From the TUC

5 reasons why a “dependent contractor” test is a bad idea

20 Jul 2017, by in Working Life

One of the more curious suggestions to emerge from the Taylor Review is the proposal to replace the concept of “worker” in employment law with that of “dependent contractor”.

This proposal might sound interesting, but here’s 5 reasons why it may not be such a good idea.

All working people should benefit from the same floor of rights

The issue of “employment status” is not what matters to working people. It’s the rights they get at work that count.

The TUC wants to see more people benefiting from the floor of rights that are currently only enjoyed by employees. These include:

  • Family friendly rights
  • Protection from unfair dismissal
  • The ability to play a full role in their union

We would do this by creating a new “worker” definition covering dependent contractors, casual workers and employees.

The Taylor Review avoids this ambitious line. Instead, it recommends keeping the three-tier approach to who gets which rights at work.

So while employees will still benefit from the full range of employment protections, the “self-employed” will get very few rights at work. “Workers” (now named “dependent contractors”) will continue to be treated like second class citizens.

Those on zero-hours contracts or working through an agency may have basic rights to holiday pay, sick pay and protection from discrimination. But they will still be at risk of being sacked without notice and of losing out on redundancy pay if work dries up. This could leave them with no money for rent and bills until they find another job.

They won’t even be guaranteed the right to return to their job after having a baby.

What’s in a name?

You might wonder what’s actually in a name. What’s wrong with renaming workers as “dependent contractors”? Isn’t it just a bit of window-dressing?

No. This apparently minor change would still mean employment legislation needs to undergo major renovation. And it’s not clear the outcome would be more attractive.

The Taylor report suggests the term “dependent contractor” more accurately describes recent changes in the modern world of work. But this is to see the world of work only through the lens of the gig economy.

The Review seems to have forgotten that it’s not just Uber drivers, Deliveroo couriers and Pimlico plumbers who rely on the existing “worker” test. And you’d be hard pressed to find many social care zero-hours contract workers or agency workers picking fruit who think of themselves as “dependent contractors”.

It’s all about control

The Review also recommends that the principle of control should have greater importance when deciding whether an individual is an “independent contractor”.

But doesn’t this risk taking us back to the 1950s/60s? Writing in 1951, Kahn-Freund, a leading labour law scholar, proposed the control test is outdated:

“[it] postulates a combination of managerial and technical functions in the person of the employer, i.e. what to modern eyes appears as an imperfect division of labour”.

In 1968, the courts similarly concluded that control ‘can no longer be regarded as the sole determining factor’. Is this really the time to go back to the future?

The TUC fears that a control-led test won’t help those who enjoy some autonomy over when or how they work, but still rely on the employer for work. This might include academic researchers, project managers or homeworkers who may have deadlines, but can structure their own working patterns.

If courts are to be able to respond to the diverse types of employment seen in the modern workplace, they need access to a wide range of tests. The economic reality of any relationship needs be the first thing to be assessed.

However, the TUC does agree that it’s all too easy for bosses to misclassify staff as ‘self-employed’ simply by inserting a substitution clause in their contract. The ‘personal service test’ should (perhaps) be consigned to history.

Working people should also no longer face the burden of proving they are entitled to rights in the workplace. As a default, individuals should be treated as “employees” unless the employer can show they are genuinely self-employed.

Setting the tests for employment status in stone

The Taylor Review next recommends:

Government should replace the minimalistic approach to legislation with a clearer outline of the tests for employment status, setting out the key principles in primary legislation, and using secondary legislation and guidance to provide more detail.

There are three main concerns here:

  • Setting out the tests in legislation might provide business and workers with more certainty. But it could also provide employers’ with a sitting target – making avoidance far easier. Employment lawyers are very adept at drafting new contracts. It’s unlikely to take them long to get around new fixed statutory tests.
  • The recent gig economy cases have shown that the courts are skilled in adapting old status tests to fit new types of employment. Setting the tests in ‘statutory stone’ could tie the judges’ hands and make the law less flexible.
  • New statutory tests could quickly become outdated. But any revisions would require politicians to pass new laws. This could take years in a post-EU referendum world. In the meantime, bosses would get away with exploiting workers whilst individuals miss out on the rights they need.

New category with fewer rights

The TUC’s main concern is not that this proposal is just some rebranding exercise. Our fear is that the Taylor recommendations could lead to the creation into a new, distinct legal category that delivers fewer rights for working people. This can only increase inequality in the world of work.

There are already hints of this approach in the Taylor Review. The Review proposes a new, weaker approach to calculating the national minimum wage for gig workers employed as “dependent contractors”.

Companies such as Deliveroo have also been quick to call for legal changes that ensure that some but not all employment rights to apply to their staff.

There’s clear evidence that the market is rigged against those working in the gig economy. It’s vital that employers do not use new technology as an excuse for avoiding basic rights at work and for not treating staff well.

Which takes me back to where I started. It should make no difference if individuals are an employee, or if they are offered or allocated work via an agency, an online platform or an app installed on their smartphones.

All economically dependent workers should benefit from the decent floor of rights currently enjoyed by employees.

Read more on the Taylor Report: Follow the money: How do the tax and social security proposals in the Taylor Review measure up?