The impact of UK Law on sport

By Stephanie Crainey, Ross Codona and Briege Elder (Editor: SJ Crossan)

Introduction

Sport is often viewed as a special entity whereby the law and legal systems do not directly interfere with its rules (Laver, 2020). Therefore, the rules under which a particular sport is played are not an area where the legal system will usually interfere.

The government in the United Kingdom has adopted this non-interventionist approach to sport, meaning there is no general law for sport. Instead regulation is left to the National Governing Bodies (NBGs) (Bennett, 2019).

However, with the turn of a new decade and the economic crash caused by the COVID-19 pandemic, some major issues in sports law have arisen, including whether an athlete is an employee or worker, the terms and conditions governing athletes and their use of social media platforms. Can these issues possibly be addressed, never mind resolved?

Is an Athlete an employee or a worker?

Above British cyclist, Jess Varnish (right) who is currently involved in legal action against British Cycling and UK Sport over her employment status

The question of an individual’s employment status is always up for debate no matter which profession we are discussing. The focus of this question, in recent times, is mainly focused around the gig economy. This type of work might involve individuals providing a service e.g taxi driver (Uber) or food delivery (Nicholson, 2019).

However, due to the nature of the work (short-term and very insecure), gig economy workers are not usually granted the same rights and protection as employees under UK employment law.

Attempts have now been made to address this situation: in 2017, Matthew Taylor, Chief Executive of the Royal Society of Arts and former Downing Street adviser, was commissioned by the UK Government to conduct an independent review on modern working practices; and in the US State of California, Assembly Bill 5 was passed into law in 2020 giving gig economy workers employment status. The Taylor Review looked at the growth of the UK gig economy and considered its implications for worker rights and responsibilities (Nicholson, 2019). Despite the widespread attention that the Californian Assembly Bill 5 and the Taylor report both received, there is still not sufficient clarity surrounding the status of workers who provide services in the gig economy.

In 2018 the issue of employment status and sport received a lot of media attention when former Great Britain cyclist, Jessica Varnish argued that she ‘should be considered an employee of British Cycling or of the funding agency, UK Sport.’(McGowan, 2019). The world silver medallist set out to prove she was, in fact, an employee in order to enable her to sue British Cycling and UK Sport for both wrongful dismissal and sexual discrimination, after she was dropped by team GB before the 2016 Olympics. Shane Sutton, former British Cycling director, was found to have used sexist language toward Varnish, although he denied these claims. Sutton later left his post with British Cycling.

Unfortunately, for Varnish, she lost her claim for wrongful dismissal at the Employment Tribunal in early 2019. Put simply, the Tribunal held that she was not an employee of either British Cycling or UK Sport and, therefore, she was not entitled to bring such a claim. Varnish has now appealed to the Employment Appeal Tribunal.

The appeal hearing could either overturn the decision of the Tribunal or order a new hearing to take place. Varnish stated:

“I want to give others the opportunity to hold to account employees of governing bodies, who they interact with on a daily basis, and have significant control over their careers and opportunities.”

She added:

I continue to think it’s unfair that athletes still have no structured means to do this, and I hope this appeal will be the first step towards affecting change, and bring about a fairer, more modern and high performance system in the UK where athlete welfare is not just a sound bite, but something that we all believe in.” (McGowan, 2019).

In response to her statement, a British Cycling spokesmen added:

We very much regret that Jess has been advised to pursue the route of an employment tribunal when other avenues were available to her….. We will continue to represent what we believe are the best interests of every rider currently supported through the high performance system, and all those in our sport who hope to one day compete at an Olympics or Paralympics.” (McGowan, 2019).

Employment rights: employees vs workers

Determining the question of Jessica’s Varnish’s employment status (employee or worker) is vital to this case as it will decide what employee rights she is entitled to (if any).

True, most workers are protected against unlawful discrimination in terms of the Equality Act 2010, and harassment and victimisation in relation to ‘whistle-blowing’ actions (reporting of wrong doing in the work place). However, you must be an employee in order to be protected from unfair and wrongful dismissal (CIPD, 2020)

Section 230 of the Employment Rights act 1996 defines an employee as “an individual who has entered into or works under a contract of employment.”

Over many years, UK courts and Tribunals have developed specific tests that must be fulfilled in order to assess an individual’s employment status (Crossan, 2017). These include:

  • Mutuality of obligation
  • The control test
  • The economic reality test
  • The organisation or integration test

The definition of a worker (which is a wider concept than an employee) can also be found in different pieces of legislation e.g. the National Minimum Wage Act 1998 and the Working Times Regulations 1998. The Chartered Institute of Personnel Development (CIPD) defines a worker as:

an individual who undertakes to do or perform personally any work or service for another party, whether under a contract of employment or any other contract.’(CIPD, 2020).

Although the CIPD definition is based on the Employment Rights Act 1996, the definition of worker varies from statute to statute.

As in other parts of the UK employment market, the employment status of athletes will often be a contested concept, meaning that the various tests listed above will have to be deployed by the courts and Tribunals to resolve the issue. It is notable that a large part of Jessica Varnish’s original Tribunal action focused on the control test i.e. she had to follow the training regime laid down by British Cycling in order to be eligible for continued funding from UK Sport.

Athletes in the world of social media

Social media is a great way for an athlete to connect with their existing fans. As well as this, it also allows you, the individual fan to connect with others whom you have never met, such as other fans of your team/sport, or supporters from your hometown etc. Athletes, amateur and elite, can have their use of social media restricted and regulated through provisions contained in Standard Player Contracts.

This is completely understandable from the point of a view of an employer or sponsor because an athlete’s online activities/posts may bring about critical, reputational harm and financial loss to partnered clubs and associations. Athletes’ contracts may contain certain restrictions on what they can and can’t post on social media. However, these restrictions may or will vary from specific social media targeted polices (“blackout” before during and after games), to more general restrictions which cover wider aspects of an athlete’s behaviour (Social Media In Sport: Top Tips, 2020).

