The EAT has confirmed that the Employment Tribunal came to the right conclusion in finding that three private hire drivers were workers rather than self-employed contractors, with the result that the drivers were entitled to holiday pay and the National Minimum Wage (Addison Lee v Lange and ors, UKEAT/0037/18/BA).
Employment law in the UK provides a range of statutory rights to employees including maternity leave, redundancy pay and the right not to be unfairly dismissed. A wider category of workers do not receive as many rights as employees but are still entitled to certain statutory rights such as protection from discrimination, the right to maximum working hours, the right to pension auto-enrolment, and, as was important in this case, the right to be paid the national minimum wage and entitlement to paid holiday.
The test for whether someone is a "worker" is set out in section 230(3) of the Employment Rights Act 1996 (ERA) (and, for working time purposes, in regulation 2(1) of the Working Time Regulations 1998 (WTR). "Worker" is defined to include employees but also a wider category of individuals who pass the statutory test. There are three parts to that test, all of which must be satisfied to achieve worker status:
- There must be a contract.
- The contract must require the individual to perform work personally for another party. This will usually involve consideration of whether the employee has a right to send a substitute to perform the work in his or her place.
- The status of the other party (i.e. the putative employer) is not that of a client or customer of any profession or business undertaking operated by the individual. This is a factual question and involves looking at a range of factors to determine the true nature of the relationship between the company and the individual. If the relationship is akin to an employment relationship, for example, with the company exerting control over the individual and the individual being integrated into the company's business, then it is more likely that the individual will be a worker.
Addison Lee Limited (Addison Lee) is a professional private hire firm which uses around 4,000 drivers to service private and commercial customers and which also operates a courier service.
Mr Michaell Lange, Mr Mark Morahan and Mr Mieczyslaw Olszewski (the Claimants) were all drivers for Addison Lee. They worked under a "Driver Contract", which stated that the drivers were independent contractors. The contract went on to say that each driver was a sub-contractor of Addison Lee, which allowed Addison Lee to fulfil its bookings with customers. A number of similar express clauses in the contract reinforced this 'arm's length' view of the contractual relationship.
However, Addison Lee provided new drivers with induction and training documentation called "Driver Guidance", which told them how they should do the job. Also, 99.9% of drivers had to enter into a "Vehicle Hire Agreement" to hire a vehicle from an associated company of Addison Lee, for which they had to pay a weekly deposit and rental fee. In effect, this meant that drivers had to work at least 25-30 hours per week to cover the costs of their vehicle.
Further restrictions were also placed on how drivers could use of the vehicle; most significantly that only an individual that had entered into the driver contract could drive it. The training slides used in Addison Lee's standard induction told every driver that they would be representing Addison Lee whenever they were in such a vehicle. Alongside this, Addison Lee also published a code of conduct that all of its drivers had to abide by at such times.
Drivers were provided with a hand-held computer which would locate the driver and their vehicle and automatically allocate work, if any was available (which in reality it always was), for the driver closest to the job. On receiving notice of a job, the driver could accept the job by pressing a button. As a general rule, if a driver received work while logged on, they had to accept this immediately and move to the pick-up location. If they failed to accept a job (or to give an "acceptable" reason for not accepting a job), it could result in a sanction and even in the driver being removed from the system, at least temporarily, pending further investigation.
Addison Lee would always agree fares with customers, both in cases where customers had an account with Addison Lee or if they were paying in person. The drivers had no knowledge of any fares being agreed, and, barring a significant change in the journey, no further negotiation was allowed.
The Claimants brought a claim for holiday pay under the WTR and for unlawful deductions from wages under the ERA for Addison Lee's failure to pay them the national minimum wage for the time spent in-between transporting passengers. The Claimants alleged they were entitled to these rights and that Addison Lee had wrongly classified them as independent contractors when they were, in reality, workers.
The Employment Tribunal (Tribunal) considered the working relationship and found that the Claimants were workers under s230 ERA 1996.
