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IWGB Response to “A Framework for modern

employment” Report by BEIS & DWP Select

Committees

17 November, 2017

Introduction

1. The Independent Workers’ Union of Great Britain (IWGB) represents, among others,

workers in the so-called “gig economy”. In particular we represent same-day delivery

couriers (e.g. City Sprint), food delivery couriers (e.g. Deliveroo), and private hire drivers

(e.g. Uber). The IWGB has brought and won many employment tribunal claims against

companies in the so-called “gig economy”, establishing that the people who work for

these companies are (limb b) workers and as such entitled to employment rights.

2. Following on from the recommendations of the Taylor Review, the BEIS and DWP select

committees have produced a report and draft bill making recommendations for how to

protect workers in the so-called “gig economy”. Some of this report is extremely positive,

some of it we believe will not make much difference, and some of it is concerning. This

note is the IWGB response to the report. The structure of the note largely follows the

structure of the report.

Clarity in Primary Legislation

3. It is disappointing to note that this report falls victim to the same general error of law so

often seen in the press and throughout the Taylor Review. The report has listed the three

main employment statuses as employee, (limb b) worker, and self-employed. This is

incorrect because limb b workers are a category of the self-employed. This is a very

important point not only in that it is reflected in the tax position, but also because many

of these workers strongly identify as self-employed, albeit as self-employed people who

should have some employment rights.

4. The error is made despite the fact that there is absolute clarity of the current position, as set

out in paras 24, 25, and 31 of the judgment of the Deputy President of the Supreme Court, Lady

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Hale, in her judgment in one of the leading employment status cases before the Supreme Court:

Clyde & Co LLP & Anor v Bates van Winklehof [2014] UKSC 321:

24. First, the natural and ordinary meaning of “employed by” is employed under

a contract of service. Our law draws a clear distinction between those who are so

employed and those who are self-employed but enter into contracts to perform

work or services for others.

25. Second, within the latter class, the law now draws a distinction between two

different kinds of self-employed people. One kind are people who carry on a

profession or a business undertaking on their own account and enter into

contracts with clients or customers to provide work or services for them. The

arbitrators in Hashwani v Jivraj (London Court of International Arbitration

intervening) [2011] UKSC 40, [2011] 1 WLR 1872 were people of that kind. The

other kind are self-employed people who provide their services as part of a

profession or business undertaking carried on by some-one else. The general

medical practitioner in Hospital Medical Group Ltd v Westwood [2012] EWCA Civ

1005; [2013] ICR 415, who also provided his services as a hair restoration surgeon

to a company offering hair restoration services to the public, was a person of that

kind and thus a “worker” within the meaning of section 230(3)(b) of the 1996 Act.

...

31. As already seen, employment law distinguishes between three types of

people: those employed under a contract of employment; those self-employed

people who are in business on their own account and undertake work for their

clients or customers; and an intermediate class of workers who are self-

employed but do not fall within the second class.

5. The report’s first recommendation regards clarity of employment status definitions:

We recommend the Government legislates to introduce greater clarity on

definitions of employment status. This legislation should emphasise the

importance of control and supervision of workers by a company, rather

than a narrow focus on substitution, in distinguishing between workers

and the genuine self-employed.

1 https://www.supremecourt.uk/cases/docs/uksc-2012-0229-judgment.pdf

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6. The first problem with this recommendation is that like the Taylor Review it reads as an

endorsement of the proposition that a lack of clarity is the problem. We say the real

problem is not a lack of clarity but a lack of enforcement of existing law (more on which

below). 7. Placing less emphasis on the requirement to work personally would be welcome. Indeed the way

the personal service requirement has been interpreted has often led employers in the so-called

“gig economy” to focus on a purported right of substitution as their main line of defense, our case

against Deliveroo being a prime example2. Although in general companies that have tried to use

bogus substitution clauses have been caught out for the same and lost their tribunal cases, the

recent CAC decision in favour of Deliveroo has shown that in some circumstances it might be

possible for these companies to game the system3.

