Matthew Taylor Review: all work should be fair and new dependent contractor status is needed

From it ‘could change how we look at the future of work’ to ‘hardly a game changer’ the Taylor Review is getting a mixed response from politicians, employers and unions. So, what do employment solicitors and HR professionals make of it?

Matthew Taylor, chief executive of the RSA thinktank and former head of policy at Number 10 under Tony Blair, says in many respects the employment market is very positive. However, he makes a number of recommendations to improve the experience of work in Britain.

Here’s a link to the report.

And here are the key recommendations:

A new role for the low pay commission.

An emphasis on transferable skills.

Getting mayors to take the lead in promoting health and wellbeing at work.

Making it easier for employees to get information about their rights.

Legislation to change the status of gig workers to dependent contractors.

“We think it is helpful to have an intermediate category covering casual, independent relationships, with a more limited set of key employment rights applying. We do though think that the current three-tier approach is confusing and that the two categories of people that are eligible for “worker” rights should be easier to distinguish from one another.

“With that in mind, government should introduce a new name to refer to the category of people who are eligible for “worker” rights but who are not employees. We recommend that the legislation refer to this group as ‘dependent contractors’. (p.35 of Good Work: The Taylor Review of Modern Working Practices).

Initial reactions

Laura Livingstone, Partner and Head of Employment at Gordon Dadds, says:

“Amending the law on the National Minimum Wage (to make it clear that gig-economy workers will not have to be paid NMW for each hour logged on when there is no work available) suggests a weakening of gig workers’ rights, particularly to the minimum wage.

“For dependent contractors, minimum wage rules are to be applied on a “piece rate” basis, i.e. paid by the task, rather than by the hour. For example, if a driver or courier gets stuck in traffic, will they then be paid less for not completing their jobs target?

“It is good that zero-hour contracts have not been banned entirely – in some cases, their flexibility can benefit both sides – but the right to request after a year puts pressure on the worker, power in the hands of the boss, and does not give security that the workers need, the same workers who already lack job and shift security.

“Regarding zero hours and short hours contracts, companies should pay a premium for flexibility, paying contracted hours at a standard rate, and anything further at a higher hourly rate.

“Extending the right to a written statement of terms to workers as well as employees and require written statements to be given on day one of employment is beneficial. It could clear up some of the ambiguity that can exist regarding hours of work or salary.

“It is also right that the burden of legal proof is reversed on ET claims, so that companies are to demonstrate that someone is not an employee. It has not been right for a worker to have to go to an employment tribunal to establish normal employment rights.”

Kevin Poulter, Partner, Employment Department at Child & Child, says:

“Away from the headlines and a general belief that the report hasn’t gone far enough, during the launch the Prime Minister made some comments that also deserve consideration. In supporting the entrepreneurial start up culture that has erupted in the UK in the past few years or so, Mrs May said “As aspiration becomes reality, as an idea becomes an invoice, we will back those who dare to dream and who dare to think big.”

“However, it is at the time when businesses grow from a bedroom to a boardroom that the most support is needed and the difficulty is in supporting new businesses whilst also protecting and preserving the rights of workers.  It is often businesses that are starting out that rely on ad hoc workers, flexible payment terms and goodwill.  Steps to formalise such relationships may go some way to protect workers, but they may also restrict new business growth in the early stages.

“It will take time to find a balance and, in that sense, time will tell. Clarity and certainty is what will matter the most, but it is now up to Government to take on that challenge.”

Liz Stevens, professional support lawyer at Birketts LLP, says:

“Clarity over employment status is something to be welcomed, but I suspect the reality of trying to draft primary legislation suitable for the job will prove very difficult to achieve. Employment tribunals are well suited to considering the nuances of specific employment relationships by a careful analysis of all the relevant circumstances; it is much harder to distil the relevant principles into workable legislation. If it was an easy nut to crack, I suspect it would have been done years ago.