Clubs and organisation are urged routinely to remind athletes with regard to what is appropriate and inappropriate online behaviour. This can incorporate a reminder to athletes that, while they are not participating in the activity, they still have commitments to the employer and sponsors and are expected to stick to an agreed code of conduct – just as though they were working. Athletes may have both a personal and professional social media account, but the restrictions and requirements that they are expected to adhere do not change.

Social media allows athletes to secure sponsorship. Platforms such as Facebook, Instagram and Twitter are just some of the ways to reach thousands of people who you would not normally be able to target.

In the UK, athletes and brands must take care when posting promotions and sponsored posts. This is regulated by the Advertising Standards Authority and the Committee of Advertising Practice Codes. The CAP code requires that all advertising is easily identifiable.

In 2012, professionalfootballers, Wayne Rooney and Jack Wilshire broke this requirement after they posted a tweet under Nikes campaign slogan ‘#makeitcount’. The two athletes failed to make it clear that the tweets were in fact from Nike’s marketing communications. For an athlete or any individual using social media for promotional purposes, they must add ‘#spon’ or ‘#ad’ to a post, something which both Rooney and Wilshire failed to do. This helps to make the advertising easily identifiable and prevents anyone from failing to meet the requirements (Social Media In Sport: Top Tips, 2020).

A delicate balancing act

Guidelines for athletes to follow for social media may vary from each profession. It’s no surprise that what Athletes post can be seen potentially by millions of people around the world. There is a need to ensure that, before posting any content, they are happy with what they are about to upload. Are they happy for the post to be linked back to them and be easily accessible forever? Would they be happy if the post was to end up appearing somewhere which was not intended e.g TV, gossip magazines/blogs? It can be a very delicate balancing act.

It is important to respect yourself, your sport and the club/organisation of which you are part. Anyone, especially a public figure (such as athletes), must ask themselves, how might this be portrayed or received by my followers? Will this reflect negatively upon their “role model” status? Could my post effect sponsorship for them or the sport?

These are just a few guidelines that Scottish athletes have to consider Athletes must also ensure that the amount of time they are spending on social media is not affecting their performance. All of these factors are essential when considering what content to upload and share with your followers on social media. Ultimately it’s all about having respect for your audience and yourself.

Maternal/paternal rights for athletes

Many employees receive family-friends benefits which include parental leave or childcare. Diageo, for example, is a UK beverage company which recently introduced female employees to be offered a minimum of 26 weeks fully paid maternity leave under a new global policy (Rennie and Beach, 2020). The vast majority of employees, by contrast will receive just the statutory minimum maternity pay.

Maternity rights

Sporting bodies are generally falling behind in creating Family-Friendly policies which is inconsistent with modern attitudes towards athletes’ rights. Many British athletes e.g Jessica Ennis-Hill and Jo Pavey are parents, yet have still made a successful return to sport.

UK Sport Guidance states thatif a female athlete becomes pregnant they can continue to receive World Class Programme funding and support during pregnancy and after child birth. She (the mother) and her performance director are expected to agree a new appropriate training and competition programme that would map the athlete’s return.

Three months after childbirth, the sports performance director is encouraged to undertake a review with the athlete in order to assess them on her commitment to the agreed plan. By the end of the three months, if the athlete has made the decision that they in fact do not want to return to the sport, then they would be given a notice period depending on the length of time that they had been involved on the World Class Programme before they were then removed from funding (Falkingham, 2020).

Paternity rights

In 2019, the England Cricket team had its biannual tussle with rivals Australia. Batsman, Joe Denly, a new recruit to the England ranks, left the field at the end of the first 5 days of the final Test Match at the Oval in London. The athlete drove 60 miles to be with his wife for the birth of their daughter. The following day, Denly was back on the field facing the Australian bowlers. Joe then went on to create the highest score to date, only narrowly missing out on a Test century (Jackson and Brenner, 2018 and Anderson et al, 2019).

Denly’s story is a happier example than the experience of former Manchester United’s French star, Anthony Martial. The star was fined £180,000 and shamed publicly in 2018 for missing a week of training after flying to be his wife in order to support her through a difficult labour and welcome their son into the world. Two of the days in which he was away were dedicated to travel alone (Jackson and Brenner, 2018 and Anderson et al, 2019).

Sporting success is valued more than family. The famous one liner,“winners never quit and quitters never win” is one which athletes find so important. So much so that, in the 1990s, the President of Oakland athletics, Billy Bean missed his partner’s funeral in order to continue playing a game (Anderson et al, 2019).

These types of incidents sit completely at odds with decent treatment of employees. Organisations are increasing the length of time woman get full maternity pay. A study by the University of Birmingham found that only 9,200 new parents (just over 1% of individuals entitled) shared parental leave in 2017-18. However that rose to 10,700 in the financial year 2018-19. Companies now seem more willing to offer other options to just maternity leave, in the hope of recruiting and retaining high calibre employees (Birkett and Forbes, 2018).

How has Coronavirus has affected sport?

Law in sport is no different to ordinary law in that sporting organisations and sponsors have to respect and obey the rules. This has been particularly highlighted during the current COVID-19 pandemic crisis.

Coronavirus has caused major sports leagues and events around the world to cease current activities or cancel upcoming events due to strict lockdown rules (The Independent, 2020). COVID-19 has forced governing bodies to try to intervene and protect institutions within their area, for example, FIFA (the governing body of football) has set up a £121 million relief fund for its 211 national associations (Keegan, 2020)

The lockdown laws which come as part of the pandemic haven’t just affected international bodies but also had an affect domestically. In Football, national leagues such as the Premier League in England have come to a halt until further notice ,whilst some other leagues around Europe declared their seasons over or null and void as they have in Ligue 1 (France) and the Eredivisie (The Netherlands).

