Yodel courier case: European Court decision raises questions about correct test for a 'worker'

One of the developing areas in UK employment law has been the question of employment status in the gig economy and whether people have the rights of “workers” rather than “independent contractors”.
 
A number of individuals have brought successful legal challenges after they have been wrongly categorised by their employers as “independent contractors” rather than workers or employees.
 
Being acknowledged to have “worker” status can be an important distinction for wrongly categorised individuals. While it does not give them all of the employment rights afforded to employees, it does bring certain rights, including paid holiday, under the Working Time Regulations 1998 (“WTR”).
 
For the past few years, the main battleground in these “worker” status cases has been the issue of “substitution”. If an individual has an “unfettered” right to appoint a substitute to carry out their work, then they are not a “worker” (confirmed by the UK Supreme Court in Smith v Pimlico Plumbers).
 
The importance of these “substitution” clauses has led to a number of gig economy companies, including Deliveroo, including amended clauses in new contracts for their workforce in a bid to head off potential Tribunal claims, particularly over holiday pay.
 
The different worker definitions
 
The WTR brought the EU Working Time Directive (WTD) into UK law.  The WTD is silent on defining a worker. In comparison, the WTR requires that, to be a worker, an individual must perform work “personally” for the employer. This “personal” service requirement means that individuals with “unfettered” substitution clauses will not be workers under UK law.
 
Previous European case law has defined a worker as a person who “performs services for and under the direction of another person in return for which he receives remuneration.” (Allonby v Accrington and Rossendale College, Fenoll v Centre D’Aide par le Travail).
 
B v Yodel
 
The Watford Employment Tribunal referred the claim of B v Yodel to the Court of Justice of the European Communities (“CJEU) for guidance on whether UK worker status claims being defeated because of an “unfettered” substitution right was compatible with the CJEU’s different worker test in Allonby and Fenoll.
 
B was a neighbourhood courier delivering parcels for Yodel. There was no dispute that B had an “unfettered” substitution right under his contract - indeed, it was a right used by other couriers. He just chose not to use substitutes.
 
The CJEU answered that that it was for the referring national court to decide if the Yodel courier should be classified as a worker because it requires an assessment of all the circumstances.  However, it observed that the WTD does not cover independent contractors who are afforded the discretion to:

• Use subcontractors or substitutes to carry out the work;
• Choose to accept tasks or unilaterally set the maximum number of tasks;
• Provide services to any third party, including direct competitors; and
• Fix their own working hours within certain parameters and tailor their time to suit their personal convenience rather than solely the interests of the employer.

This is all on condition that the independence of the contractor does not appear to be fictitious; and  it is not possible to establish the existence of a relationship of subordination between the contractor and the employer.

The CJEU concluded that the independence of the Yodel courier did not appear to be fictitious and there did not seem to be a relationship of subordination, but noted that this was ultimately for the national court to decide.

Independence and subordination, or unfettered right to substitute?

This case brings to light the potential conflicts between the CJEU worker definition and that adopted in UK legislation.

In Yodel, Allonby and Fenoll, the CJEU’s guidance on how a worker is defined does not only focus on personal service –  the degree of independence, subordination and direction is of greater importance.

The Yodel order suggests that the importance of the “use of substitutes and contractors” is only one part of the puzzle – if a subordinate and dependent relationship exists even when substitution is used, a person is likely to fall within the CJEU worker definition.

To amend the Yodel example, one can imagine a courier who has an “unfettered” right to substitute another courier to do their work, but they cannot find a substitute or just choose not to exercise this right.

However, the service contract with the company specifies the completion of all assigned work, with penalties such as fines for non-compliance. This amount of work results in 10 to 12-hour days, both making work for a third party impractical and not allowing any leeway to tailor their time to suit their personal convenience.

This courier would fall foul of the UK‘s “worker” definition. But on the CJEU’s analysis it would be difficult to see how an unused but unfettered right to substitute alone meant that he had independence and was not subordinate or under direction when every other part of the CJEU “discretion” criteria in B v Yodel was not fulfilled.

As the CJEU points out, these cases turn on their individual facts, but it is not difficult to imagine such a hypothetical worker, and it calls into question whether the UK’s “all or nothing” approach to substitution is compatible with the CJEU worker definition.

The negative ramifications on worker rights of the UK’s overemphasis on substitution was addressed in the Taylor Review in 2017 – a government commissioned report into modern working practices – which recommended that the test for worker status should be more focused on control and less so on personal service.

Unfortunately, that review is steadily gathering dust and further uncertainty also exists about how worker rights will look after the UK’s transitional period with the EU ends in January 2021.

In the meantime, eyes turn to the next stage in the Uber case in the Supreme Court in July of this year, and whether the Court will issue further guidance in this respect.