Worker Status and Substitution Clauses

As many of you will be aware, over the last few years there has been a number of high-profile cases which have addressed the difficult concept of whether individuals working in the ‘gig economy’ are employees, workers or self-employed.

Last month, the Court of Appeal handed down a Judgement on another case, Stuart Delivery Ltd v Augustine, which considered whether a delivery courier was a ‘worker’ or not.

The Law

A ‘worker’ is defined under section 230 of the Employment Rights Act 1996 as an individual who has entered into or works under:

• A contract of employment; or
• Any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual.

If a person does not fit in to either of these definitions, that person would generally be considered to be self-employed.

When it comes to establishing whether there is a requirement to ‘perform personally’ the work, one of the main issues in litigation involves consideration by the court about whether the individual has a right to substitute another person to undertake the work. This was one of the main battlegrounds in the well-known ‘status’ case of Pimlico Plumbers Ltd and another v Smith. One of the key outcomes of the Pimlico Plumbers case was that if there was an unfettered right which allowed the individual to provide a substitute, this would be inconsistent with the principle of providing services personally and would therefore likely defeat the argument that the individual was a worker.

The Facts

In the current case, Stuart Delivery Ltd developed a tech-platform which connected couriers with clients via a mobile app. The Claimant, Mr Augustine, worked as a courier for Stuart Delivery Ltd for approximately 5 months from late 2016.

As part of the app-connection process, couriers had the ability to sign up for one or more time slots via the app. In essence, this meant that the couriers had to commit to being available in a certain area at a certain time, in return for a minimum rate of £9 per hour. Once a courier had committed to a particular ‘slot’, they had the ability to be able to get out of it by sending a release notification via the app, which made the slot available to other couriers. However, if the slot was not taken up by another courier, then the original courier remained responsible for fulfilling the slot commitment or they would incur a penalty.

In 2017, Mr Augustine brought a number of claims in the employment tribunal. He alleged that he was either an employee or, alternatively, a worker for the purposes of section 230 of the Employment Rights Act 1996. Therefore, the employment tribunal had to determine his ‘status’ as part of the case, which included whether he was under an obligation to ‘perform services personally’ which brought into play whether the app process created an unfettered right for him to provide a substitute, or not.

The employment tribunal decided that Mr Augustine was not an employee. However, it was decided that he was a worker. In coming to this conclusion, the employment tribunal decided that the release process did not amount to an unfettered right of substitution. This was because Mr Augustine could only be released from the slot (and thereby his obligation to be responsible for the slot) if another courier signed up for it, and as such, Mr Augustine had no control over whether this happened. In reality, once Mr Augustine had signed up for the slot he was personally obliged to do the work himself because if he didn’t, then he would suffer a penalty.

The Employment Appeals Tribunal agreed with the employment tribunal’s original decision and so the case moved to the Court of Appeal, which focussed on the question of Mr Augustine’s right of substitution.

The Court of Appeal dismissed the appeal. In brief, the Court of Appeal decided that, on the facts, the employment tribunal had been entitled to find that Mr Augustine was a worker within 230 of the Employment Rights Act 1996. The court’s key observation was that Mr Augustine’s limited ability to notify other couriers via the app that he wanted to be released from a particular slot was not, in reality, a sufficient right of substitution to remove from him that obligation to perform the work personally. Ultimately, other couriers could choose not to take on the available slot and Mr Augustine could not personally put forward another ‘substitute’ to take over the slot.

Summary

Once again, this is another important decision on the gig economy involving substitution clauses. As ever with this type of ‘status’ litigation the employment tribunal will carefully scrutinise the detail to see what actually happens in practice – and not just what the contract says. That said, if there is a genuine unfettered right for the individual to provide a substitute when the individual either cannot or does not want to do the work, then this should still be capable of defeating the argument that the individual was a worker (and an employee for that matter). This was certainly the case in the ‘Deliveroo’ case of Independent Workers Union of Great Britain v Central Arbitration Committee and another where it was concluded that there was a lack of personal service, which resulted in a failure by Deliveroo riders in their attempts to gain trade union recognition.

Darren Tibble, Partner