The halting of sporting activities isn’t the only implication of this crisis: it has had a major impact on the employment of all those involved in sport directly or indirectly.

In the UK, furloughing has been introduced to try and help businesses to pay their employees. The furlough scheme means that the UK Government pays 80% of employees’ wages up to a ceiling of £2500 a month.

This causes issues, however, for many professional, sporting institutions, as many athletes are earning far above £2500 a month. Therefore such individuals are ineligible to be furloughed placing sporting institutions under serious financial strain should players refuse to take wage cuts. FC Sion, a football team in Switzerland, were forced to terminate the contracts of 9 footballers after they refused to take pay cuts (BBC, 2020b)

In other instances, the furlough scheme has been supported and it has had the desired effect. The McLaren Formula 1 team main drivers Carlos Sainz and Lando Norris have taken pay cuts in order to support their fellow employees on the team (Galloway, 2020)

Added to this, the UK Health Protection Regulations 2020 have prevented sports such as Formula 1, Football, Boxing or Rugby being performed because of current social distancing restrictions. Whilst this has had a detrimental effect on the sporting world as a whole, it has provided a boost in less traditional fields. E-sports have increased in prominence since the cancellation/postponement of traditional sporting events. Formula 1, in particular, has capitalised on the potential E-sports platform. Formula 1 has been hosting ‘virtual’ Grand Prixs where a mixture of current drivers, figures in the sport, other sportsmen or celebrities race against each other by using the official Formula 1 video game (Dixon, 2020).

The reaction has been positive as a reported 3.2 million viewers witnessed the inaugural virtual Grand Prix, the stature of many of those involved is testament to its success as prominent figures in world sport such as Thibaut Courtois, Ciro Immobile and Sir Chris Hoy have all competed in the virtual Grand Prix (Dixon, 2020)

The cancellation of major sporting matches and events is causing massive implications financially and logistically. In Rugby there had been suggestions that games in France could be played behind closed doors should the league be started again. Club owners highlighted objections to this, in particular, the owner of ‘Stade Toulouse’ would potentially lose millions of Euros before the end of the season should games be played behind closed doors (Ultimate Rugby, 2020).

The UK Health Protection Regulations 2020 have caused major financial implications to sporting institutions across the country. Leeds United, a football club competing in the English Championship, is set to miss out on lucrative financial benefits of promotion to the Premier League. Being promoted to the Premier League guarantees Clubs a large sum of prize money worth millions. However, the following season they spend in the premier league promises them close to £100 million even if they finish last place (Winters, 2020). This level of money could help Leeds United recover from its financial deficit. At the time of writing, all games have been postponed for the foreseeable future meaning that there is a lack of certainty as to what happens next.

Logistically on a global scale COVID-19 has caused the disruption of massive global events that take years of organisation to have now been postponed. Although some of the postponements are only estimated to be a year, the cost can still be detrimental. Reports claim that a one year delay of the Olympics could result in £2.3 billion in further costs (Mail online, 2020).

Conclusion

COVID-19 has emphasised key aspects of employment law, even at an elite level in sport there is more protection being employee rather than being a worker or self-employed. Many members of clubs and teams in different sports have agreed pay cuts. However, they are still being paid. This situation isn’t the same for professional golf: players are registered as self-employed. Footballers are still being paid or have at least agreed a deferral of wages or a temporary pay cut, but nevertheless, their employment contract still protects them during this time of major uncertainty. Golfing stars such as Rory McIlroy and Tommy Fleetwood do not have this protection unlike football stars such as Harry Kane and Raheem Sterling.

It is clear that UK employment law needs to do more in determining an athlete’s employment status. The UK Government must also work harder to protect athletes and their rights. Due to the catastrophic pandemic, not only will sports organisations and clubs suffer but also their athletes. The only certainty in these most uncertain times is that Covid-19 is likely to generate a plethora of future legal disputes which will shape our legal landscape, especially in the world of sport, for some time to come.

References

Anderson, E., Parry, K.D., & Batten, J., 2019. With women’s sport leading the way, male athletes could benefit from family-friendly policies too. Available at: https://scroll.in/field/942000/with-womens-sport-leading-the-way-male-athletes-could-benefit-from-family-friendly-policies-too

Anderson, E., Parry, K.D., & Batten, J., 2020. Sporting Dads: Male Athletes Need Family-Friendly Policies Too. [online] Available at: https://www.google.co.uk/amp/s/theconversation.com/amp/sporting-dads-maleathletes-need-family-friendly-policies-too-125514 [Accessed 25 April]

BBC Sport. 2020. Should Sports Do More To Help Female Athletes Feel ‘More Comfortable’ Having Children During Career?. [online] Available at: https://www.google.co.uk/amp/s/www.bbc.co.uk/sport/amp/48336819 [Accessed 25 April]

BBC, 2020a. Coronavirus: How The Virus Has Impacted Sporting Events Around The World. [online] Available at: <https://www.bbc.co.uk/sport/51605235> [Accessed 22 April 2020].

BBC, 2020b. FC Sion sack nine players for reportedly not taking pay cut because of coronavirus crisis. Available at: https://www.bbc.co.uk/sport/football/51980881 [Accessed 22 April 2020].

Bennett, M., 2019. Sports Law In The United Kingdom | Lexology. [online] Lexology.com. Available at: <https://www.lexology.com/library/detail.aspx?g=7cc100e9-382e-4013-b1a0-8499c6889c0e> [Accessed 22 April 2020].

