Frank Field MP proposes reform programme to end rampant injustice in the gig economy

25 Mar 2019

Frank Field MP today proposes a reform programme, relating to employment law and its enforcement, with the objective of ending the rampant injustice that afflicts all too many workers in the gig economy.

In recent years, individual workers and trade unions have begun directly challenging this injustice in the courts. With one or two notable exceptions, every single challenge has been successful.

As a result, a growing number of companies have been required to recognise people as ‘workers’ who are entitled to basic forms of statutory protection – including a guaranteed minimum wage and holiday pay – rather than ‘independent contractors’ with no such protection.

However, some of these companies have decided not to meet their legal requirements to recognise the rights that are held by their workforce. Rather, they are still largely free to continue exploiting those who they have wrongly classified as ‘independent contractors’. Injustice has been allowed to persist throughout much of the gig economy. 

In a report, entitled Legalising the gig economy, Frank finds that:

  • The judicial process is prone to being strung out by companies and, even when it eventually delivers favourable outcomes for individual claimants, or some larger groups who challenge their employment status, there is no sure-fire way of extending justice to people in a company’s wider workforce who are similarly misclassified and exploited.
  • The laws governing work in the gig economy are inadequate. Certain aspects of the law, such as the emphasis placed upon a notional ‘substitution clause’ when determining an individual’s employment status, enable companies far too easily to avoid their responsibilities as employers.
  • There is virtually no proactive enforcement mechanism to prevent workers being misclassified as ‘independent contractors’ and subjected to bogus forms of self-employment. The onus currently falls on individual workers to enforce the law. 

A major challenge for reformers, therefore, must be to ensure it is no longer left to individual workers to pursue justice through a draining, expensive, and convoluted legal process which seems to be stacked in favour of the company. Going through an employment tribunal is often the last thing in the minds of people who are in precarious jobs.

The report recommends that the Government incorporates the following six reforms within any forthcoming employment legislation:

  • A modern, streamlined judicial system, with new powers for employment tribunals to handle freestanding cases that deal exclusively with employment status. A fast-tracking process should be introduced for the handling of such cases – the objective should be to resolve them within a matter of weeks, rather than several years. Employment tribunals should also be given powers to make broader recommendations, at the conclusion of each case, which apply to similarly placed individuals across a company’s entire workforce.
  • Clearer legal definitions and tests of ‘worker’ and ‘independent contractor’ status, which look beyond contractual terms and focus more closely on the factual substance of the relationship between an individual and a company. The tests should place less of an emphasis on the notional ‘substitution clause’ in companies’ written contracts. They should instead primarily consider the extent to which companies mediate the transactions between their workforce and customers; the means used to determine the price, terms and conditions of the services provided by the workforce, as well as the means of payment; the monitoring, supervision, and treatment of the workforce’s performance and the details of their work – particularly in the context of management decisions being taken by company algorithms; the amount of direction and discipline that is used by a company towards its workforce; and whether the work being performed by individuals forms part of their, or a company’s, core or regular business.
  • A statutory presumption of ‘worker’ status, in which employment law begins from the basis that a company’s workforce comprises ‘workers’, who are still able to choose their preferred work patterns without having to sacrifice basic rights and financial security. Having reversed the burden of proof in this way, it would be for companies to argue why individuals should be classified as ‘independent contractors’.  
  • A new single labour inspectorate, headed by a Commissioner for Labour Market Enforcement, with the remit and resources it needs regularly to conduct proactive checks on companies, to ensure they are not wrongly classifying members of their workforce as ‘independent contractors’, and to deliver justice on behalf of those individuals who it has found to be wrongly classified. Stiffer fines for non-compliance with the law, which are linked to a company’s turnover, should be introduced as a means of resourcing the new labour inspectorate.
  • An enhanced role for trade unions in the gig economy, enabling collective organisation and the negotiation of pay and conditions for all individuals engaged in this form of work. Trade unions will have an important role in remedying the structural inequality we have identified by, for example, providing intelligence to the new labour inspectorate and negotiating more favourable settlements for each company’s workforce.
  • A move towards the equalisation of employment rights, such as protection from unfair dismissal, between ‘workers’ and ‘employees’, and a review of the continuous service rule for this particular segment of the labour market.

The report also asks for the Government to honour the commitment it gave for the Business, Energy & Industrial Strategy and Work & Pensions Select Committees to undertake pre-legislative scrutiny of any forthcoming legislation that covers these issues.

The report can be found here.