Holiday pay and the gig economy

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Holiday Pay Gig Economy

Holiday Pay Gig EconomyMost of us are by now very familiar with the ‘gig economy’ whose businesses deliver our pizzas and provide us with cabs and numerous other services. None of these businesses are alike but many of them share one particular characteristic: they have treated the people working for them as self-employed.

As self-employed people, the individuals working for such businesses do not enjoy the benefits and security that employee status brings but have the freedom to take on work (or ‘gigs’) as and when they want. For the businesses themselves, there are obvious administrative and financial savings: by having contractors rather than employees, they can avoid the other responsibilities of being an employer.

Meanwhile, the law has had to play catch-up with the changes brought about by the new technologies driving this sector and the innovative ways of working it has engendered.

In the last year, the courts in a number of cases involving Uber and other similar gig economy businesses have had to analyse the employment status and rights of the people working for them. They have found that where these individuals might not be conventional employees they nonetheless fall within the broader definition of ‘worker’ in section 230(3) of the Employment Rights Act 1996. As such, gig workers are entitled, amongst other things, to National Minimum Wage, paid annual leave, the right to rest breaks and a maximum 48 hour week, protection under the Data Protection Act and to auto-enrolment in a pension.

This will have come as a shock to businesses who have for years been wrongly classifying their operatives as ‘self-employed’. Things may have got even worse for them following a ruling of the European Court of Justice on 29 November.

Conley King was a salesman who had worked for a company under a ‘self-employed commission-only contract’ for 13 years. In that time he had never been paid for holiday. The company terminated his contract when he turned 65 and he brought a claim for unpaid holiday pay. It was accepted he had a right to paid holiday as a worker but the Court of Appeal sought guidance from Luxembourg on whether his entitlement to the EU minimum of 20 days’ paid leave a year was lost at the end of each holiday year or could be carried over until termination of his contract.

The ECJ found firmly in Mr King’s favour. Workers prevented or discouraged from exercising their right to paid leave, perhaps because they have been mistakenly treated as self-employed, may carry over any untaken part of their annual entitlement to 20 days’ holiday until they have the opportunity to exercise that right, or until termination of their contract.

Businesses now face potential claims for years of unpaid holiday, going back to 1996 in some cases. If you are an employer or employee affected by these recent decisions, speak to one of our specialist employment lawyers and we can advise you how best to proceed.

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