MPs publish draft legislation designed to protect 'gig economy' workers from exploitation

Out-Law News | 20 Nov 2017 | 4:17 pm | 2 min. read

MPs have released draft legislation aiming to force companies to pay self-employed workers higher wages and provide basic rights and benefits, in a response to continued focus on the 'gig economy'.

The House of Commons Work and Pensions, and Business, Energy and Industrial Strategy committees released a report and draft legislation (40 page / 534KB PDF) to amend the Employment Rights Act in response to an independent review published in July.

The July report by Matthew Taylor, chief executive of the Royal Society of Arts, recommended reforms to make it clearer whether people in work qualify for full employment rights, should be classed as self-employed, or otherwise fall into a new category of 'dependent contractor' he said should be established.

In their joint report the committees said they agreed with Taylor that there is “an urgent and overwhelming case for increased clarity on employment status”, and a need to close loopholes “that enable dubious business practices”.

The report proposed implementing a default model of worker status for companies with substantial workforces that were currently labelled as self-employed. That would mean that when a complaint was made about a company, it would be presumed that the individual was a worker with employment rights unless the contrary was proved.

Collective proceedings or class actions to determine employment status would be allowed under the new legislation. The committees also suggested introducing higher fines and an expansion of 'naming and shaming' for non-accidental breaches of employment rights by companies. They also said enforcement bodies needed more resources to “root out bad practice”.

Employment expert Diane Nicol of Pinsent Masons, the law firm behind Out-Law.com, who was appointed to the Taylor Review, said many of the committee's recommendations, including those on fines and enforcement, were in line with Taylor's recommendations.

“This aligns with Taylor’s desire to replicate good working practices which are undertaken by many UK employers and this together with the recommendation that the Director of the Labour Inspectorate takes a proactive approach to enforcement, conducting a deep dive into industry practices, will have a similar effect,” Nicol said. “It will be important not to make this too onerous for employers and tie them up in even more 'red tape'."

“One of the issues with employment tribunals making decisions in employee or worker status cases, apart from the length of time these cases take to land including the lengthy appeal process, is the fact that the decisions only apply to the particular cases heard before them and not to the entire workforce of the employer or engager involved,” Nicol said. 

“One recommendation which might encourage engagers and employers to apply findings against them across their workforces is higher cost awards, for example where similar cases are brought after such a decision is made and the employer and engager’s defence fails again. Greater scope for class actions in the tribunal system is also encouraged which would help to address this issue,” she said.

Nicol said: “What was proposed by Taylor is an attempt to ensure that the flexibility which exists within the British system can continue but that that flexibility is not one-sided. It will be interesting to see whether the government thinks that the Select Committee, with its recommendations, has maintained that balance.”

Nicol said the call for a 'worker by default' model would address criticisms of an uneven playing field, although she said “care will be needed with this not to encumber flexibility”.

The report follows several pieces of litigation brought over self-employed workers' rights. Last week the Central Arbitration Committee ruled cyclists delivering food on behalf of food delivery company Deliveroo are self-employed, rather than 'workers' who would be entitled to unionise.

However the Employment Appeal Tribunal confirmed that two drivers for taxi-hailing app Uber should be classed as workers, and entitled to benefits such as paid rest breaks, holidays and the National Minimum Wage.