Birkett, H and Forbes, S (2018). Shared Parental Leave: Why is take up so low and what can be done? (1). Available at: https://www.birmingham.ac.uk/Documents/college-social- sciences/business/research/wirc/spl-policy-brief.pdf

Chartered Institute of Personnel Development, 2020. Employment Status Q&As. [online] Available at: <https://www.cipd.co.uk/knowledge/fundamentals/emp-law/employees/status-questions> [Accessed 26 April 2020].

Dixon, E., 2020. F1’S Inaugural Virtual Grand Prix Draws 3.2M Online Viewers. [online] Sportspromedia.com. Available at: <https://www.sportspromedia.com/news/f1-virtual-bahrain-grand-prix-online-viewers-streaming-esports-julian-tan> [Accessed 22 April 2020].

Galloway, J., 2020. Carlos Sainz, Lando Norris take pay cuts as some McLaren staff furloughed. [Sky News online] Available at: https://www.skysports.com/f1/news/12433/11967263/carlos-sainz-lando-norris-take-pay-cuts-as-some-mclaren-staff-furloughed

The Independent, 2020. Sport-By-Sport Look At The Impact Of Coronavirus Around The World. [online] independent.co.uk. Available at: <https://www.independent.co.uk/sport/sport-football-basketball-rugby-olympics-cancelled-coronavirus-impact-around-the-world-a9398186.html> [Accessed 22 April 2020].

Jackson, J. and Brenner, S., 2018. Anthony Martial faces fine despite return to Manchester United training. [The Guardian online]. Available at: https://www.theguardian.com/football/2018/aug/01/manchester-uniteds-anthony-martial-to-return-to-training-after-birth-of-child [Accessed 22 April 2020]

Keegan, M., 2020. FIFA draw up plans for emergency relief fund as governing body looks to help cash-strapped football authorities facing ruin due to coronavirus pandemic [Mail online]. Available at: https://www.dailymail.co.uk/sport/sportsnews/article-8172853/FIFA-draw-plans-emergency-relief-fund-governing-body-looks-help-football-authorities.html

Laver, N., 2020. Sport And The Law [online] Available at: <https://www.inbrief.co.uk/sports-law/sport-and-the-law/> [Accessed 22 April 2020].

Mail online, 2020. Tokyo Organisers Counting The Cost Of Postponement Of Olympic Games. [online] dailymail.com. Available at: <https://www.dailymail.co.uk/sport/sportsnews/article-8181433/Coronavirus-Tokyo-organisers-counting-cost-postponement-Olympic-Games.html> [Accessed 22 April 2020].

McGowan, A., 2019. Varnish Wins Right To Appeal Tribunal. [online] BBC Sport. Available at: <https://www.bbc.co.uk/sport/cycling/50825263> [Accessed 24 April 2020].

Nicholson, R., 2019. Are Professional Athletes Employees?. [online] Shepherd and Wedderburn. Available at: <https://shepwedd.com/knowledge/are-professional-athletes-employees> [Accessed 24 April 2020].

Rennie, J., Beach, N., 2020. Win-Win: A Progressive Approach To Maternity & Paternity Rights For Professional Athletes – Lawinsport. [online] Lawinsport.com. Available at: https://www.lawinsport.com/topics/item/win-win-a-progressive-approach-to-maternity-paternity-rights-for-professional-athletes [Accessed 25 April]

Scottish Athletics, 2020. [online] Available at: https://www.scottishathletics.org.uk/wpcontent/uploads/2014/04/SAL-Social-Media-Guidelines-191016.pdf [Accessed 23 April]

Talk Sport, 2018. The Money Each Premier League Club Earned From TV And Their Final Position. [online] Available at: <https://talksport.com/football/376346/how-much-money-each-premier-league-club-earned-tv-and-their-final-position-180518283150/> [Accessed 22 April 2020].

The National Law Review. 2020. Social Media In Sport: Top Tips. [online] Available at: https://www.google.co.uk/amp/s/www.natlawreview.com/article/social-media-sport-toptips%3famp [Accessed 23 April]

Trades Union Congress, 2020. Employment Status And Rights. [online] Available at: <https://www.tuc.org.uk/employment-status-and-rights> [Accessed 25 April 2020].

UK Health Protection Regulations 2020

Ultimate Rugby, 2020. Top 14 Owner Claims His Club Will Lose Millions If Games Are Played Behind Closed Doors. [online] Available at: <https://www.ultimaterugby.com/news/top-14-owner-claims-his-club-will-lose-millions-if-games-are-played-behind-closed-doors/625829> [Accessed 22 April 2020].

Winters, M., 2020. The colossal cost of cancellation: Leeds could lose £100m MINIMUM if promotion to Premier League is scrapped while National League leaders Barrow may miss out on £1m if the season is voided… the impact on lower leagues would be devastating [Mail online]. Available at: https://www.dailymail.co.uk/sport/sportsnews/article-8293009/Leeds-United-lose-100m-MINIMUM-promotion-Premier-League-scrapped.html

Copyright Stephanie Crainey, Ross Codona and Briege Elder, 22 April 2020

Challenging times …

The issue of employability and job security amidst these challenging times, with reference to specific organisations.

Alistair Lee, Niamh Mackenzie, Fraser Morrison and Abby Roberts (edited by SJ Crossan)

The Coronavirus does not pick and choose who to target – everyone is at risk. Therefore, on March 23rd, the UK went into full scale lockdown, three days after the Government put in place restrictions on select businesses. This lockdown has had a detrimental effect on almost every business, and thus has affected their employees in turn. A few months ago, before the COVID-19 outbreak and the World Health Organisation declaring a worldwide pandemic, most people would never have heard of the word ‘furlough’. Now, it is on everyone’s lips. It is critical for organisations to deal with their staff in the correct manner when it comes to their job. If not, their livelihood is at risk and their family’s livelihoods are at risk, particularly if they cannot take advantage of the Government’s furlough scheme.

