Gig Economy

November 2017

Gig Economy by Albert Bargery, employment law specialist at Parrott & Coales.

Gig Economy Workers denied holiday pay may claim for the whole of their employment

A UK window salesman who did not receive a paid holiday for 13 years has been backed at the European Court of Justice in his landmark legal battle. The court has ruled that "An employer that does not allow a worker to exercise his right to paid annual leave must bear the consequences".

In King the claimant was a commission-only salesman who worked for the respondent business from 1 June 1999 until he was retired on 6 October 2012 at the age of 65. He brought claims of age discrimination relating to his dismissal and for holiday pay on the basis that he had never been paid for holidays (his contract making no provision in that respect) and he had therefore taken less than the amount to which he was statutorily entitled. After he was dismissed from the firm, a UK tribunal ruled that Mr King should have been classified as a worker. He also brought a claim for £27,000 of holiday pay he should have received.

The decision could have significant implications for firms in the so-called gig economy, and opens the door for similar cases.

What is the gig economy?

The ‘gig economy’ comprises of short-term and unpredictable work arrangements negotiated on online peer-to-peer marketplaces. In the UK, it is estimated that one million people are employed in this type of capacity.

Its continued growth has raised a number of interesting questions about the future direction of employment. Advocates argue that the gig economy offers innovation and empowers both workers and entrepreneurs, while critics suggest that it disenfranchises the workforce and undermines workers’ rights.

Generally, instead of a regular wage, workers get paid for the "gigs" they do, such as a food delivery or a car journey. Importantly, staff in the gig economy are classed as independent contractors, and this means that they have no protection against unfair dismissal, no right to redundancy payments, and no right to receive the national minimum wage, paid holiday or sickness pay.

What legal problems have arisen so far as a result of the expansion of businesses operating in the gig economy?

The first key issue is employment classification—are cleaners at TaskRabbit or drivers at Uber employees or not? This is precisely the sort of question that has also been in the courts recently.

Assessment of the gig economy staff, suggest that they are neither employees nor self-employed and so an intermediate status must be created in order to address the problem of staff and give them a basic set of rights.

However, that this might not solve the problem because UK law already has an intermediary category between the role of employee and contractor—the ‘worker’—yet we have not escaped the problems of the gig economy.

The role of ‘worker’ is one in which a person can expect to receive basic protection , such as minimum wage entitlement and protection against discrimination, yet as current litigation between Uber and its drivers in the Employment Tribunal shows, this third category of employment offers no simple solution, either. Italian and German law likewise hold additional categories, similar to a ‘worker’; with none fully addressing the questions thrown up by companies such as Uber.

A defining judgment'

The case now returns to the UK Court of Appeal for a further ruling.

However, the decision means companies which routinely use staff on self-employed contracts - such as taxi or delivery firms - could face potentially huge liabilities if that status is later challenged.

James Williams, the barrister who represented Mr King, has said it left employers who have miscategorised workers as self-employed, liable for back holiday pay when the workers' employment is terminated.

The head of the IWGB trade union, Dr Moyer-Lee, called it a "bombshell judgment", that was a "game changer for the so-called 'gig economy'".

"The law is now recognising the massive unpaid debt of 'gig economy' companies to their workers and IWGB members will be coming to collect."