We are seeing the growth of a ‘gig economy’ in the UK, with a large number of workers employed through platforms such Uber, Deliveroo and Task Rabbit. In this article, Associate Adviser, Mike Emmott, explores the disparity between perceptions of employee security between people working in the gig economy and those on zero hour contracts. He also asks if a new employee status should be defined in employment law to accommodate this growing section of the UK’s workforce.

By Mike Emmott, Associate Adviser

Workers in the gig economy, such as Uber, Airbnb or TaskRabbit, sell their services through a technology platform, accessible to both workers and users through social media. Workers don't need an "employer" in order to find customers. Their relationship with the business that provides the IT platform doesn't sit comfortably with traditional ideas about what it means to be employed. As a result their employment status is often unclear. Should they be regarded as employees, or independent contractors?

Workers in the gig economy are effectively on zero hours contracts. Many people on zero hours contracts don't know how much work they will have next week; neither do those working in the gig economy. However, there is a significant disparity in public attitudes towards the two issues: zero hours workers are often portrayed as people denied the protection of the employment relationship, including, for example the right to claim unfair dismissal, or redundancy terms.

However, attitudes towards the gig economy are generally more positive. This is undoubtedly due largely to the fact that technology has made possible a more efficient service, with significant benefits to consumers. A recent communication from the European Commission, for example, concluded that "In view of the significant benefits that [the gig economy] can bring, Europe should be open to embracing these new opportunities". This is a ringing endorsement, coming from a body that has always upheld the model of full-time, permanent employment.

It's not surprising that public attitudes towards these two phenomena should be somewhat contradictory. Although neither offers the security of a traditional job, many of the workers involved are happy with the flexibility they offer, and the ability to control their own lives.

On the other hand, policy makers can hardly ignore the impact that labour market changes have had on political attitudes and behaviour. The recent referendum on Brexit suggests strong dissatisfaction by many voters with their economic situation and their ability to improve their lives. It's becoming increasingly difficult for governments to claim that the labour market is driven by globalisation and that workers will just have to put up with the results.

How, then, should the UK respond to the gig economy? One response has already come from the trade unions. The GMB has claimed in the employment tribunal that drivers working for the taxi-hailing app, Uber, should be classed as workers and not self-employed contractors. This would mean they would be entitled to statutory protections, for example in relation to holiday pay and the national minimum wage.

It remains to be seen what the tribunal will make of this claim. Meanwhile, it may be worth looking to see what is going on across the Atlantic, where the evidence suggests that about 600,000 workers, or 0.4% of total US employment, work with an online intermediary in the gig economy. A larger number probably work for an offline intermediary, but the number of online independent workers is growing rapidly.

A recent report by two academics with links to the Obama administration comments that work relationships within the gig economy do not fit easily into existing legal definitions of “employee” and “independent contractor”. The paper proposes a new legal category of “independent worker”, which would have some elements of both employee and independent contractor status.

Under this proposal, the employer would be replaced by an "intermediary" such as Uber, which would retain some control over how the independent worker does their work. The report suggests that independent workers would qualify for many of the benefits and protections currently applying to employees, including the right to bargain collectively, protection against discrimination, and employer contributions for payroll taxes.

The authors claim the proposal would protect and extend the “compact” between workers and employers, and reduce the legal uncertainties and costs that currently beset many independent worker relationships. It certainly represents a considered attempt to come to terms with the gig economy and produce a model of an employment relationship that offers something to both employers and workers.

Although the scale of the gig economy is currently modest, any new employment status intended to address the gig economy would be bound to have wider repercussions. Senator Elizabeth Warren has called for action in four areas, including social security, health and pensions, labour law and collective bargaining. This agenda would aim to benefit workers, whatever their employment status, including independent contractors.

What does all this mean for the UK? There are important differences between employment law in the US and the UK, including the greater scale of employment and social protections in the UK. The UK already has a third employment status, in addition to employee and self-employed – i.e. “worker”, which might be roughly equated with the US proposal for an “independent worker”. So possibly the challenges presented by the gig economy might turn out to be somewhat easier to address in the UK context.

Nevertheless the position of the self-employed will remain problematic here too. Recent data from the Office for National Statistics (ONS) show that nearly one in six UK workers are now self-employed. As fewer and fewer workers have an employer to fall back on, the question of what social protection should apply to the self-employed will become more difficult to duck. This is not, of course, simply a result of the gig economy, but the (recently renamed) Business, Energy & Industrial Strategy department clearly needs to take the US work on board before it publishes its long-anticipated review of employment status.

One strength of the US report is that it accepts that the problems raised by the gig economy can hardly be left to the courts to deal with by "interpreting" the law on employment, and that legislation is likely to be needed. The changes implied for social security and pensions systems are likely to be quite radical, and to call for some reconsideration of historic assumptions. These are political rather than legal issues.

Given the other claims on legislative time, it seems unlikely that the UK Government will feel able to give any high priority to sorting out the issues around employment status. In any case, bearing in mind the failure to follow through on the public consultation on employment status by the Department of Trade and Industry (DTI) in 2002, it seems doubtful if there will be much political appetite for designing and implementing new arrangements on the scale set out in the US report. But it’s an area where significant policy development is going to be needed on both sides of the Atlantic in the years ahead.


Mike Emmott

Mike Emmott, Associate Adviser

Mike's special fields of interest are employee relations and employment law. Central to his work is the way in which economic and social changes are affecting employee attitudes and working practices. Recent work has focused on employee voice, global employment relations, industrial relations skills and HR in the public sector.

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