Some companies have understood this and dealt with their employees correctly and efficiently, while some most certainly have not. People do not forget. If an organisation comes out of this pandemic looking worse for wear, due to their negative actions, it certainly will not recover quickly – if ever.

Virgin is one of many companies to handle this situation extremely poorly. Richard Branson has never been particularly liked by the people of the UK, plus he owns an airline – one of the most disliked types of organisations due to their price hiking. Therefore, this pandemic could have been used to gain some trust back – instead, it has done quite the opposite. On March 26th, Virgin Atlantic Airways said they would reduce their daily flights by 80% amid the drastic decline in travel owing to the coronavirus pandemic. Like many organisations, this steep decrease in business led Virgin to look at where they could cut costs to try and save the business. They decided to do this through their staff. Employees at the UK airline have been forced to take eight weeks of unpaid leave over the next three months. Amid backlash from this decision, Virgin released this statement:

“An increasing number of countries are now closing their borders – most significantly, the US, where a travel embargo from the UK comes into force on Tuesday (17th March). Though this was expected, it has accelerated the sharp and continual drop in demand for flights across Virgin Atlantic’s network, meaning immediate and decisive action is needed… Today, Virgin Atlantic will put drastic measures in place to ensure cash is preserved, costs are controlled, and the future of the airline is safeguarded.” (The Street, 2020)

While this seems a fair and logical response on the surface, if you delve a bit deeper, you begin to understand why it is so horrific that Virgin are not paying their staff while they’re on leave due to COVID-19.

Virgin Atlantic boasts revenues of £2.8 billion, with the Virgin Group as a whole commanding revenues of over £19 billion. (Virgin Annual Report, 2018). In addition to this, Richard Branson has a net worth of $4.4 billion (Forbes, 2020). In 1971, Branson was convicted and briefly jailed for tax evasion. This experience has not changed his attitude however, since in 2013, he described himself as a ‘tax exile’ having saved millions in tax by ending his mainland British residency and living in the British Virgin Islands. (The Daily Telegraph, 2013). And it is not just him personally that is doing this – his entire business empire is owned by a complicated series of offshore trusts and companies. If he were to liquidate all the company’s assets, he would pay extremely little in tax.

When you consider all the above, does Virgin’s statement seem fair and logical now? A multi-billion-pound organisation owned by a multi-billionaire who lives on his own private island that can fetch up to $87,500 per day, asking for a £500 million bailout from the Government (funded by taxpayer money) just so they can pay their staff doesn’t seem particularly fair and logical.

Denmark, Poland and France have all refused to bailout tax haven-controlled companies. The UK should do the same – refuse to pay the £500 million and tell Richard Branson to dig deep into his particularly selective pockets.

Virgin are not alone, however, when it comes to receiving criticism for their approach to dealing with staff during these strange times. British pub chain, JD Wetherspoon have recently received a lot of backlash from their questionable approach to the COVID-19 pandemic. The chain insisted that it could not afford to pay its staff during the crisis until the government had reimbursed the company for their wages (Davies, 2020). Tim Martin, founder of the company, sent a video out to his employees explaining the situation and the approach that the company had chosen to take after the government had called for all pubs to be shut to reduce the spread of COVID-19 (Ng, 2020). The employees were told that they would only be paid for the hours that they had worked up until 22nd March 2020 and that no further pay would be given until the furlough scheme had been put in place. The government had announced that they would pay 80% of staff wages up to £2,500 (Munbodh, 2020). However, this left many employees worried, due to the fact this could take until the end of April (Davies, 2020). Martin told his 40,000 employees that if they needed a wage, then they should consider taking on work with Tesco (Munbodh, 2020), causing considerable anger from employees who felt that they were unappreciated and being “abandoned” by their employer. Not only were Martin’s employees left questioning when they would next receive a wage, but many of the company’s workers were even stripped of bonuses that they had already managed to achieve (Ng, 2020).

The company received a lot of backlash online for this approach to the situation, with many members of the public vowing to “boycott” Wetherspoons pubs in the future once they have reopened for business (Brown, 2020). Piers Morgan, co-presenter of Good Morning Britain, posted on Twitter “Don’t go to Wetherspoons,” in response to Martin’s attitude towards the Covid-19 Crisis (Ingate, 2020). One member of the public even responded to the company by leaving a message for Tim Martin by graffitiing one of the Chain’s many pubs, The Postal Order. The words “pay your staff” and “pay up” were sprayed onto the windows of the pub in red and white paint (Ng, 2020). Photos of the vandalised pub, which were shared online, received a lot of support from individuals who condemned Tim Martin for suggesting to his employees that they should take on employment with Tesco following the closure of his pubs (Ng, 2020). A strike movement was also formed by a group of Wetherspoons employees called ‘Spoon Strike’ and the Bakers, Food and Allied Workers Union (BFAWU) and demanded that the company give them full pay. In a statement released by Spoon Strike, they wrote “Whilst other companies such as Costa have promised their staff eight weeks fully paid, Wetherspoons have left over 40,000 people without their next pay date. With no means of paying for rent, bills or food, and no warning” (Ng, 2020).

Following the large wave of backlash that Tim Martin and his company received, Mr Martin later announced that the first payment for his workers under the government job retention scheme would be made on 3rd April ‘subject to Government approval, and weekly thereafter’ (Brown, 2020). However, many members of the public are still shaming Martin, who is supposedly worth over £40million (Munbodh, 2020) for his initial response to the crisis and continue to vow to “boycott” Wetherspoons pubs once they have reopened for business.

The impact on the employment market in the UK is not all negative, however.