“Many of the proposals will require significant periods of consultation and it therefore remains to be seen how many of them will find their way into the Government’s legislative programme, when so much parliamentary time and resources are already devoted to the complexities of Brexit.   The Government has so far only committed to ‘engaging with stakeholders’ and publishing a full response to the review later in the year. The only thing we can say with any certainty is that none of the proposed reforms will take effect any time soon.”

Claire Dawson, employment law specialist at Slater and Gordon, says:

“The Taylor Review has rightly recognised that there is exploitation in the so-called “gig” economy and that those engaged in it are too often treated unfairly.

“The growth in the digital economy has blurred the lines between the classification of employee, worker and the genuinely self-employed, the latter group having no employment rights.

“While it is welcome that this government-commissioned report has attempted to clarify the position of a large proportion of the work force, much more needs to be done to redress the imbalance in power between large companies like this and their staff.

“The courts have already recognised the right of Uber drivers and others such as bicycle couriers to “worker” status meaning they have the right to holiday pay and an hourly minimum wage.  There is a danger that by allowing a piece-work rate of pay to apply, as suggested by Taylor, the right to minimum wage is diluted in this sector.  Experience shows that some large companies will use whatever the law allows to drive down costs, often to the detriment of staff.

The Taylor Review has made some welcome recommendations for making it easier and cheaper for people to challenge unfair work practices through employment tribunals. At the moment the process of establishing they have basic rights, such as holiday and sickness pay and are entitled to the minimum wage, can be prohibitively lengthy, complex and expensive. Taylor has suggested that no fee should apply where a worker wants a determination about their status.

“He would also allow Tribunals to impose aggravated penalties on employers who do not apply existing rulings on employment status to similar groups of workers. Large companies should feel pressure to categorise their staff correctly from the start and provide them with information about their statutory rights so that workers don’t have to take claims.

“The Government also needs to address is the way large companies often ask so-called independent contractors to confirm they are self-employed in their contracts and to sign clauses which require them to pay back the company’s liability, costs and expenses if they claim employee or worker status at a later date.

“Although likely unenforceable, these clauses cause a great deal of concern and anxiety for the individual workers asked to sign up to them. This is an area that must be addressed.  Taylor has recommended that workers have the right to a statement of their terms and conditions which include details of their statutory rights at the outset, in the same way employees do. This is positive but there should be more of a disincentive on employers miscategorising staff as independent contractors and including oppressive terms in contracts.”

Daniela Korn, an Associate in the Employment and Business Immigration Group at Sheridans says:

“There is no doubt the Taylor review was launched with the good intention of ensuring ‘fair and decent work,’ but will the recommendations be sufficient to achieve this goal? Our initial reaction is that it doesn’t really help to codify the case law principles, as the principal problem is predicting how the principles apply to a particular set of facts.

“This becomes particularly challenging when the facts we are now faced with – e.g., digital platforms and gig economy workers – differ significantly to the traditional working models upon which the courts are used to adjudicating. The UK Courts know the tests (whether they’re set out in case law or statute), it’s just hard to say in each case what the correct answer is. Some of the proposals in respect of gig economy workers including clarification as to when national minimum wage would be payable are welcome, but query whether it goes far enough.

“The crucial element that the report does not address is a direct solution in how we categorise who is an employee, a worker and the truly self-employed. It confirms that clearer definitions are needed but it falls short of setting out proposals on how those categories should be defined and applied.”

Phil Allen, Partner and employment law specialist at national law firm Weightmans, on dependent contractors:

“Creating a new ‘dependent contractor’ status could be a sensible way of balancing the need to allow innovative business models to thrive, with that of protecting workers from exploitation. These contractors could be offered sickness and holiday pay, while they, and the business, retain the flexibility of the gig model. It would sensibly stop concerns about status being a blocker to organisations offering dependent contractors such benefits.

“But it won’t resolve the more fundamental problem of distinguishing between who is and isn’t classed as an employee or a dependent contractor when disputes arise. Relabelling workers as dependent contractors won’t achieve anything if the distinction between the categories remains as difficult to pin down.  Removing benefits as a distinguishing factor, if anything, will blur the boundaries even further leaving very few factors to aid in identifying where the distinction is to apply.

