The origins of the ‘gig economy’ can be traced back to the worldwide recession in 2008 – 2009, when people began to take on shorter term freelance ‘gig’ type roles (involving personal service) which went outside the normal parameters of the employer/employee relationship. Very quickly, internet applications to host those services and put users in touch with the service providers came into being. These applications are now called platforms. While technology has kept up with the increase of these platforms, employment law has not, particularly in Ireland.
It has been noted that the gig economy’s development has been held back in some countries due to technical, cultural or regulatory issues. The arrival of Uber and various other platforms (Deliveroo, Citysprint), along with class actions in the UK and worldwide, has been seen as a major impetus for employment law to catch up, particularly in terms of how this new model of work fits within existing legal definitions.
Employee or self-employed contractor
Many countries, like Ireland, distinguish only between employees and self-employed contractors. The tests to make that distinction are also very common across various jurisdictions. Overall, the distinguishing feature of ‘control’ is the most common factor used to determine whether someone is an employee or not. However, there is an interesting body of case-law, in Ireland on this point, and more so in the UK. This is worth examining to determine whether the Irish system needs to consider adapting its employment law to deal with the various issues created by the gig economy
The introduction of the Employment (Miscellaneous Provisions) Bill 2017 should also be included in this consideration. This Bill includes a provision whereby an employer who incorrectly designates an employee as a self-employed contractor may face a fine of up to EUR 5,000 or imprisonment, or both. This is being criticised by employer bodies, and it remains to be seen whether it will be in the final version of the legislation.
There are similar examples in other jurisdictions. Misclassification of a worker as an independent contractor in the Czech Republic can result in a fine of up to EUR 400,000! The US is notorious for its lack of adequate employment protection due to the system of ‘at will’ employment. However, in March 2017, Lyft (an Uber equivalent) paid USD 27 million by way of settlement to 95,000 Californian drivers who claimed that they had been misclassified as independent contractors.
Development of the current Irish position: the ‘tests’
Over the years, various tests have been used by the courts and tribunals to determine the employment status of individuals. These include the ‘control’ test, the ‘in enterprise on one’s own account’ test, the ‘mutuality of obligation’ test, the ‘integration’ test (albeit to a lesser extent recently), and the ‘right of substitution’ test. Some of these have been more dominant in the cases, and are discussed below.
Control
As an indication of just how slowly the Irish system has been in catching up on new ways of working, we are still heavily relying on the seminal 1998 High Court case of Henry Denny & Sons Ltd v Minister for Social Welfare (1988 IR 34). This is a case that was reported when the worldwide web was still in its infancy, and the notion of mobile applications was likely still in a research lab.
In this case, a supermarket demonstrator (Ms. Mahon) was engaged under a contract, which referred to her as an independent contractor. She was not eligible under her contract to become a member of the company pension scheme or a trade union. Ms. Mahon was not supervised carrying out her work, but the company provided her with necessary clothing and equipment to carry out her function. She invoiced the company after carrying out the demonstration and this had to be signed off by the supermarket store manager. Ms. Mahon was also required to comply with any reasonable direction given to her by the store manager. She was not allowed to work for any competitors, and could not routinely hire other people to carry out her work. Accordingly, Ms. Mahon was found by the High Court to be an employee of Henry Denny & Sons, despite the written terms of the contract.
In the Supreme Court, Keane J declared that it was prudent to look behind the contract to establish the real relationship between the parties, and this is an exercise that is still common in all cases, whether they are before the courts, Workplace Relations Commission (‘WRC’), Department of Employment Affairs and Social Protection, or elsewhere. Some of the factors pointed to by Keane J as being appropriate for consideration in the test to differentiate between employees and self-employed contractors are as follows:
A number of years later, the Employment Status Group was established under the Irish Government’s Programme for Prosperity and Fairness. The group was set up due to concerns about the increasing numbers of individuals categorised as ‘self-employed’ when the ‘indicators’ were that ‘employee’ status would be more appropriate. The Group issued a Code of Practice for Determining Employment or Self-Employment Status of Individuals (‘the CoP’), which was last updated in 2007 (i.e. before the recession and before the explosion of the gig economy).
The CoP sets out criteria indicating that an individual is an employee, along with additional factors to be considered, and also sets out the criteria which would point to an individual being self-employed along with additional factors to be considered. The Employment (Miscellaneous Provisions) Bill also sets out similar criteria. Both should be considered in detail, but broadly, include the points set out below. Any one criterion will not automatically point to a conclusion of employment status of itself, but regard should be had to all the circumstances of the situation.
