Matthew Taylor’s long-awaited “Review of Modern Working Practices” has finally been published. The review sets out some substantial recommendations with significant implications for employment law.
The Review was commissioned in October 2016 by Theresa May to consider how employment practices needed to change in order to keep pace with modern business models, and there is particular focus on "platform" or "gig economy" workers who provide their services through apps or digital platforms. The report has now been titled “Good Work: The Taylor Review of Modern Working Practices” and the emphasis is on providing “fair and decent” work for all.
The report makes a number of recommendations for clarifying the law on employment status and associated employment protections, which now fall to the Government to take forward. The key recommendations are summarised below.
- The three-tier approach to employment status (that is currently employee, worker, or self-employed) should be retained.
- The Government should introduce the new term “dependent contractor” instead of “worker” to refer to those eligible for worker rights, but who are not employees (all employees are workers, but not all workers are employees). Many gig workers would fall into this new category.
- The absence of a requirement to perform work personally should not be an automatic bar to accessing basic “worker” rights, such that employers cannot hide behind substitution clauses in employment contracts.
- In developing a new test for “dependent contractor” status, the principle of "control" should be of greater importance, with less emphasis on personal service.
- The key principles defining employment status, namely personal service, control and mutuality of obligation, should be set out in primary legislation, with further detail set out in secondary legislation or as guidance.
- The Government should develop an online tool, which gives individuals an indication of their employment status.
- Individuals should be able to have employment status determined without having to pay an employment tribunal fee.
- In the event of a claim, the burden of proof should be placed on the employer to prove that the individual is not an employee or worker (or dependent contractor).
National Minimum Wage (NMW)
- Gig workers should be compensated based on their output (ie by number of tasks performed), provided that platforms can show that an average individual, working averagely hard, receives the NMW with a 20% margin of error (known as “fair piece rates”).
- The definition of "working time" in NMW legislation should be amended to make it clear that gig workers cannot log onto an app when they know there is no work and expect to be paid NMW for all the time that he or she has the app open.
- Platform-based companies should use data at their disposal to provide individuals with an accurate guide to potential earnings if they sign in at a given time.
- The definitions of employment status for tax law and employment law should be aligned.
- The findings of the tax tribunal and employment tribunal should also be aligned, so that where a tribunal finds that an individual is an employee for tax purposes, it is also binding for employment law purposes.
Further detail on the tax implications of the review is available here.
Statements of terms
- Dependent contractors should have the same right to a written statement of terms as employees.
- It should be a statutory requirement to receive that written statement of terms on day one of employment (rather than the current within two months).
- There should be a standalone right to compensation if the employer has not provided the written statement (compensation can currently only be sought as a parasitic claim).
Continuity of employment
- Continuity of employment should be preserved where any gap in employment is less than one month, rather than one week.
Zero hours contracts
- The Low Pay Commission should consider whether employers should pay a premium for short-notice work ie for those on zero hours contracts.
- Those on zero hours contracts should have the right to request guaranteed hours after 12 months.
- Access to holiday pay should be improved for atypical workers by increasing the pay reference period from 12 weeks to 52 weeks.
- Individuals should have the choice to be paid “rolled-up” holiday pay (to be calculated as 12.07% premium on pay).
- Statutory sick pay should be reformed to become a basic employment right comparable with the NMW, which accrues in line with length of service.
- Individuals should have a right to return to the same or similar job following a period of prolonged sickness absence.
- Agency workers should have the right to request a contract of employment after 12 months on an assignment.
- The "Swedish derogation" (which allows agency workers to opt out of equal pay with permanent employees if they sign a “pay between assignments” contract) should be abolished.
Enforcement of Tribunal awards
- BEIS should have the power to enforce Tribunal awards, not just impose a penalty for non-compliance.
- Employers who do not pay awards within reasonable time should be named and shamed.
- Tribunals should consider the use of aggravated breach penalties and costs orders in circumstances where an employer has lost an employment status case and does not apply the ruling to similar working arrangements and subsequent cases are brought by individuals under those comparable arrangements.
- The Information and Consultation of Employees Regulations should be extended, such that employers are required to set up consultation arrangements when requested by 2% of their workforce (rather than the current 10%).
In a speech to the House of Commons launching the review, Theresa May conceded that it was commissioned when she led a majority government and that she can now only act with the support of other political parties. The Prime Minister confirmed that the Government would study the report “carefully over the summer and respond in detail later in the year”. The extent to which the recommendations are implemented remains to be seen. We will update this summary when further detail becomes available.
ACAS has published new guidance against the backdrop of the report, which can be found here.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.