One example of initiatives that have been employed to help protect workers is a free online training scheme for furloughed individuals. The Department of Education run initiative offers online training courses for workers who are furloughed in order to “ improve their knowledge, build their confidence and support their mental health so they have skills they need to succeed after the coronavirus outbreak” (BBC News, 2020). The hope is that it helps to mitigate some of the impact the crisis will have on a post lockdown employment market, by facilitating the growth of workers during the pandemic.

Regarding individual firms that are looking after their staff during the crisis, the Co-operative Group are a fantastic example. To show their appreciation for their key workers keeping shops stocked and the nation fed, they have rewarded over 7,500 staff with an extra week worth of pay in addition to doubling their staff discount. The hope is to help to ease the financial burden they face during lockdown and to reward staff for going “above and beyond” during lockdown (Derby Telegraph, 2020). This shows that not all employers are looking to shirk away from the issues surrounding their workers’ rights – some are bolstering them and trying to offer a more supportive and robust working relationship during these trying times.

Ford’s UK division have also been taking steps to protect their workers by considering the duty of care that they have towards them. Despite March normally being one of the busiest months of the year for car sales, Ford’s UK boss Andy Barratt prevented any of his dealerships from ordering new cars. Barratt stated that cash liquidity was important in these financially pressing times and in order to prevent mass furlough he insisted that the cash reserves were better use keeping staff employed. The firm have opted to pay staff until at least June, where they will review the situation and take necessary steps from there. This will protect the rights of employees and their financial security, with Ford stating that; “All dealers need to focus on, is keeping their people safe, keeping their business viable and the revenue they need in return to keep those things going.” (Chaplin, 2020). They have not only done this for financial reasons – the company recognised that there is a great level of stress put on workers in the months of April and March to shift all of this new stock but they decided it was more important to protect the mental and physical health of employees and as a result, they have instructed that staff should work from home where possible. This shows a great awareness of the duty of care that Ford have for their staff, taking action to support their financial wellbeing, in addition to physical and mental health of their staff in these uncertain times.

After the initiative of companies such as The Co-op and Ford, the UK staple that is Boots have followed suit.

Boots is one of the largest retailers in the UK, both in terms of revenue and number of shops. Boots have around 2,500 shops and employ over 63,000 people across the United Kingdom – these range from local pharmacies to large health and beauty shops.

Due to the recent COVID-19 breakout, many shops and retailers have been forced to shut. Like other pharmacy chains, Boots have been designated as an essential retailer which is why they have remained open during this worldwide pandemic. However, staying open opens a whole new can of worms – particularly when it comes to keeping employees and customers as safe as possible, all the time.

To make sure that Boots employees are fully protected, they have put many factors in place to protect and support their staff, to take care of their customers by providing a consistently high service, and to also protect their business. By taking these measures, it ensures a safe, secure employment through difficult trading conditions. Some of the measures that have been taken by Boots to comply with their duty of care for their staff and customers include:

  • Flexible hours to cope with increased demand
  • Closing stores for one hour each day to clean and sanitise surfaces
  • Plastic visors provided for staff
  • Masks/aprons/gloves provided
  • Workers always asked to remain two metres apart throughout the day
  • Maximum of 3 customers allowed in the shop at the one time to maintain social distancing
  • Perspex screens put up at counters.

Boots are in some ways in a different trading position than many other companies across the globe. Their role is to provide healthcare to customers and to make sure patients receive vital medical products. Their employees benefit from this, but in turn they also have to now work in difficult and unsafe conditions with the COVID-19 situation, so Boots have to make sure they provide as much personal protection to safeguard their employees and customers, and to let them continue to trade effectively.

Boots employees do not have the risk of being put on furlough or being made redundant. They provide an important service and their employees are classed as Front-Line Workers, who have the permission under Government guidelines, to carry on working at their normal place of work. Because of these conditions, Boots employees feel that they continue to have job security, and do not have the worry of losing their income as many others do, through these difficult circumstances.

Instead of closing stores and pharmacies, and putting employees in insecure positions, they have created jobs out of this situation. Due to the high demand of prescriptions being delivered to patients aged 60 and above, they have had to recruit more than 400 new drivers for the pharmacy delivery and collection service, where prescriptions are collected from doctors’ surgeries. This has been done to cope with unprecedented demand but overall it is a major benefit as many people may have been made redundant and are grateful of having the opportunity to take on a different role, whilst also helping to provide support for people in need. They have also created jobs in their warehouses and distribution centres due to a significant increase in its online business.

Conclusion

In the coming weeks, the lockdown measures may or may not be lifted. However, even if they are, there will be several restrictive measures put in place and thousands of businesses will still not be allowed to open. This means that organisations will need to continue to support their staff as much as possible, and if they are not currently supporting staff to the best of their abilities, they will need to start doing so. It is as simple as that. For what is a relatively short period of time to take a financial hit by paying staff in full, while not bringing in any revenue, it is a drop in the ocean when you consider the potential long term impact of millions of customers boycotting the business because of the way they treated their staff during this pandemic.

Copyright Alistair Lee, Niamh Mackenzie, Fraser Morrison and Abby Roberts, 28 April 2020

Volunteers please!

Photo by ray sangga kusuma on Unsplash

I seem to be on something of a theme these last few weeks where my focus in the previous blog (and in this one) has been on agreements which are not enforceable in court.

In my last blog (Rock, paper, scissors …), I examined the historical, legal position in Scotland in relation to gambling agreements. These types of arrangements were – until the introduction of the Gambling Act 2005 – unenforceable in the Scottish courts on the basis that they fell into a category of agreement which was below the dignity of judicial scrutiny (sponsiones ludicrae).

It was with some interest then that the ongoing Covid-19 crisis should flag up another aspect of the law of contract which addresses situations where certain agreements are deemed to be unenforceable.