An employee:
Conversely, a self-employed contractor:
In the most recent Irish case (June 2018) on this issue, six plasterers were found to be employees by an Adjudication Officer in the WRC, who made awards totalling more than EUR 18,000 between them under the Payment of Wages Act 1991, the Organisation of Working Time Act 1997-2015, and the Terms of Employment (Information) Act 1994 to 2014. The employing company did not attend the hearings at which the workers gave evidence that they had been hired at a rate of EUR 180 per day. The employees were given fixed hours of work with two 30-minute breaks. The company also supplied material and equipment, and instructed the workers at all times as to what they were to work on, moving them from one task to another as required. While the plasterers supplied their own work clothing, this had been the case in that trade for many years.
The union representing the plasterers used both the control test in the Denny case and the mutuality of obligation test (discussed below) to argue that the plasterers were employees. The Adjudication Officer also had regard to the Code of Practice, and the fact that it states that an individual would normally be an employee if he or she:
‘is under the control of another person who directs as to how the work is to be carried out; supplies labour only; receives a fixed hourly/weekly/monthly wage; cannot subcontract the work…; does not supply materials for the job; does not provide equipment other than the small tools of the trade…; is not exposed to personal financial risk in carrying out the work; does not assume any responsibility for investment and management in the business; does not have the opportunity to profit from sound management in the scheduling of engagements or in the performance of tasks arising from engagements; works set hours or a given number of hours per week or month; works for one person of one business’. (ADJ-00010186, ADJ-00010949, ADJ-00009498, ADJ-00010183, ADJ-00010195, ADJ-00010189 – reported in IRN, 25 28.6.18)
As such the ‘control’ test is still very dominant in Irish law in deciding on the employment status of an individual.
Mutuality of obligation
Another important case on this issue is Minister for Agriculture and Food v Barry (2008 IEHC 216). This involves Temporary Veterinary Inspectors who lost their jobs at a Galtee Plant in 2004. They sought notice and redundancy payments which the Minister resisted, based on an argument that they were self-employed contractors. So far it has been before the Employment Appeal Tribunal (‘EAT’) three times, at the High Court twice, and at the Supreme Court.
The first time this claim was decided at the EAT, in 2006, the Tribunal panel found in favour of the claimants in a two-to-one decision. That decision was appealed to the High Court, which remitted it back to the EAT who found that they were independent contractors. This decision was also appealed to the High Court and then further appealed to the Supreme Court. The Supreme Court sent the case back to the EAT last year, and this further decision that they were self-employed contractors has been appealed (for the third time) to the High Court.
The most recent appeal to the High Court was of the EAT’s majority decision that the inspectors were not employees of the Minister. The majority decision followed the reasoning of Edwards J in the High Court (in a decision on the case in 2008) where he referred to UK case law in detail, and examined the factor of mutuality of obligation in determining employment status. This means that there must be mutual obligations on the employer to provide work, and on the employee to perform work for the employer. It this mutuality is not present, then there is no contract of employment. He referred to a UK case, which called it the ‘irreducible minimum of mutual obligation necessary to create a contract of service’ (Carmichael v National Power plc 1999 ICR 1226).
In particular, Edwards J pointed to the fact that if there is no mutuality of obligation:
‘it is not necessary to go any further. Whatever the relationship is, it cannot amount to a contract of service. However, if mutuality of obligation is found to exist, the mere fact of its existence is not, of itself, determinative of the nature of the relationship and it is necessary to examine the relationship further.’
This ‘mutuality of obligation’ test was the first of several tests that were considered in determining whether the vets were employees or contractors: if this test was not passed then the other tests, such as ‘control’, ‘enterprise’, ‘integration’ and ‘right of substitution’ are essentially immaterial. The majority decision was not satisfied that the claimants had established that there was ‘mutuality of obligation’ between them and the Minister. Passing this test is deemed to be essential for the claim they were employees – and not independent contractors – to proceed, and it is then necessary to consider other tests such as ‘control’, ‘enterprise’ and ‘integration.’
