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13th July 2017

Ask the Expert – The Taylor Review

Matthew Taylor and his team have finally published their review of working practices in the UK. As well as commenting on many aspects of employment (and self-employment) law and practice, the review makes recommendations as to how those aspects could be, in his team’s opinion, improved. This update summarises the main (but non-exhaustive) recommendations in four broad categories.

Employment status

Not surprisingly, particularly since the dawn of the ‘gig economy’ and significant decisions such as in the much-publicised Uber case, a great deal of the review focuses on the nuances of there being three main employment statuses: employee, worker and self-employed.

The review recommends keeping the three-tier approach, but suggests renaming non-employee ‘workers’ as ‘dependent contractors’. It also encourages an update to legislation to make it easier for both employees and employers to determine which status applies to a particular individual. It suggests doing so by taking the key indicators assessed in case law, such as how much control the individual has over their work, and putting them into legislation.

Increased rights for atypical workers

The review recognises the changing workforce and the increase in atypical working such as zero-hours contracts and agency workers. It also considers the law not to have kept pace with such developments and states that a result of that falling behind means that there is not enough protection for such workers.

Currently, only employees are entitled to a written statement of terms and conditions within the first two months of their start date. The review calls for this to be extended to workers and for the statement to be provided on the first day of work, to ensure that workers know the terms that apply to them from the outset.

In relation to zero-hour workers, the review recommends that zero-hours workers be given the right to request a minimum number of hours after 12 months. Going further, it also suggests requiring workers to be paid a rate higher than the National Minimum Wage (NMW) for any hours worked that are not guaranteed under the contract, as an incentive to offer minimum hours to workers. For example, if a worker’s contract was for only six hours per week, the worker would have to be paid more for the seventh (and each subsequent) hour each week.

Similarly, it suggests that agency workers should be allowed to request direct employment in their workplace after 12 months. The review also seeks to improve transparency for agency workers by requiring them to be given more information on issues such as pay.

Holiday and sick pay

Current legislation on the calculation of holiday pay for workers with no fixed hours states that an average should be taken over the preceding 12 weeks. Acknowledging that this may not reflect a true average of pay if less (or more) work has been undertaken in those 12 weeks than normal, the report recommends increasing the reference period to 52 weeks. A legislative decision on this point could be helpful, particularly as the applicable reference period remains one of the unanswered questions following the raft of case law on holiday pay in relation to overtime and commission.

Interestingly, the report also suggests allowing holiday pay to be ‘rolled up’, which effectively allows workers to be paid an additional rate of pay on top of their normal hourly pay to reflect their entitlement to holiday pay. This is controversial in that rolling up holiday pay was deemed unlawful by the European Court of Justice in 2006. In addition, paying holiday pay with normal pay could arguably be a disincentive from taking a period of leave, which seems contrary to recent case law such as Fulton v Bear Scotland and Lock v British Gas.

The review also opines that Statutory Sick Pay (SSP) should be a right available to all workers (i.e. not just those who meet the earnings threshold) from the first day of sickness, rather than the fourth as it is now. In addition, it suggests an incremental rate of SSP that increases with length of service. The review would also like to see a legislative right for workers on long-term sick leave to be able to return to their former role, in the same way as currently applies to family-related legislation such as maternity.

The review also calls on HMRC to be given greater powers to enforce the payment of SSP and holiday pay, as it currently has in relation to the NMW.

Legal action and enforcement

The review acknowledges the unlikelihood of the government abolishing tribunal fees (albeit the situation may be different in Scotland). However, again in the employment status theme, it considers it unfair that many claimants have to outlay fees simply to determine the preliminary issue of whether they are an employee, worker or self-employed contractor. The review therefore recommends allowing claimants to get a judgment on their employment status without having to pay a fee.

Moreover, it wishes to switch the burden of proof to employers, i.e. that it is for the employer to prove that the individual is not a worker or employee (for example), as opposed to the individual having to prove their status.

In terms of enforcement, the review considers that more could be done to enforce tribunal decisions, particularly in relation to the payment of compensation. The suggestion is for the government to have more powers to take action against employers who don’t pay compensation, and for the ability to ‘name and shame’ those employers (as can currently be done in relation to the NMW).

The review also calls for greater penalties against employers who do not apply case law decisions to the wider workforce. For example, if a tribunal were to decide that a claimant were a worker and not self-employed, but the employer did not then treat similar individuals as workers, it could be forced to pay higher compensation to any similar claims from other individuals.

What’s next?

As can be seen from this update, the review has made a great deal of recommendations as to how employment law could be changed. The review is not binding and it will of course be open to Parliament to make (or not make) any changes as it sees fit.

It does however seem likely that we will see at least some developments in these areas, and there is arguably a need for our current laws to catch up with modern life. We will continue to release updates when we become aware of potential changes, but if in the meantime you have any questions on any of the issues mentioned in the above article please contact Seanpaul McCahill.

13th July 2017