I am speaking of agreements where an individual volunteers to provide services, for example, to a charitable or community organisation. This type of arrangement is technically referred to as an agreement binding in honour only.

The well known UK retailer, Boots, has recently been criticised for its use of volunteers during the Covid-19 outbreak and accusations of exploitation have been flying around. The retailer placed advertisements for individuals to come forward to be trained as testers. This was all part of a UK Government initiative to encourage people to volunteer to help out during the crisis.

At first glance, there seems to be nothing wrong with what Boots is doing, but the retailer has been accused of abusing or exploiting the enthusiasm of volunteers to help out. The advertisements stated that individuals must commit to work at least 32 hours per week. This situation begins to sound less like volunteering and more about control. The Trades Union Congress and some employment lawyers have warned that Boots may be opening itself to legal action in the future. You may label an individual as a volunteer, but if you begin to treat him or her as a worker or even an employee, you may find that the relationship is not one of volunteer and recipient.

A link to the story as reported in The Independent can be found below:

https://edition.independent.co.uk/editions/uk.co.independent.issue.140520/data/9513276/index.html

When we think of volunteers, we do not often think of them as individuals who provide services to commercial companies, but rather charitable and community based organisations. Furthermore, UK National Minimum Wage legislation exempts charities from its provisions – not commercial organisations like Boots.

Genuine volunteers

Such situations arise where the parties (the volunteer and the recipient of services) clearly intend not to be bound by the agreement that they have entered. There is no intention in the minds of the parties to create a legal relationship. The arrangement will last as long as the parties find it convenient. Other side can withdraw from this arrangement at any time without penalty. The party who withdraws from the arrangement may find that their honour or integrity is called into question, but in the absence of legal sanctions, this is a situation that they can probably live with.

There are downsides to being a volunteer: they are not employees within the meaning of Section 230 of the Employment Rights Act 1996 and this means that if such individuals suffer less favourable treatment in the course of their involvement with the recipient, they may have limited legal redress.

Section 83 of the Equality Act 2010 makes it very clear that if a person wishes to pursue an employment related discrimination claim, s/he must be in ‘employment under a contract of employment, a contract of apprenticeship or a contract personally to do work’. The wording of Section 83 would, therefore, exclude genuine volunteers because such individuals are providing services to recipients under an agreement binding in honour only.

In X v Mid Sussex Citizens’ Advice Bureau (CAB) and Others [2012] UKSC 59, the UK Supreme Court affirmed the earlier decision of the English Court of Appeal in which the claimant (‘X’) had signed a ‘volunteer agreement’ to work at the Citizens’ Advice Bureau which was ‘binding in honour only’. This meant that ‘X’ did not have a contract of employment or a contract in which to perform services personally. This meant that ‘X’ was outwith the disability discrimination laws (now contained in the Equality Act 2010) and it was incompetent of her to have brought the claim. The Supreme Court, in a lengthy exposition of the effect of EU Directives, also considered whether there was an obligation placed upon EU member states to outlaw discrimination in relation to volunteers. The Supreme Court concluded that there was no such duty placed upon member states by the EU.

A link to the Supreme Court’s judgement can be found below:

https://www.supremecourt.uk/cases/docs/uksc-2011-0112-judgment.pdf

Copyright Seán J Crossan, 18 May 2020

Written statements of employment

Screen capture by Seán J Crossan

In the UK, the beginning of April is always an important period for employment lawyers because the British Government and/or the Westminster Parliament typically introduce new laws which directly impact on people’s terms and conditions of employment.

There is no such thing as one document which contains all the terms of an employment contract – something that my students and members of the public have difficulty understanding at first. It is important to grasp from the outset that there are various sources of the employment contract which include, amongst other things:

  • The written statement of the main terms and conditions of the contract (as per Section 1 of the Employment Rights Act 1996)
  • Employee handbooks (e.g. available on employer’s intranet)
  • Employer’s policies and codes of conduct (e.g. disciplinary codes)
  • EU Laws, Acts of Parliament and statutory instruments (e.g. Employment Rights Act 1996, Equality Act 2010, TUPE Regulations 2006, Equal Treatment Directives)
  • Judicial precedent and the common law (e.g. Walker v Northumberland County Council 1 AER 737)

Today new rules come into force about the written statement of the main terms of employment. Previously, only employees were entitled to receive such a document which had to be issued by an employer within 8 weeks of the commencement of employment (as per Section 1 of the Employment Rights Act 1996). Now, an employer must issue a written statement to both employees and workers from or before day 1 of their employment or engagement.

The written statement will contain important information about the contract of employment, such as:

  • The employee’s name
  • The employer’s name
  • Date when employment commenced and period of continuous service
  • The rate of pay and how often the employee is paid
  • Working hours
  • Holiday entitlement
  • Sick pay entitlement
  • Pensionable service and details of employer’s pension scheme
  • Notice requirements
  • Job title or brief JOD description
  • Whether the job is permanent/temporary/fixed term
  • The location of the employee’s place of work
  • The existence of collective agreements and how they affect the contract
  • Arrangements for working outside the UK (if relevant)
  • Details of disciplinary and grievance procedures

Furthermore, as a result of today’s changes to the law, the written statement must also address the following matters:

  • The hours and days of the week that the employee/worker must work for the employer and whether they can be changed and the mechanism for doing so
  • Entitlement to any paid leave
  • Entitlement to contractual benefits which have not already been addressed in the written statement
  • Probationary periods (if relevant)
  • Training opportunities provided by the employer

The legal status of the written agreement

The written statement is not the contract of employment itself because no single document could possibly encompass all the terms of such an agreement. There is nothing to stop the parties adopting the statement as the contract of employment, but it is important to understand that it can be varied or altered as a result of legislative changes, court decisions and collective agreements.

