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Businesses at Risk Amidst Confusion Over Employee Status

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A leading employment law expert has said that many companies in the UK are at risk of falling foul of the law over the confusion surrounding employee categorisation – after one of the UK’S biggest minicab companies lost its bid to overturn a ruling that entitled its drivers to a range of workers’ rights.

The warning comes after Addison Lee, a private hire taxi company based in London, was told at an Employment Appeal Tribunal this week that it must pay drivers the national minimum wage and holiday pay – with the Appeal Tribunal rejecting the company’s argument that they were self-employed independent contractors.

This latest outcome, which upholds an earlier Tribunal ruling from last year, has ‘shone a light’ on the ongoing confusion over how employees, workers and self-employed contractors differ – and what businesses need to do to ensure they are not breaching the law.

Aneil Balgobin, employment law expert at Simpson Millar said:

“In many cases, companies still think that all they need to do to avoid the financial burden of staff being treated as employees or workers is to get the individuals to sign contracts stating that they are “independent contractors” or “self-employed”.

“It’s generally easy to determine who is genuinely an employee and who is genuinely self-employed – but the middle tier of a “worker” is a real grey area.

“It has to be said though that rather than erring on the side of caution and treating such individuals as workers a number of companies have rolled the dice and maintained that these people are “independent contractors”. However the courts and tribunals are generally cracking down on this by peeling away the contractual wording and looking at what is happening in reality.

“Therefore the financial gain that certain companies have obtained by not recognising staff as workers and not paying them holiday etc is being wiped out by these cases – on top of legal costs and negative publicity there are also hundreds or thousands of other claims that Addison Lee may now be facing from its workforce of around 4,000 drivers.

“It’s inevitable that at some point in the future (when the legislature gets some breathing space from Brexit) that the uncertainty about worker status will be clarified; but until such time companies are well advised to revisit their contractual documentation and assess whether they have tried to use clever wording which is not reflective of what is going on at ground level – otherwise they could be storing up big problems for the future which they may not be able to financially survive.”