8. We are against shifting the focus of determining worker status away from the current multi-

factorial test and towards a focus on control. Control should undoubtedly be one of the issues

looked at, but so should the question of whether the putative worker is integrated into the

operations of the putative employer, whether the putative worker markets his/her services to the

world in general or rather just to the putative employer, etc. The fundamental question that

courts and tribunals should continue to ask when distinguishing between independent

contractors who are in business on their own account and workers is: is the individual carrying

out a business undertaking or profession on his/her own account, of which the other party is client

or customer, or is he/she carrying out their work as part of someone else’s business. This casts a

wider net than a test which places greater emphasis on control. This can be seen in part in Lady

Hale’s judgment in Bates, in the context of a partner in a law firm claiming to be a worker under

the Employment Rights Act 1996:

38. Maurice Kay LJ pointed out (at para 18) that neither the Cotswold

“integration” test nor the Redcats “dominant purpose” test purported to lay

down a test of general application. In his view they were wise “not to lay down a

more prescriptive approach which would gloss the words of the statute”. Judge

Peter Clark in the EAT had taken the view that Dr Westwood was a limb (b) worker

because he had agreed to provide his services as a hair restoration surgeon

exclusively to HMG, he did not offer that service to the world in general, and he

was recruited by HMG to work as an integral part of its operations. That was the

right approach. The fact that Dr Westwood was in business on his own account

was not conclusive because the definition also required that the other party to

2 For example, see https://www.thesun.co.uk/news/3669915/deliveroo-loophole-substitute-riders-security-food-safety-checks/ 3 It is important to note however that the CAC decision in the Deliveroo case is problematic to say the least and may not be the final word on the matter.

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the contract was not his client or customer and HMG was neither. Maurice Kay LJ

concluded, at para 19, by declining the suggestion that the Court might give some

guidance as to a more uniform approach: “I do not consider that there is a single

key with which to unlock the words of the statute in every case. On the other

hand, I agree with Langstaff J that his “integration” test will often be appropriate

as it is here”. For what it is worth, the Supreme Court refused permission to

appeal in that case.

39. I agree with Maurice Kay LJ that there is “not a single key to unlock the words

of the statute in every case”. There can be no substitute for applying the words

of the statute to the facts of the individual case. There will be cases where that is

not easy to do. But in my view they are not solved by adding some mystery

ingredient of “subordination”4 to the concept of employee and worker. The

experienced employment judges who have considered this problem have all

recognised that there is no magic test other than the words of the statute

themselves. As Elias J recognised in Redcats, a small business may be genuinely

an independent business but be completely dependent upon and subordinate to

the demands of a key customer (the position of those small factories making

goods exclusively for the “St Michael” brand in the past comes to mind). Equally,

as Maurice Kay LJ recognised in Westwood, one may be a professional person

with a high degree of autonomy as to how the work is performed and more than

one string to one’s bow, and still be so closely integrated into the other party’s

operation as to fall within the definition. As the case of the controlling

shareholder in a company who is also employed as chief executive shows, one

can effectively be one’s own boss and still be a “worker”. While subordination

may sometimes be an aid to distinguishing workers from other self-employed

people, it is not a freestanding and universal characteristic of being a worker.

40. It is accepted that the appellant falls within the express words of section

230(3)(b). Judge Peter Clark held that she was a worker for essentially the same

reasons that he held Dr Westwood to be a worker, that she could not market her

services as a solicitor to anyone other than the LLP and was an integral part of

their business. They were in no sense her client or customer. I agree.

9. The problem with too much emphasis on one individual factor is that the putative employer

focuses all their energies on disguising the true nature of that factor, and other nuances of the

working relationship between putative worker and putative employer are disregarded. Already,

4 These passages refer to “subordination” rather than control. We understand the term “subordination”, at least as an EU law concept, to be wider than that of “control” which makes our point all the more poignant.

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“gig economy” employers go to great lengths to disguise or minimize the nature of control, e.g.

insisting they do not determine the route that a courier takes.

10. In sum, removing any potential for companies to use substitution clauses to defeat worker

status claims is a good idea, but the rest of the matter should remain untouched.

11. The second recommendation regards burden of proof for putative workers:

We recommend the Government legislate to implement a worker by

default model, as set out in Part 2 of our draft Bill. This would apply to

companies who have a self-employed workforce above a certain size

defined in secondary legislation.

12. On the face of it this recommendation sounds great, but the proof is in the pudding. The

draft legislation referred to states:

Where in any complaint made to an employment tribunal any question

arises as to whether an individual is a worker, it shall be presumed that

the individual is a worker unless the contrary is established.