This concept and initial hurdle of mutuality of obligation was considered more recently in the High Court, in McKayed v Forbidden City (2016 IEHC 722), which referred extensively to the Barry decision. This case involved a translator who was engaged by the defendant and claimed to be an employee. The High Court found that the fact that he had been given work on a regular basis for a particular period did not create an obligation to provide work. Also of note was that the fact of being on-call did not convince the court that he was an employee – it was found that the translator was free to refuse work when called by the defendant (whether he did so or not).
Right of substitution
The Code of Practice states that the ability to hire sub-contractors or other people to do the work is one of the factors that would be indicative of contractor status.
However, the Supreme Court, in Castleisland Breeding Society v Minister for Social and Family Affairs (2004 IESC 40) looked at this factor, and found that a prohibition on the use of substitutes without prior approval was not fatal to a finding of self-employed contractor status. This is the exact point on which Deliveroo won its case before the Central Arbitration Committee (‘CAC’) in the UK – i.e. the fact that riders could (and did) substitute themselves with others (Independent Workers’ Union of Great Britain v Roofoods Ltd t/a Deliveroo, 2018 IRLR 84). However, it’s also likely that that the Castleisland case can be distinguished on its own facts. The only reason that prior consent to the use of substitutes was required was because the work (artificial insemination) was highly regulated and the Breeding Society needed to ensure that testing complied with statutory requirements. As such it was a reasonable requirement in a contract for services.
The UK
In the UK there are three basic categories for people who provide services. At one end are ‘employees’ who have the most legal protection (for example, protection against unfair dismissal, maternity and family leave rights, holiday pay and sick pay), but are under the control and supervision of their employer. At the other end of the scale are self-employed individuals, who have little legal protection as they are essentially in business on their own account, but have a high level of flexibility (for example, in terms of choosing when and if to accept work) and pay tax and national insurance contributions at different levels from an employee. In the UK, unlike many other countries, there is a ‘middle category’ between employees and self-employed individuals called ‘worker’. Worker status does not give full employee rights, but it does give individuals the right to annual paid holiday and to the National Minimum Wage. For some, it may also result in a right to pension contributions in accordance with the auto-enrolment rules.
On 28 October 2016, the London Central Employment Tribunal ruled that Uber drivers had ‘worker’ status and were not self-employed (Aslam v Uber 2017 IRLR 4). Uber’s position was that it operated solely as a software platform provider that links customers (or ‘riders’) with self-employed drivers who are willing to provide transport services. Uber viewed the drivers as ‘partners’, and each driver as, essentially, a self-employed individual operating their own small business (so Uber UK considered itself to be made up of 30,000 small businesses). In support of its position, Uber emphasised that drivers are under no obligation whatsoever to turn on the Uber app at any point and, indeed, can choose to turn it off or on as suits them and their lifestyle. In addition, even if they are logged onto the app, there is no obligation to accept any rides that are offered to them. This lack of obligation to accept any work offered is often at odds with a finding of worker status. Uber claimed that this offered drivers a high degree of flexibility and left them free to combine using the Uber app with other work and lifestyle commitments.
The terms and conditions which both drivers and riders using the app sign up to, state that there is a contract (to provide transport services to someone who wishes to travel somewhere) between the driver and the rider, with Uber only acting as the intermediary platform between them. Despite this, the Tribunal did not consider that realistically it could be said that there was a contract between a rider and a driver, given that when the rider and driver sign up to Uber’s terms they don’t know the identity of the alleged other party to the contract (or parties, as in the course of using the app many different drivers will, of course, transport many different riders). The destination of the journey, a key term of the supposed contract, is not disclosed to the driver until after they have collected the rider, and the fee for that ride is both set and collected by Uber.
The Tribunal held that Uber was not a technology company offering a software platform as it claimed, but was fundamentally in the business of providing transport services (and not only software services to others who provide transport services). In doing so, it took into account that Uber was, in effect, marketing products that could only be transportation products – whether ride services to customers, or delivery services such as Uber Eats.
The Tribunal decided that, for any periods during which an Uber driver (a) has the Uber app switched on; (b) is within the territory in which the driver is authorised to work; and (c) is able and willing to accept rides offered to them, the driver is a worker of Uber.
A key element in the Tribunal’s decision was the level of control that it considered Uber exercised over the drivers. In addition to the points above concerning key information not being known to the parties and the setting and collecting of the fare, Uber set the default route for journeys through its GPS system, and interviews and recruits drivers. If drivers do not accept a certain number of fares, Uber locks them out of the app for a short period. If customers complain about their Uber experience, Uber takes what is in effect disciplinary action against drivers.
