guides

Employee Rights Guide

There are a number of forms of work engagement but there are three types of employment status under which individuals currently provide their services in the job market:

•    Employee.
•    Worker.
•    Self-employed independent individual.

The employment status of an individual is important for a number of reasons particularly as certain important legal rights only apply if an individual is an employee. 

The Employment Rights Act 1996 (ERA) defines an employee as:

"an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment". 

A contract of employment is further defined as:

"a contract of service or apprenticeship, whether express or implied and (if it is express) whether oral or in writing".

A contract of service is distinguished from a contract under which a person gives service as an independent contractor under a contract for services. 

The terms "contract of service" and "contract for services" carry no statutory definition and the category into which a particular contract falls is determined according to the particular facts. At the most basic level under a contract of service, a person agrees to serve another, whereas under a contract for services they agree to provide certain services to the other. 

However, that simple formulation is the start, not the conclusion, of the legal analysis. The question of whether a person operates under a contract of service is often both a question of fact and a question of law.

Employment status tests

Case law has identified a number of relevant factors that may indicate whether a person is engaged as an employee.

Statutory employee rights

Following a full analysis of the working relationship taking into account these factors, it may be found that the individual should be classified as an employee. The result will be that the individual will have the benefit of a number of statutory employment rights. These include rights to:

Worker rights

In employment law, the question of employment status has been blurred in recent years by the evolution of the status of the "worker", a creature created by statute. 

A worker is defined as  

an individual who has entered into or works under (or, where the employment has ceased, worked under): A contract of employment; or any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual.

The same relevant factors apply when deciding if an individual has worker status. The test is easier to pass through. It has been described as being set at a lower bar than that which applies to employee status.

While workers have less extensive employment protection rights than employees, some of the statutory employment protections above will cover workers as well as employees. In particular the rights to 

These are all rights that a worker or an employee can claim. 

Recent developments

Much of the recent case law regarding employment status in the gig-economy has centred on these types of rights. The Uber case has recently been heard in the Court of Appeal. Uber argued that its drivers were independent contractors. They could work for other companies, including its direct competitors, and they paid their own expenses, including taxes and the cost of their licences. The company said its role was that of an agency, matching drivers to those who needed a cab.

Both the employment tribunal and EAT judges have already disagreed. The drivers could not set their own fares and were subject to a number of controls. The drivers claimed they had to accept 80 per cent of trips offered, or lose their account status, although this point is disputed by the company. The EAT judge decided that when the drivers accepted trips, they were workers.

Each case will be judged on its particular facts, and employers will need to carefully consider the issue of employment status if they wish to avoid having that decided by an employment tribunal. 

The future

Between February and June 2018 the Government carried out public consultation on whether the options proposed in the Taylor Review of Modern Work Practices could achieve more certainty and clarity for businesses when determining employment status, particularly in relation to the realities of the modern labour market.

The Taylor Review was an independent review carried out by Matthew Taylor Chief Executive of the Royal Society of Arts which considered how employment practices need to change in order to keep pace with modern business models. 

The review’s found that whilst the current employment status framework worked reasonably well for most people as the majority of people were ordinary employees in some cases, the framework does not provide the certainty and clarity individuals and businesses need.

There were a number of recommendations made with a view to improve the employment status framework. This included:

No further developments have been reported following the close of consultation and it may be some time before any changes will be made to what is a very complex area of employment law.

Our employment & people services team

Our team  understand the law and potential HR pitfalls and know how to get you from A to B not only safely, but in a commercially sensible way that benefits both your business and your people.

For more information on Gateley’s employment & people services offering:

Employment & people services

Contact our expert

Christopher Davies

Christopher Davies

Professional Support Lawyer

Christopher has specialised in employment law for 20 years. He is responsible for ensuring that our employment lawyers are kept up to date with legal developments and changes to civil procedure.