The shifting business environment of the ‘gig’ economy provides a difficult arena to achieve a degree of legal clarity as to the employment status of those within it.
Many employers use freelance and self-employed sub-contractors believing that such workers do not have the same employment rights as ordinary employees. However a flurry of recent cases has illustrated the significant risks that employers run in engaging workers on a self-employed or freelance basis.
The case of Pimlico Plumbers, recently played out in the Court of Appeal, is a good example of the risks employers face in this area. In that case a long-serving independent contractor was held by the Court to be a worker and as such was entitled to basic employment rights including holiday pay.
Are you at risk of compensation claims?
Employers may find themselves in a position when terminating arrangements with such workers that they are exposed to claims for compensation that could run into the tens of thousands of pounds.
This is because providing such workers with a contract of self-employment and making arrangements that the worker pays their own tax do not provide a guarantee that Employment Tribunals or HMRC would find that such individuals are not in fact employees or workers.
Employment Tribunals will always look at the reality of the working relationship and not the label that is put on it by the employer.
What do Linder Myers advise?
Head of Employment, Alan Lewis, advises “The key to security against claims from freelance workers or self-employed sub-contractors is for employers to have contracts in place that clearly set out such matters as mutuality of obligation and personal service and to ensure that such contracts actually reflect the reality of the working relationship with the individual engaged by the business.”Find out more about our Employment department