As we read it therefore, it seems to simply say that when a tribunal claim is made over

worker status that the burden of proof will be on the company to show the claimant is

not a worker. This seems to be the same as Taylor’s recommendation from Chapter 8 of

his report:

The burden of proof in employment tribunal hearings where status is in dispute

should be reversed so that the employer has to prove that the individual is not

entitled to the relevant employment rights, not the other way round subject to

certain safeguards to discourage vexatious claims.

13. Whilst this one may sound good to a lay audience, in practice it would not achieve much.

Employment status cases rarely turn on the burden of proof. Especially in cases in the so-called

“gig economy”, they are usually a dispute as to whether the putative worker is truly in business

on his/her own account with the other party as client or customer, or whether they are carrying

out their work as part of the “gig economy” company’s business. The written contract will of

course say the individual is truly independent and in business on their own account, the individual

will say the written contract is bogus, the Tribunal will engage in an Autoclenz investigation of

what the true obligations are, find the relevant facts, and apply the law. The facts will often be

disputed but once found the judge will apply the law without much consideration as to who has

to prove what. The facts either constitute a working relationship which falls within the definition

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of a worker or they do not. The same exercise would need to be undertaken no matter with

whom the burden of proof lay.

14. The third recommendation regards pay for non-contractual hours:

We recommend that the Government work with the Low Pay Commission to

pilot, for workers who work non-contracted hours, a pay premium on the

National Minimum Wage and National Living Wage. The Low Pay Commission

should be responsible for identifying suitable companies to be included in this

pilot, based on workforce size and turnover.

15. This one has the potential to be an improvement, though the devil will be in the detail. In the

case of employees- as opposed to workers- we believe 0 hours contracts should be banned due

to the massive power imbalances between employee and employer which all too often lead to

exploitation. However, in the absence of a ban a higher minimum wage would be better than

nothing. Higher minimum wage for limb b workers would also be welcome.

16. The fourth recommendation regards continuity of service for accrual of employment

rights:

We recommend that the Government extend the time allowance for a

break in service while still accruing employment rights for continuous

service from one week to one month.

17. This would be a slight improvement though probably not a game changer. In any case, impact on

the so-called “gig economy” would be minimal: it is rarely ever asserted that these people are

employees who need to accumulate length of service in order to claim unfair dismissal (as

opposed to workers or micro-entrepreneurs).

18. The fourth recommendation attempts to make the employment tribunal system more effective:

We recommend that the Government creates an obligation on employment

tribunals to consider the increased use of higher, punitive fines and costs orders

if an employer has already lost a similar case. We further recommend that the

Government takes steps to enable greater use of class actions in disputes over

wages, status and working time.

19. To the extent that this recommendation means tribunals using higher and more frequent

punitive fines than they are currently enabled to do, then this is definitely welcome. One

of the biggest problems with employment rights in the so-called “gig economy” is the

total impunity with which companies have been allowed to act and the minimal financial

consequences for them when they are found to have behaved unlawfully. Punitive fines

should, however, not be restricted to companies which have already lost a similar case.

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A large punitive fine of say £20,000 for every individual limb b worker who a company

deprives of employment rights in the first instance would lead to companies thinking

much more carefully about who they choose to misclassify. The fines should be larger

and effectively hit the bottom line more than the associated employment costs of limb b

workers otherwise the cost-benefit analysis of bogus employment status classification will

fall down on the side of depriving workers of rights.

20. With regard to the second half of the proposal, facilitating the ability of judgments to be

read across to a wider group of workers, and minimizing the need for more and more

workers to take out litigation, is definitely a welcome move.

21. The fifth recommendation is fantastic; it proposes killing the Taylor recommendation that

should have never been born:

We recommend the Government rules out introducing any legislation

that would undermine the National Minimum Wage/National Living

Wage.

This refers to Taylor’s proposal that as long as “gig economy” companies can demonstrate

that the average worker working averagely hard clears 120% of minimum wage they

would not be liable to ensure that any individual worker actually earns the minimum

wage. Hardly has such a bad idea been presented with such self-congratulatory praise by

its author for its supposed brilliance. The proposal would be a massive step back and rip

minimum wage protection out of the hands of many who most need it. The report is right

to recommend it never see the light of day.