The Tribunal attributed significant weight to the driver contract, Addison Lee's relationship with the associated vehicle hire company, the vehicle hire agreement itself (requiring drivers to hire vehicles from their specified associated company and restricting the use of the vehicles), the inability to remove the Addison Lee insignia from the vehicles, Addison Lee's rigorous recruitment process and training materials; the considerable number of hours drivers had to work to make the job economically viable and the strict standards for dress codes and acceptance of jobs when logged on to work (which were both subject to sanctions).
Addison Lee argued that there was no genuine obligation to provide and perform work for the drivers (and that, in reality, each driver was actually running their own small business), but the Tribunal rejected that argument. Applying the case of Autoclenz Ltd v Belcher & Ors  UKSC 41, which enables a Tribunal to not give effect to a contract's express terms if they do not reflect the actual working relationship between the parties, the Tribunal found that there was an overarching contract between each Claimant and Addison Lee. The Claimants were therefore workers and entitled to the rights they were claiming for.
The Tribunal went on to determine that the Claimants were also workers regardless of any overarching contract, because there was a contractual obligation on the Claimants to personally undertake work when they were logged onto the handheld computer. In particular, the Tribunal found that there was a realistic expectation from drivers to be provided with work when they logged on and that Addison Lee must have expected the drivers to log on in sufficient numbers for the business model to work, especially given their investment in the training of each driver.
In respect of working time, the Tribunal held that, when logged on, the Claimants were at Addison Lee's disposal regardless of whether they were transporting a passenger or not. Also, by enforcing the use of specified vehicles for hire and then restricting their use, there was a strong implication of both an overarching agreement and that the Claimants remained under Addison Lee's rules between driving jobs. This meant that the Claimants were entitled to be paid for time logged on between jobs, regardless of whether they had completed a fare.
Employment Appeal Tribunal
At the Employment Appeal Tribunal (EAT), Addison Lee challenged the Tribunal's findings that the driver contract did not represent the true agreement between Addison Lee and the Claimants. Addison Lee argued that logging on did not make the Claimants workers, as there was not a hard obligation to perform the work and that the Tribunal's determination in respect of working time had been "infected" by the Tribunal's finding that the Claimants were under any such an obligation.
However, the EAT rejected these arguments. It confirmed that the Tribunal had correctly determined that the driver contract was not a true reflection of the agreement between the Claimants and Addison Lee; any of the drivers, when logged on, were clearly undertaking to accept the driving jobs allocated to them. The EAT went on to find the Tribunal's conclusion consistent with the nature of the relationship, referencing how payment was taken by Addison Lee, that a driver had to accept a job allocated to him and was unable to refuse such work.
Drawing a distinction between the overarching contract and each fare, the EAT determined that, in this case, the Tribunal was entitled to conclude that the Claimants undertook to perform work personally when they logged on and that, regardless of what the relevant contractual documentation said, Addison Lee was not a client or customer of the Claimants. Therefore, the Claimants were workers because of the obligations that were incumbent on them every time they were logged on.
Further, the EAT upheld that when the Claimants were logged on they satisfied the definition of working time in the WTR, even though for part of the time the Claimants were not actually carrying passengers.
This case follows a number of similar judgments relating to the employment rights of those working in the 'gig economy' and is relevant to all employers who engage independent contractors. It joins a trend of cases which suggest that, unless the contractual documentation that is in place reflects the reality of the situation, there is every chance that a Tribunal will look beyond the contract to conduct a fact finding exercise to determine whether worker status can be inferred from the actual working relationship.
Shortly after this decision, the Government released the "Good Work Plan", in response to the Taylor Review of Modern Working Practices. In the Good Work Plan, the government announced that they will bring forward legislation to improve clarity on employment status with the aim of reflecting modern working practices and avoiding a misclassification of staff.
To further this aim, the Government has now commissioned independent research to find out more about those with uncertain employment status and how they may be best supported, whilst also confirming that they will bring forward detailed proposals on how tax and rights frameworks could be aligned. As such, employers are best advised to expect future development in this area, which we will report on as soon as any proposals are announced. In the meantime, all employers who engage independent contractors would be wise to start reviewing any such relationships and how they operate to ensure that the contractual documentation and labels used accurately reflect the reality of the relationship on the ground.