News & Events

The Gig Economy

Submitted By Firm: Burness Paull

Contact(s): Ronald Mackay

Author(s):

David Morgan

Date Published: 10/26/2016

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“Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.” (Tom Goodwin, Havas Media)

I had the privilege of speaking on the panel at the global Employment Law Alliance conference in New York City last week on the topic of the “Gig Economy”.  This is a hot topic in employment law circles as it cuts across the vexed issue of employment status – that is, whether individuals who take on work on a piecemeal basis are workers, employees or truly self-employed independent contractors (as the companies who engage their services would prefer!).  It has been described as the “Uber-isation” of work or sometimes the “sharing” or “collaborative” economy.  For me, the above quote from the digital marketing agency Havas sums up the background well.

This is timely, as the UK Government has today launched an inquiry into the future world of work, focusing on the rapidly changing nature of work, and the status and rights of agency workers, the self-employed, and those working in the “gig economy”.

Few businesses nowadays would not describe themselves as “tech” companies given the importance of information technology in all that we do.  But for businesses in the gig economy, tech is at the heart of everything that they do.  We heard on the panel from an in-house attorney at one of the leading tech companies in the USA providing taxi services on-line via an app.  The issue of the employment status of drivers is so integral to their business that he described himself as an “independent contractor lawyer” first and an employment lawyer second!

I presented on the employment law implications for Europe, although it was remarkable how similar the issues are globally.  The EU Commission has put out a short paper acknowledging the importance of the gig economy and its potential legal implications throughout the EU.  However, it really just scratches the surface and confirms that it is a matter for member states to address the issues at a local level.  In the employment area, the EU at least acknowledges that challenges which businesses will face in accurately categorising the status of their workers in the gig economy.

This was something that we as employment lawyers have been advising on for many years.  Whether it is the status of cleaning contractors, media freelancers, security guards or even football referees, the question of employment status has plagued courts and employment tribunals for many years, not to mention HMRC when looking at the tax treatment of these individuals.  Its profile was heightened the other year with the introduction of pension auto-enrolment, which covers all “workers”.

Increasingly the boundaries between worker and employee are blurred and I think that this is all the more so when we look at individuals working in the gig economy.  If, say, a delivery driver is given an app to use to provide their services to the public; provided with a uniform; expected to take on a set number of jobs; and is ultimately rated on the service they provide, are they not truly employees or at least workers?  The dilemma of this categorisation sets the stage for their legal rights – whether that is to unfair dismissal protection, national minimum wage, holidays or sick pay.

To answer some of these questions, we are all hotly awaiting the outcome of the claim being brought by the GMB union on behalf of a number of drivers against Uber before the Employment Tribunal in London.  However, even when the judgment is known (assuming that it is not settled as has been the case in multi-million dollar litigation in the USA), I doubt that we will still have a final answer as the case will likely be appealed.

Tech companies are disrupters in the market and I think that this no more so than in the so-called “gig economy”.  Haven’t we all got used to using clever and convenient apps for the delivery of our goods and services and for riding taxis?  These businesses may come into established markets and rock the boat whether with existing traditional businesses or in the face of established legal regulation.  But can we now live without them?  Have we not become so used to them in this 24-7 world that we might now see consumer demand being so great that the law will have to adapt to accommodate them.  Full blown employment status could cripple the low-cost business model and sustainability of some of these businesses.  So I wonder therefore whether, to cut through the uncertainty of the litigation approach to determining employment status, we could see Government intervention to regulate the industry fairly whilst acknowledging the importance of these high growth start-ups to the consumers who have come to rely on them.

My provocation is that the traditional tests of “subordination”, control and “mutuality of obligation” (which we employment lawyers get so excited about), are no longer fit for purpose in assessing the status of these workers.  After all, the flexibility of picking and choosing “gigs” is generally why workers are attracted to this sector in the first place.  Who is to say that independent contractor status does not suit the majority of these workers anyway?

David Morgan
Partner

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