Improvements in Secondary Legislation

22. The sixth recommendation is based on the one Taylor Review recommendation that we

could agree with in its entirety, and with which we still agree today:

We recommend that the Government extends the duty of employers to

provide a clearly written statement of employment conditions to cover

workers, as well as employees. We further recommend that this right

apply from day one of a new job, with the statement to be provided

within seven days. This change should be made by secondary legislation

under s23 (4)-(5) of the Employment Relations Act 1999.

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23. The seventh recommendation will do no harm but will certainly not achieve its aim of

getting workers’ voices effectively “heard”:

We recommend that people on worker contracts, as well as employees,

be counted towards the 50 workers needed before a company is covered

by the ICE regulations. We also recommend the threshold for

implementation of the regulations be reduced from 10% to 2% of the

workforce. This would require amending secondary legislation under s42

of the Employment Relations Act 2004.

24. We are one of the few trade unions that has actually used the Information and Consultation of

Employees (ICE) Regulations 2004 as a deliberate and central part of our collective organizing

strategy. This was not by choice but rather because a loophole in the collective bargaining laws

prevented us from obtaining statutory trade union recognition in a couple workplaces5. And from

this experience we can say just how useless the ICE Regs have been. In addition to the percentage

threshold required to trigger the Regs which the Review has identified, the Regs suffer from the

following problems:

a. When given the choice by the EU to apply the Regs to “undertakings” or “establishments”,

the UK chose undertakings. This means that rather than having the ability to be based at

the workplace level, as the collective bargaining laws allow for, the ICE Regs occur at the

company-wide level. Even if one lowered the number of workers required to trigger an

ICE request, there are other number thresholds which come up in the Regs which would

make company-wide organizing challenging without significant reform. For example,

once “negotiating reps” have been elected, if an ICE agreement is not approved by all of

them then the deal is put to a ballot of the entire workforce6. For a group of workers to

try and campaign in favour or against an ICE agreement when the voting population is in

the thousands and spread across the entire country, is a tall order.

b. The ICE Regs do not naturally facilitate workers being represented by trade union officials

in negotiations. Having a seat at the table with the bosses is good, but often people want

the backing of an official whose job it is to know the relevant employment law and who

has experience negotiating and advocating on workers’ behalf.

5 The loophole is paragraph 35 of Schedule A1 to the Trade Union and Labour Relations (Consolidation) Act 1992 which blocks a trade union from obtaining statutory recognition if the employer already recognizes another trade union, regardless of membership levels. In the case where the recognized union has a certificate of independence and was recognized voluntarily there does not exist a de-recognition procedure by which a worker can compel de-recognition of that union. We are currently challenging this as a breach of Article 11 of the European Convention of Human Rights. 6 See Regulation 16(4)

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c. The ICE Regs take forever to implement, a problem made all the more acute by the high

turnover which characterizes work in the so-called “gig economy”. As an example, we

made a valid employee request under ICE at the University of London in December, 2014

and over two and a half years later the first ICE consultation meeting has still not taken

place. Granted this particular process was made slower by the UoL stitching up the

elections (later found to be unlawful in tribunal), but the main point remains: each step

of the Regs can take a very long time.

d. The Regs do not mandate collective bargaining. If a group of workers overcomes all of

the considerable hurdles set out in this legislation and obtains an ICE agreement with an

employer, the employer at a bare minimum needs to inform them and consult them on

key issues7. However there is no link between this consultation and any action by workers

if views are not taken on board. In our experience, employers rarely take on suggestions

by workers which weaken their bottom line without the threat of action.

25. Making the ICE Regs more accessible, and applying them to workers and not just employees, will

not change much. And they are no substitute for better collective bargaining arrangements.

