United States: Recent UK Ruling Highlights Risks Of "Independent Contractor" Status

In most jurisdictions, there is a binary distinction between "independent contractors" and "employees," with employment rights only afforded to "employees." In the UK, there is a third class—"worker" —who benefit from certain employment rights, including paid time off and a minimum wage.

The case of Addison Lee Ltd. v. Lange and Others provides important guidelines on the distinction between "workers" and "independent contractors" which are of critical importance for businesses that engage atypical workers. Importantly, UK Employment Appeal Tribunal ("EAT") rejected an appeal filed by British taxi company Addison Lee Limited, and instead affirmed the Employment Tribunal's finding that Addison Lee's drivers were not independent contractors, but instead qualified as "workers."

Facts

Michall Lange and two other drivers brought claims against Addison Lee, asserting that they qualified as "workers" under UK regulations. This was despite their contracts expressly stating they were independent contractors. The drivers therefore argued that they were entitled to holiday pay and minimum wage.

Under Addison Lee's system, all drivers were provided with a hand-held computer, which they were instructed to turn on whenever available for work. When provided a job, a driver was expected to immediately accept it or provide an acceptable reason for not doing so. A failure to accept a job or provide a legitimate reason for not doing so could result in sanctions, such as logging the driver off of the system or referring the matter to a supervisor. Although Addison Lee did not promise its drivers a specific amount of work, it did instruct drivers that they should try to work an average of 50 to 60 hours per week.

The Employment Tribunal Decision

The drivers' attorney argued to the Employment Tribunal that the independent contractor status provided in Addison Lee's employment contracts did not reflect the true arrangement among the parties. Addison Lee countered that drivers should not qualify as workers because Addison Lee did not require them to work. Therefore, Addison Lee maintained, each driver was running his or her own small business—Addison Lee merely provided the cars and equipment.

The Employment Tribunal concurred with the drivers, holding that although they were technically free not to work, "[t]he commercial reality [was] that they are undertaking to do work when and as soon as they log on." In other words, while logged on, a driver had undertaken to do work for Addison Lee and was expecting Addison Lee to offer such work. This created a mutuality of obligation through the contractual obligation for Addison Lee to offer work and for the individual to accept it, subject to the individual's occasional entitlement to decline if a parcel was too heavy. This mutuality of obligation meant that the drivers should be classified as "workers" rather than independent contractors. Further, the Employment Tribunal determined that time drivers were logged on counted as "working time," regardless of whether the driver was transporting a passenger.

EAT's Holding

Addison Lee appealed to the EAT, contending that a driver logging on to the system should be considered only "a signal of willingness or availability, not a commitment to undertake journeys," and that there was insufficient basis for departing from the express wording of the relevant contracts which stated that the drivers were independent contractors.

However, the EAT held that the Employment Tribunal had been right to look behind the express wording in the relevant contract in order "to glean the true agreement from all the circumstances of the case," including, importantly, the parties' relative bargaining power. With those principles in mind, the EAT held that it was reasonable for the Employment Tribunal to find that the drivers were workers based, in particular, on the fact that drivers was required to accept jobs when logged in to Addison Lee's system. Regardless of the contractual provision stating that drivers need not take work, the reality was that when logged in, drivers were obligated to undertake jobs assigned to them, which meant they had the status of workers.

Implications

The analysis provided in Addison Lee confirms that the label given to a contract is not determinative. It is an example of how the commercial reality will determine the status of someone undertaking work. Relationships that have the character of a "worker" relationship, such as the mutuality of obligation in this case, requiring the individual to accept offered work, may lead to a rejection of the independent contractor status, requiring payment of applicable wages and benefits. With more and more companies seeking to take part in the "gig economy" of independent work, businesses should review their practices and policies to assess the true nature of the relationship with those that they engage.

Recent UK Ruling Highlights Risks Of "Independent Contractor" Status

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions