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Taylor Review recommends wide-ranging changes to employment law

Replacing the current ‘worker’ classification with a new concept of the ‘dependent contractor’ is one of the headline recommendations of Good Work: The Taylor Review of Modern Working Practices for dealing with the issues raised by the exponential growth of the gig economy.

The Taylor Review was commissioned in October 2016. Lest anyone think this was simply concerned with the gig economy, in fact its brief was very wide and covered six themes. Here we focus on the employment law aspects which - if they make it into law - will have a significant impact for employers.

The recommendations are as follows:

  • Retain current categories of ‘employee’, ‘self-employed’ and ‘worker’ – but re-label ‘worker’ as ‘dependent contractor’.
  • Replace the minimalistic approach to legislation with a clear outline of the tests for employment status, setting out the key principles in primary legislation, and using secondary legislation and guidance to provide more detail.
  • Build on legislative changes to further improve clarity and understanding by providing individuals and employers with access to an online tool that determines employment status in the majority of cases.
  • The absence of a right to work personally (i.e. a right of substitution) should no longer be a barrier to being a worker (or dependent contractor as it may become).
  • The element of ‘control’ should be of greater importance when determining dependent contractor status. Legislation should outline what this means in a modern labour market and not simply in terms of the supervision of day-to-day activities. The report says that greater emphasis on control and less on personal service will lead to more people being protected by employment law and make it harder for employers to ‘hide behind’ substitution clauses.
  • Adapt the definition of ‘working time’ (for purposes of the NMW) for gig economy workers. Platforms via which such workers log on should use the data at their disposal to provide individuals with an accurate guide to their potential earnings if they sign in at any given time. The rules that apply to ‘output work’ under the NMW regulations could be adapted so that workers would be entitled to a piece rate for such work but would have to take some responsibility for choosing to work at times of low demand.
  • Extend the right to a written statement of terms to dependent contractors (and employees) from Day 1 and back this up with a standalone right to compensation for failure to comply.
  • Align the definition of self-employment for employment law and tax purposes so that being employed for tax purposes would mean that an individual is either an employee or a dependent contractor.
  • Consider introducing a higher NMW for hours that are not guaranteed by the employer; this is aimed at addressing concerns over zero-hours contracts. Employers could continue to use them but pay more for such flexibility. Additionally, ZHC workers should be given the right to request guaranteed hours after 12 months in post.
  • Improve quality and transparency of information given to agency workers in terms of rates of pay and those responsible for paying them. Give agency workers who have been with the same hirer for 12 months a right to request a direct contract. Abolish the Swedish derogation which allows agencies to avoid matching end-user pay by employing agency workers in a way that allows for pay between assignments.
  • Widen the Information and Consultation of Employees Regulations 2004 to cover workers, with the threshold of support for a valid request for an ICE forum being reduced from 10% of the workforce to 2%.
  • Preserve continuity of employment where any gap in employment is less than one month rather than one week.
  • Reform Statutory Sick Pay (which can no longer be reclaimed from the government) so that it becomes a basic employment right available to all workers, payable by the employer and accrued in line with length of service. Similarly, give individuals a right to return to the same job after long-term sickness absence (conditional on their engagement with the Fit for Work service).
  • Holiday pay for those on irregular hours: increase the pay reference period from 12 to 52 weeks. Give individuals the choice of being paid ‘rolled up’ holiday pay, receiving a premium on their pay instead of paid time off.
  • Allow flexible working requests to cover temporary as well as permanent changes to employment contracts, e.g. to accommodate flexibility needed for a particular caring requirement.

Enforcement of rights

The report makes the fundamental point that there’s little point having employment rights if they’re not enforced properly (by the state). To that end, the report has the following recommendations:

  • Give HMRC enforcement powers in respect of sick pay and holiday pay, as well as for the NMW.
  • Tribunal fees are a barrier to workers enforcing their rights, especially when they fall at the last fence in relation to employment status, so give individuals the right to an authoritative determination of their employment status without having to pay a tribunal fee.
  • Reverse the burden of proof in tribunal hearings on employment status so that the employer has to prove why someone isn’t entitled to rights.
  • Allow tribunals to impose aggravated penalties/costs orders on employers who unreasonably defend cases when they know they’re breaching the law.
  • Allow the government itself to enforce tribunal awards, i.e. pursue the actual award rather than simply imposing a penalty for non-compliance.
  • Set up a ‘naming and shaming’ regime for employers who don’t pay tribunal awards within a reasonable time.

The full report can be accessed here.