There is no doubt that the current workplace collective bargaining regime could be improved, in

particular with the so-called “gig economy” in mind. By way of example, in our bid for trade union

recognition on behalf of Deliveroo riders in Camden and Kentish Town:

a. Deliveroo was not straight about the number of riders in our proposed “bargaining unit”-

it came out in cross-examination in the Central Arbitration Committee (CAC) that

Deliveroo’s numbers had included riders who might not have performed a single delivery

in the previous six months.

b. We were not given access to the workers- we had to stand outside waiting around to

speak to people when they were in between jobs and just guessing when they were most

likely to show up- rather than being facilitated in communicating with riders.

c. Deliveroo ran a campaign of misinformation- calling riders in Camden and Kentish Town

and threatening them with taking away their flexibility, forcing them to wear uniforms,

and other unattractive propositions if the IWGB won its case (ironically much along the

lines of the Taylor Review’s explanation for its minimum wage proposal). Deliveroo also

told riders they would lose their self-employed status if we won our case (which was not

true as limb b workers are a sub-category of self-employed).

d. Deliveroo took advantage of the fact that the CAC needs to look at the situation at the

time of the hearing rather than at the time the application was submitted, and issued

entirely new contracts to riders, with substitution clauses they had no intention of

allowing to be implemented on mass-scale (which they successfully used to game the

system and defeat the claim in the first instance) just weeks before the hearing.

7 See Regulation 20

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e. Deliveroo claimed to have eliminated “opps codes”, the method by which riders are

assigned to different zone, e.g. Camden and Kentish Town, just weeks before our hearing

as well, in an obvious attempt to defeat our claim (by saying our bargaining unit was no

longer viable).

f. Deliveroo rocked up to the hearing with no fewer than eight lawyers.

The above provides a flavour of what we are up against. If one wants to focus on giving workers

more voice, it would be more effective to think about how to make it easier for unions to gain

access to workers and enter into collective bargaining agreements, and how to make it harder for

companies to game the system.

Effective Enforcement

26. Given that the fundamental problem of employment rights in the so-called “gig economy”

is a lack of enforcement of existing law, it is extremely refreshing to see that in stark

contrast to the Taylor Review’s half-page mention of government enforcement, the select

committees have made it one of their principle areas of focus.

27. The eighth recommendation is a case in point:

We recommend that the Government brings forward stronger and more

deterrent penalties, including punitive fines, for repeat or serious

breaches of employment legislation, and expand “naming and shaming”

to all non-accidental breaches of employment rights by businesses and

supply chains.

28. Increasing and improving the effectiveness of penalties is spot on and would go a long

way to solving the problem. We look forward to seeing more detail on how this will be

done.

29. Whilst we are skeptical about how effective “naming and shaming” will be, it would

certainly do no harm.

30. Although unclear from the above recommendation how far-reaching it will be, we would

want to see the areas of employment law which, in theory, are enforced by government,

expanded far beyond the currently narrow remit. The Government needs to be given a

mandate to enforce employment status and the associated rights. Minimum wage

enforcement alone, even if made more effective than it has previously been, will not be

enough to prevent companies from bogusly classing their workers as people in business

on their own account in order to deprive them of rights.

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31. The final recommendation would also be an improvement:

We recommend that the Government provides the Director of Labour

Market Enforcement and the main enforcement agencies with the

resources necessary to undertake both reactive and proactive roles,

including deep-dives into industrial sectors and geographic areas, and

supply-chain wide enforcement actions. Where extra resources are

needed, they should be funded through higher fines on noncompliant

organisations. We also recommend that the Government sets out, in

response to this report, how it intends the powers and resources of the

Director of Labour Market Enforcement will develop over the next five

years.

32. This again would be a big improvement on the current situation. Although to be truly

effective the range of rights that could be enforced would need to be expanded (as

above). If the Government had the resources, motivation, and power to take a “deep-

dive” into the so-called “gig economy”, when they come up for air the problem may be

half-way sorted.

33. Allowing enforcement actions against lead firms for labour abuses against other firms

further down the supply chain would definitely be a welcome improvement, though one

that is difficult to imagine without further legislation.

Conclusion

34. This report gives a welcome focus to the issue of government enforcement of

employment law. The recommendations in that regard would definitely be a step forward

though are not enough to solve the problem.

35. This report is right to recommend killing the Taylor Review’s minimum wage proposal.

36. The report makes some other recommendations which could be helpful, e.g. higher

minimum wage for non-guaranteed hours and getting rid of the personal service

requirement for limb b worker status.

37. The recommendation to have worker status tests focus on “control” as the main

ingredient is of grave concern and should be dropped immediately.

38. The rest of the recommendations are unlikely to lead to a major improvement in the lot

of workers in the so-called “gig economy”.

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39. We are disappointed to see that the report does not call for the extension of more

employee rights- in particular unfair dismissal and statutory sick pay- to limb b workers.