“There will still be significant legal differences between what dependent contractors and full employees are entitled to – such as protection from unfair dismissal.  That means we are likely to continue to see disputes arise. And, by their very nature, these businesses do not operate in a standardised way, meaning there is potentially massive room for interpretation. Even if the law is tightly written, it is still likely to be tested and interpreted in the courts.”

Michael Burd, Chair and Partner at Lewis Silken says:

“It is hoped that many of the Taylor Report’s recommendations will be embraced as they have the potential to bring about significant positive change in employment law. Recognition of the importance of the so-called gig economy to the UK is to be welcomed. To date applying employment laws designed for the working practices of the last decades to modern ways of working is putting a round peg in a square hole.

“Our international colleagues from all parts of the world have shown a great interest in the UK’s attempts to grapple with reconciling employment laws to new ways of working. Interest in Taylor’s recommendations will extend far beyond our shores and could well influence other countries’ responses to these challenges.”

David Jones, employment solicitor at Myerson Solicitors says:

“The key talking point so far in the Taylor Review is the recommendation that a new category of “dependant contractor” should be created. “How wonderful!” employment lawyers groan collectively, “more legal definitions. Just what we needed!” However, new legal definitions also need to be applied and tested. We can (and, no doubt, will) form our own opinions on how the new legal terms should be interpreted; but it is only once judges have considered and applied the terms that the position will be clearer. That process could take years to filter through.

“The other difficulty is that workers engaged in those contracts are often on low pay, with little job security. Even if their (newly created) legal rights are being breached, the costs of enforcing those rights is off-putting, especially since the introduction of Employment Tribunal fees.

“In formulating the new category of “dependant contractor” the Taylor Review has identified “control” and “supervision” as the key factors. However, these are already applicable in the existing legal test for a “worker”, and yet employers have still treated workers as self-employed. This shows the problem is not necessarily related to legal definitions, but culture: in some quarters, there are still employers who prefer to treat their workers as self-employed until such point they are instructed otherwise by an Employment Tribunal.

“Even with the introduction of “dependant contractors”, enforcement will be crucial. The Taylor Review has recommended some steps to improve enforcement, in particular that claimants should be able to have their employment status determined for free. Currently a claimant must pay their Employment Tribunal fees before finding out that their claim has been rejected at a preliminary stage on the basis they are not an employee or worker.

Julie Taylor, senior associate in the employment team at Gardner Leader Solicitors, says:

One of the more curious recommendations appears to have been inspired by “piece work” used in the agricultural sector. The idea is that new “dependant contractors” should be able to have access to a payment system that tells them how much work they have to complete in order to be paid at least the minimum wage. This will also require that they work when there is high demand, but will give the option of working at other times and the individual can choose whether they are prepared to work for the lower pay.

“A further proposal is to task the Low Pay Commission with examining whether a higher NMW rate can be applied to workers who do not have guaranteed hours.

Many expected that the review would recommend the abolition of zero hours contractors, however, instead the review recognises that many individuals actually value the flexibility these arrangements allow. Instead, the sensible recommendation is that those on zero hours contracts are given the right to request fixed hours. This would appear to be supported by industry, particularly given the recent experience of McDonalds who offered all their zero hours employees the option to move onto fixed contracts and only 20 per cent of them took up the opportunity.”

Kate Griffiths-Lambeth, director of Human Resources at Charles Stanley, says:

“Although what it states is laudable (support for good quality, well-paid, secure work, where people don’t feel “like cogs in a machine rather than being human beings”), I doubt if many/any of the recommendations will be enacted – the Government has other more pressing concerns.

“Many of what are identified as being appropriate practices are simply proposals – for example that an individual should be able to request set hours, but there is no compulsion on the employer to capitulate. Given that “The UK is rated a having the 5th most efficient labour market in the World Economic Forum’s Global Competitiveness Report 2016-17, behind only Switzerland, Singapore, Hong Kong and the United States”  Taylor seems disinclined to rock the boat.

