The Taylor Review (the Review) is clearly the result of significant research, work and thought but unfortunately many of the key proposals appear aspirational and, if they are ever to come to pass, will require a substantial amount of further consultation and legislative change. It is unclear whether the government will have the appetite (or support) for this whilst focusing on Brexit negotiations and assessing the recent seismic development in the quashing of tribunal fees.
The Review seeks to tackle exploitation and the potential for exploitation at work; increase clarity in the law and help people understand their rights. Few would argue with the principle of ’fair and decent’ work and the Review tries to balance the need to preserve the flexibility that many individuals enjoy in the new work platforms with access to employment protections and rights. It appears that the discussions the Review panel had with interested parties highlighted the point that many of those working in the gig economy do not see themselves as part of an exploited group, but enjoy the flexibility of logging onto various platforms and taking the jobs that suit them when they become available. Apparently, they do not want to be ’employees’, tied to specific hours and work.
As a result the proposals are tamer than anticipated with the recommendation that the three current categories of employee, worker and independent contractor be retained; but that the ‘worker’ category should be rebadged as ’dependent contractor’ with a recast definition.
I comment on some of the key recommendations below.
The concept of dependent contractor is not a new one and has been a category of workers in Canada since 1936. In Canada this intermediate category of worker is entitled to reasonable notice on termination (whereas the independent contractor has no such right). This can be a valuable right under Canadian law. The intermediate category is a version of the self-employed, rather than a downgraded employee. Taking this approach recognises that many want to be self-employed in terms of flexibility, but where an employer retains significant control over how a job is done (once it has been accepted) the individual is not truly in business on their own account and therefore should not sacrifice all rights and protections as a result.
The recommendation (in fact submitted to Mr Taylor by the Law Society) is that case law principles should be codified in legislation for the definitions of both employee and dependent contractor, but the dependent contractor test should have less emphasis on personal service and greater importance on control than is currently the case for assessing a ‘worker’. Reference is also made to watering down the effect of a substitution clause as a blocker to employee or worker/dependent contractor status.
The new category of dependent contractor would enjoy paid holiday, SSP, National Minimum Wage (NMW) and pension rights similar to those that ‘workers’ are currently entitled to.
Clearly there is a danger that any recasting of the definitions will simply create a new raft of case law rather than the clarity hoped for, but in any event this will require significant changes to legislation and implementation will be some way off, if it happens at all.
If, however, the tax advantages for the self-employed are removed or equalised with dependent contractors or employees, then this intermediate category may be less attractive to many and the fight for employee rights may become more prevalent again. Whilst the Review recommends changes to the tax regime by harmonising the position for the employed and self-employed, this was raised by the government earlier in the year and swiftly dropped following widespread furore.
Premium NMW rates
In an attempt to provide more certainty for workers by deterring employers from only guaranteeing minimal/no hours, the Review proposes that the Low Pay Commission looks at increasing the NMW rates for non-guaranteed hours so that workers receive one rate for their guaranteed hours and a premium rate for additional hours worked.
The return of rolled up holiday pay?
The issue of calculating holiday pay for casual staff has been problematic for a number of years. The Review is suggesting that dependent contractors be given the opportunity to receive rolled up holiday pay. This would be welcomed by many employers as it is administratively simpler than the current calculations that have to be made, but would potentially breach the Working Time Directive. So, as long as the government is pledging not to erode worker rights following Brexit, then this cannot be a solution as, without certain mechanisms, it would enable dependent contractors to work 52 weeks a year without taking any holiday. This would undermine the health and safety aims of the WTD.
Tribunal fees and the burden of proof
The Review proposes that individuals should be able to get an assessment of employment status from a tribunal at an expedited preliminary hearing without having to pay a fee. This would clearly provide greater access to the tribunals but will require a mechanism to present a ‘status’ claim. The Review tiptoed around the wider issue of the abolishment of all tribunal fees, which has, of course, since been delivered by the Supreme Court in the Unison case. It seems likely that in due course the government will seek to introduce a watered-down fee regime but if they follow the Taylor recommendation it will not seek to charge anything for a determination of status.
The Review also proposes that the burden should be on the employer to show that the individual is not an employee/dependent contractor – a reversal of the current burden of proof.
These two proposals combined will perhaps encourage more speculative claims to be brought in status cases but many would argue that Taylor is right to have made these recommendations as they help to restore greater balance in the access to justice agenda.
The hidden economy
HMRC lose considerable sums in unpaid tax due to the ’hidden economy’ of cash paid workers. The Review proposes a move towards cashless transactions, with a range of payment platforms that will help individuals pay the correct tax. It is a laudable aim, but will need a lot of detail to create a workable system that actually achieves this and, even then, doubts will remain as to whether it can be policed properly.
All in all, many employment lawyers feel that the Review is slightly bathetic being something of an anti-climax. Before the Review most would not have quarrelled with the principle that clarification of the categories of employment status was urgently required. However, at 115 pages long, to mainly re-state this principle and effectively propose a rebadging of worker status with ’dependent contractor’ seems like a missed opportunity. In my view what is required is a recalibration of the different types of status rather than ’root and branch’ change but access to these rights is essential. As Gareth Brahams, the Chair of the ELA, succinctly put it in his article in the Times in May advocating reform on fees: ’There is no point having rights if they are too difficult to enforce’. With the Unison case arguably being the most profoundly important authority in employment law in a generation, greater access to justice has been achieved effectively overnight for those wishing to test status claims (amongst other rights). I suspect Matthew Taylor would have approved had he seen the Supreme Court decision coming.
How much of the Review makes it onto the statute book remains to be seen. Theresa May has made it clear that the government has no intention of ’turning the clock back’. Currently, a BEIS Committee (being chaired by Ian Wright MP) is looking at similar issues to Taylor and the future of worker rights. The white paper promised in the Autumn promises to be very interesting.
Nick Hurley is a partner and head of the employment, pensions and immigration group at Charles Russell Speechlys LLP