A new ‘single status of worker’ definition must be an essential part of Labour’s plan

In this series of blogposts the Institute of Employment Rights explores various policy dimensions associated with the delivery of Labour’s reform agenda in the domain of workers rights. It argues that while several reform proposals contained in Labour’s Plan to Make Work Pay – Delivering A New Deal For Working People seek to address genuine regulatory failures and a number major concerns faced by workers and unions alike, they sometimes lack in detail and/or occasionally appear to fall short of the policy objectives they appear to pursue.

Implementing in full Labour’s New Deal for Working people will require a significant policy delivery effort, spanning well beyond the quasi-emergency legislation that the new executive intends to present to Parliament in the first 100-days of government, in the form of an Employment Rights Bill. Ending the Conservatives’ ‘scorched earth approach’ to industrial relations will not be a quick fix. The present blogposts discusses the important plan to ‘move towards a single status of worker’.

Transitioning to a single status of worker

Labour’s Plan to Make Work Pay: Delivering A New Deal for Working People, the Labour Party’s latest version of its industrial relations programme, expresses a clear commitment to ‘move towards a single status of worker and transition towards a simpler two-part framework for employment status’. This is legal shorthand for enlarging the class of working persons entitled to employment rights (individual and collective) so as to include all workers other than persons genuinely in business on their own account.

There are currently several legal forms of worker status, identified by statute and legal practice. These are:

• the ‘employee’ with all employment rights;
• the so-called ‘limb-(b) worker’ who is self-employed but entitled to some employment rights;
• the so called ‘bogus self-employed’ worker who is treated by the employer as self-employed (and hence is given no employment rights other than some health and safety protections) but is, on examination by a tribunal or court, an employee;
• the employee of a one-person-company which supplies her labour to the real employer – she has all employment rights but they are only enforceable against herself as owner of the company;
• the genuinely self-employed worker, in business on her own account – such a worker has no employment rights.

Delivering within the first year of government – some regulatory pitfalls

Labour’s commitment to reform is to be subject to a ‘full and detailed consultation’ and therefore does not appear in the list of labour law reforms that the King’s Speech suggested will be included in the forthcoming Employment Rights Bill.  This is consistent with earlier indications that change to ‘employment status’ (along with a review of parental leave) would not be delivered within the first 100-days, but rather ‘within the first year of a Labour government’.

While it is perhaps not surprising that a new government would want to put some thinking into such a complex area of both statute and common law, parking ‘employment status’ in the ‘first year of government’ timeframe entails major regulatory risks for several key proposed reforms; Apart from ‘delivering a genuine living wage’, these include

• the prohibition of exploitative zero-hour contracts;
• the abolition of a number of ‘qualifying periods’ and making employment rights effectively available from ‘day one’; and
• ending ‘the scourges of ‘fire and rehire’ and ‘fire and replace’ that leave working people at the mercy of bullying threats’.

The interconnectedness of worker status and other reforms

Regulation for zero-hours contracts, day-one rights, job security, and the living wage are closely interrelated with worker status, and will be undeliverable in full without the latter being simultaneously addressed.

Indeed, it is arguable that without a new worker definition replacing the concepts of ‘contract of employment’ and ‘limb (b)’ worker (contained in s. 230(1) and s. 230(3)(b) of the Employment Rights Act 1996) several flagship policies (such as those identified above) will only be properly delivered several years into its mandate, that is to say once  the new ‘worker’ definition has been determined and introduced.

It is true of course that any new legislation – such as that relating to zero hours contracts – could make clear that it is to apply to both to the current definitions of ‘employee’ under a contract of employment and to ‘limb (b)’ workers.   But that will not be possible in all cases:

• Unfair dismissal law will continue to apply to ‘employees’, thereby undermining the impact of day one rights and fire and rehire/fire and replace reforms respectively.
• And while we might assume that the new living wage will apply to the wider group of workers, the impact will be substantially diminished unless and until a broader, ‘single status of worker’ definition is introduced.

We were reminded of the problems in this area only recently by the Supreme Court’s decision in the Deliveroo case.    In that case,  ‘substitution clauses’ were inserted into the contracts allowing Deliveroo couriers a seemingly unlimited right to appoint substitutes to do their work.  They were not employees but such clauses were held to be effective to deny them even limb (b) worker status, thereby denying them the right to have their trade union recognised for the purposes of collective bargaining.

What is not yet clear is how this decision will affect the right of such workers to the minimum wage and paid holidays.  As matters currently stand, the idea of universal labour rights for them must look like a fantasy.   These workers should not be abandoned.  Nor should the implications of the Deliveroo decision for other workers be ignored.  While algorithmic management and the use of ‘apps’ certainly make it easier for platform employers to organise and control a more ‘fluid’ workforce, there is no legal reason why ‘substitution clauses’ such as those used by Deliveroo could not be deployed to contracts for work in other sectors.

Justice delayed for casual workers

Quite apart of the regulatory risks of delay, it is also the case that we have waited long enough.   It is now eight years since this issue was discussed by the Taylor review, and a further review means that effective reform will be unlikely for at least several years.  In the meantime, the lobbyists and lawyers will be hard at work while the unscrupulous adapt and prepare.  Quite apart from Taylor, this is an issue that has been fully considered by Parliament and has dominated the academic literature.  It is hard to believe that there is anything left to say.

If Labour’s plans are to succeed, and if continuing segmentation of employment rights is to be avoided, it is essential that a new, broad, and single worker definition is adopted as a matter of urgency.

A new concept of ‘worker’ is needed (and readily available)

A basis for doing so is contained in the Status of Workers Bill (2023-2024) most recently presented by Lord Hendy in the House of Lords. The Bill’s purpose was precisely to introduce a single status for workers by amending the meaning of ‘employee’, ‘worker’, (and, crucially, ‘employer’) in the Trade Union and Labour Relations (Consolidation) Act 1992 and in the Employment Rights Act 1996, and related legislation.

Under the Status of Workers Bill, the terms ‘worker’ and ‘employee’ in those statutes would mean ‘an individual who … is engaged by another to provide labour, and is not, in the provision of that labour, genuinely operating a business on his or her own account’. This inherently relational definition would part with the conceptual and practical complications arising from the ‘subordinate contract’ model, and – as argued by IER already in 2018 – would include in the scope of labour law a broad spectrum of work relations, thereby reinforcing two fundamental principles of employment law:  it should be universal in coverage and it should be effective in implementation.

The Status of Workers Bill would thus exclude from coverage only those who were in  effective genuine business undertakings, where any performance of labour, if present, is marginal or is ancillary to the primary entrepreneurial purpose of organising capital or/and the labour of others.  A new definition of worker (and equally importantly a new definition of ‘employer’) would break the mould of the, largely ossified, domestic concepts of contract of employment, limb (b) worker contract, self-employed worker and so on. It would genuinely assist the new government’s regulatory agenda and policy goals.

Conclusions

By way of conclusion, employment status, plays a key gatekeeping role in all labour law systems, ultimately deciding who should be entitled to statutory protections and who should not. But as the New Deal suggests, ‘employment status’ also intersects with a number of reforms currently in the Employment Rights Bill pipeline, and, at a fundamental level, with collective bargaining and trade union recognition processes. The Labour Party is correct in identifying this area of labour law reform as requiring careful consideration. But coordinating these transformative reforms in a timely fashion will be of the essence, especially considering mounting employers’ opposition. Happily, robust regulatory options are readily available.