“The Report’s findings could have repercussions for employers and contractors as I suspect that the area where we might see some legislation is around “dependent contractors” who work for a sole organisation and where those organisations have a “controlling and supervisory” relationship – I can envisage there being a requirement for these organisations to pay NI for these individuals going forwards as well as providing certain benefits.

“This isn’t just a “gig economy” issue – IT contractors and some interim managers that remain within a traditional organisation for years would be covered by this. However, as Philip Hammond discovered earlier this year, increasing NI paid by the self-employed is a contentious subject (and in breach of a Conservative pledge made at the time of the 2015 general election).

“One interesting aspect in the report is the proposed ability for individuals to have a free assessment of their rights at work prior to incurring potentially expensive employment tribunal fees. There is clear evidence that the cost of tribunal fees have reduced the number of cases brought to tribunal over recent years.”

Sarah Peacock, an employment specialist at Blake Morgan, says:

“Far from clarifying the position, the new category of employment status of ‘a dependent contractor’ who has a number of, but presumably, different employment rights to a ‘worker’ could just complicate things for both parties.

“Employment tribunals are very experienced in looking at the realities of the working relationship and even when the contractual documentation states, for example, that an individual is self-employed, after applying various tests, the tribunals often conclude that the individual is in fact a worker.

“Many people work in the gig economy because of the flexibility and independence it provides in relation to how, where and when they work. Indeed, Matthew Taylor recognises that retaining this flexibility is crucial but that there should be two-way flexibility so that workers receive benefits yet still have the ability to work when they want.”

Philip Paget, partner and head of employment at Gordons, says:

“I think on the whole the Taylor Review outlines some sensible recommendations which, if adopted, will provide greater clarity in an area of employment where there are currently a number of grey areas. The recommendations seek to provide increased protection for workers by way of a new category of ‘dependent contractors’, who due to the nature of their employment are not autonomous and can only work when they are given instructions from a customer. That being said, whether yet another new worker category and definition is actually required is a different matter.

“As technology has advanced we have seen issues arise with app-based and zero-hours employment and the laws regarding worker entitlements and benefits, so in many ways this review has been a long time coming. It will hopefully provide clarity while also addressing the issue of the colossal level of tax lost through National Insurance contributions avoided by some employers operating this model.

“Adoption of the recommendation would also set a framework for similar employment models that will no doubt continue to be developed by businesses looking to make use of app platforms commercially.”

Beverley Sunderland, managing director of Crossland Employment Solicitors, says:

“The long-awaited Taylor Review into modern ways of working brings a number of recommendations for workers, but will no doubt have a significant impact on the ‘gig economy’.

“The recommendation is that the current three-tier approach to employment status is retained but that the current ‘worker’ category is renamed as ‘dependent contractor’ with the element of control assuming greater importance and less emphasis placed on the requirement to perform work personally.

“In the report Matthew Taylor recommends that there should be a free initial assessment of employment status in the employment tribunal to try and cut down on time wasted and costs and that employees should not have to keep fighting the same cases ‘again and again’. He also believes there should be harsher penalties for employers who deny their staff the proper status.

“This is a positive recommendation by the Taylor Review that reflects the practical reality of hundreds of ‘workers’ in the gig economy who are integrated into businesses, but without any real ‘control’ over their working relationship – previously designated as ‘self-employed contractors’ and denied holiday pay, statutory sick pay, pensions and a minimum wage.”

Alan Lewis, Manchester Employment Solicitor, says:

“The fundamental employment protection right that is missing from the review’s recommendations is the right to protection from unfair dismissal, or a similar right specific for “dependant contractors”. This right to unfair dismissal is only available to “employees”, but most employment lawyers will be acutely aware that many employers use zero hours contracts and self-employment agreements to disguise what in reality are employment relationships, with the main intention of avoiding protection from unfair dismissal. Indeed the very term “dependant contractor” used by Taylor denotes a worker who is reliant on a continued employment relationship to earn a living. There has been much comment about job insecurity in the gig economy and, as long as employers can dismiss workers without facing unfair dismissal claims, such insecurity will continue.”

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