Changes to worker status are underway

    The government launched a consultation in February on employment status. Amongst its terms of reference it asks for views on the definition of an employee and a worker for purposes of the Employment Rights Act 1996 (ERA). At the same time they have already drafted amendments to the relevant part of that act which have been before the Commons Work and Pensions select committee as a draft bill.

    The proposed amendments look at section 230 of the act where a worker for purposes of employment rights is formally defined. They create an entirely new section 1ZB which states that an employment tribunal dealing with a complaint is to presume “that the individual is a worker unless the contrary is established”. The draft also includes a requirement at section 1ZA that a written statement of status must be provided to an individual clearly showing whether they are an employee or a worker as defined in section 230. That statement must be provided within seven days of beginning work.

    The proposed additions to section 230 create a list of factors that a tribunal “may have regard to” in determining status. The use of the word may means that it isn’t compulsory but it has to be regarded as a very strong suggestion when it is enshrined in the primary legislation. The factors listed are:

    (a)    whether the contract places an obligation on the individual to perform work personally;
    (b)    whether the other party to the contract retains the potential to control to a substantial degree how the individual’s work will be carried out in relation to factors such as:
            (i) disciplining the individual;
            (ii) the activities to be carried out;
            (iii) the order in which activities are to be carried out;
            (iv) the equipment or products to be used in carrying out the activities;
            (v) the rate of pay for the activities;
            (vi) where the work will be carried out;
            (vii) how the activities will be carried out; and
            (viii) the hours during which the work is to be carried out.
    (c)    whether the individual is integrated into the other party to the contract’s business;
    (d)    whether the other party to the contract provides tools or equipment;
    (e)    the degree of financial risk undertaken by the individual; and
    (f)    whether the individual is prohibited from working for others during the contract.

    The draft bill then goes on to provide some additional factors which a tribunal “may have regard to” in considering if an individual is a limb B worker. These add to those listed above the following:

    • whether the worker was engaged in marketing their business before the contract came into existence; and
    • whether any substitution clause is capable of being freely exercised by the individual in practice (but the fact an individual has a contractual right to appoint a substitute under the contract shall not of itself prevent that individual from being a worker).

    The draft goes on to define a status of “an independent contractor” who is someone who is neither an employee nor a worker. To determine if that is the case a tribunal may have regard to the following factors:

    (a)    whether the individual assumes responsibility for the success or failure of his business;
    (b)    whether the individual can hire others at their own expense;
    (c)    whether the individual has the ability to determine the manner in which the services are carried out;
    (d)    whether the individual actively markets their services;
    (e)    whether the individual can negotiate and set the price for their services; or
    (f)    whether the individual is responsible for their own indemnity cover or public liability insurance.

    The proposals provide some options for consideration by tribunals but stop short of creating a definitive statutory test. They don’t align particularly well with concepts involved within the consultation on employment status and they may not be the final form of an amended section 203 ERA. What they do provide is a clear indication that the existing position on status for employment law purposes is going to change in the very near future and the general direction that those changes are likely to go in.

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