in Stevenson Jordan and Harrison Limited v MacDonald and Evans  is that under a contract of service an individual is employed as part of the business whereas under a contract for service the individual is only an accessory to it.
High Profile International Employment Status Cases
In considering the employment status of delivery drivers, Uber and Deliveroo classified their drivers as independent contractors. They have faced multiple legal challenges in multiple jurisdictions to this decision and have become the two most prominent companies fighting this legal battle.
Uber uses legal language in its contract with drivers to define them as “partners,” not employees. It says it is providing drivers with “business opportunities,” and it refers to itself as a “technology company” or a “platform”—not a transportation company. Uber took its legal battle over the status of its drivers to the UK’s highest court after losing at the Court of Appeal. In December 2018, the U.K.’s Supreme Court also upheld an earlier court ruling that Uber drivers should be classified as workers rather than contractors. Uber appears to be losing the legal battle to classify their drivers as independent contractors, mainly because they do exert a certain level of control to protect their business such as;
- Drivers go through interview, induction and training before commencing work. The training provides instruction on conduct, behaviour and work performance.
- Drivers cannot communicate with passengers outside of the Uber platform. They, therefore, cannot ‘expand their business’ or negotiate fare rates.
- Drivers have no capacity to delegate; they must perform the services for Uber themselves.
- Once ‘logged on’, drivers are offered jobs and must accept or decline the job within 10 seconds, without knowing the passenger or their desired destination.
- Although nominally free to accept or decline trips, drivers ‘should accept at least 80% of trip requests to retain [their] account status’ and drivers who decline three trips consecutively are forcibly logged off.
- Drivers can face consequences for failing to follow the route proposed by Uber.
- Uber generates invoices addressed to passengers by drivers.
- Drivers are paid weekly by Uber, based on the fares charged for trips, less 25% for Uber’s service fee.
- In the event of a dispute, Uber can unilaterally elect to make deductions from drivers’ accounts to compensate passengers.
- Uber sometimes contributes to drivers’ costs of cleaning vehicles soiled by passengers.
- Uber controls the key information (especially passengers’ names and contact details).
- Uber has in place performance management/disciplinary procedures.
Under UK law, they have a category for ‘workers’ that does not exist in Ireland. This is in addition to employees and contractors
Deliveroo has had more success in classifying their drivers as independent contractors as there are some key differences between how they manage the terms and conditions when compared to Uber. In December 2018, the high court in the UK ruled that the riders were not in an “employment relationship” in the context of European human rights law. The IWGB general secretary, Jason Moyer-Lee, said the union would appeal against the high court ruling. Deliveroo is proving more successful in categorising their drivers as non-employees but they have had to sacrifice control, resulting in additional risk from claims relating to immigration breaches and GDPR challenges. Deliveroo made changes meaning riders are permitted to bring in someone else to cover their work, performance monitoring was removed and riders are no longer required to wear branded clothing, all factors seen as central to differentiating their status.
As insurance companies are limiting the cover they will provide businesses for employee travel in these circumstances, future case law in this area is likely and will determine whether the Uber and Deliveroo scenarios will stand up as independent contractors. While Irish cases do tend to reflect the determinations in the UK, we don’t have the option of ‘worker’ status. This may lead Irish courts to be more prudent in leaning toward employee status as the facts are more likely to be strictly applied in line with the criteria laid out by the code of practice for determining employment or self-employment of an individual or the tests developed through the courts.
Two Factors Which Help Determine Employment Status In Ireland – Mutuality of Obligation and Substitution.
The two key factors which provide a greater degree of certainty—in determining the employment status are mutuality of obligation and substitution.
- Where it can be genuinely established that there is no mutuality of obligation then this should be sufficient to describe the relationship as that of a contract for service. If the question of mutuality is blurred, then the other factors will become more important [Mansoor v Minister for Justice, Equality & Law Reform ( IEHC 389)].
- Similarly, where there is no requirement to provide personal service this generally indicates an equality of bargaining power. Organisations offering work or requiring services to be provided by individuals are in a position to dictate the written terms which the other party has to accept so the relative bargaining power of the parties must be considered.
In order to build a strong case to justify an independent contractor status, a business would have to go to extreme measures to ensure minimal control and allow substitution. This may be in conflict with the level of control a business would like to protect its interests i.e. service standards and reputational damage. There is also a risk of becoming embroiled in a case that would grasp the media attention and become a test case for this scenario in Ireland, which is not desirable from a PR perspective. Measures would have to be taken to continually assess the unintended consequences of these arrangements as highlighted by the Deliveroo scenario.
If you need further advice on contracting for atypical employment situations or face uncertainties in defining an employee, contact Aspire HR today to arrange a consultation email@example.com
Please note: ©Aspire HR. This document is intended to be a general guide only.