As of today, entitlement to leave for bereaved parents is being introduced; increases to the National Minimum and Living Wages come into force; and increases to a range of statutory payments are also taking place. With all of this going on, it would be very difficult – if not impossible – for any written statement to express the totality of the employment contract in any meaningful sense.

Failure to issue a written statement

Section 38 of the Employment Act 2002 gives employees the right to pursue an Employment Tribunal claim against an employer for failure to issue a written statement. This type of claim would usually be brought by an employee as part of another claim against the employer e.g. dismissal or discrimination claims. In such an instance, the employee would state on the Tribunal application (the ‘ET1’) that the employer had failed to issue written terms. It is always worthwhile submitting this type of claim as part of the bigger picture of the employee’s grievance because an Employment Tribunal could issue an award worth up to 4 weeks’ wages.

Any employee who is dismissed by the employer for requesting their statutory right to receive a written statement will have the right to pursue a claim for unfair dismissal in terms of the Employment Rights Act 1996.

An example of an extract taken from an ET1 form can be seen below:

Fictional example of an Employment Tribunal claim by Seán J Crossan

Employment status

The right to receive a written statement was, previously, a very important indication of a person’s employment status i.e. whether they had a contract of service in terms of Section 230 of the Employment Rights Act 1996 – as opposed to a contract for services.

In the leading House of Lords’ decision – Carmichael v National Power plc [2000] IRLR 43, two women who were engaged on casual as required contracts as tour guides at the (now demolished) Blyth Power Plant in Northumberland were not entitled to receive written statements of employment because they were engaged under a contract for services. There was no mutuality of obligation between the parties in that National Power was not obliged to offer the women work and the two women, if offered work, were not obliged to accept it. With today’s changes to the Employment Rights Act 1996, the two women in Carmichael would now be entitled to receive a written statement.

A link to the UK Government’s website which provides (free) access to a blank template for employers to generate their own written statement can be found below:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/183185/13-768-written-statement-of-employment-particulars.pdf

Related Blog Article:

https://seancrossansscotslaw.com/2019/02/11/employment-contracts-read-them-or-weep/

Copyright Seán J Crossan, 6 April 2020

Sick Pay? (or the Coronavirus Conundrum)

Photo by Macau Photo Agency on Unsplash

Coronavirus (COVID-19) isn’t just a potential threat to your health; it could also mean that your earnings take a hit.

How so?

If you have to take time off from work (i.e. self-isolate yourself) because you have (or might have) been infected by the virus, will you be entitled to receive sick pay from the organisation that you are working for?

It depends very much on your employment status …

… if you are a zero hours worker or genuinely a self-employed person, the answer is an emphatic no.

If you are deemed to be an employee (an individual who works under a contract of service) within the meaning of Section 230 of the Employment Rights Act 1996, you may be fortunate in that you have an entitlement to receive either contractual sick pay or statutory sick pay.

Contractual sick pay

If a contractual sick pay scheme applies to your employment, you might receive, at its fullest extent, 6 months full pay and then 6 months at half pay. This generous arrangement, of course, will not apply from day 1 of the employment and employees will have to build up their continuous service in order to be eligible for the maximum level of contractual sick pay. It is probably the case that an employee with just over a year’s service would receive 1 month at full pay for sickness absence and then 1 month at half pay.

An example of entitlement to contractual sick pay arrangements taken from the Collective Agreement (the National Working Practices Agreement) between Scottish Further Education lecturers and their employers can be seen below:

Statutory sick pay

What about statutory sick pay or SSP? This is relevant in situations where employees are not entitled to receive contractual sick pay.

It’s also worth pointing out that contractual sick pay is often much more generous than SSP and, even then, not all employees will be entitled to receive this benefit because they fall outside the eligibility criteria. The current weekly rate of sickness pay (in March 2020) is £98.25 and could be paid by employers for a maximum of 28 weeks.

Ordinarily, it becomes payable only from 4th day of sickness absence, but as of Wednesday 4th March 2020, the UK Government has announced that employees who self-isolate themselves because of suspected Coronavirus infection, will be paid SSP from day 1 of their sickness absence.

This is a temporary measure which will apply only for the duration of the current COVID-19 emergency, but people who are off sick with a medical condition other than the virus will also be entitled to benefit from these changes.

See links below to articles on the BBC website about sickness pay entitlement and COVID-19:

https://www.bbc.co.uk/news/business-51628524

https://www.bbc.co.uk/news/uk-51738837

The change in Government policy will not be extended to the self-employed; and to zero hours workers (who will not be able to meet the threshold conditions for eligibility). Frances O’Grady, the General Secretary of the UK’s Trades Union Congress (TUC) has stated that as many as 2 million workers may not be eligible for SSP under the current system.

There has been some concern expressed that individuals in these categories may continue to go to work – if they have the virus or suspect as much – because they will not receive SSP during their absence.

Eligibility criteria for SSP

In 2019-20, in order to qualify for SSP you must be an employee earning at least £118 per week or £512 per month (before tax). This is known as the Lower Earnings Limit.

In April 2020, SSP will rise to £95.85 per week, but individuals’ earnings must fall within any of the following bands in order to qualify:

  • £120 per week
  • £520 per month
  • £6,240 per year

Again, this will mean that many zero hours contract workers will simply fail to qualify for SSP payments.

More problems …

There is also another complication concerning eligibility for sickness pay which the COVID-19 outbreak has raised:

Let’s assume that you do qualify for either contractual sick pay or SSP, but you have decided to take the precautionary measure of self-isolation so as not to expose your colleagues to potential risk.

It may be that you have recently returned from a destination such as China or Italy where the virus has been particularly prevalent and you decide to play it safe by not going into work. You contact your HR Department or employer to inform them of your decision; you are thanked for being extremely considerate and responsible; and then you are told that you are not entitled to receive sick pay because you haven’t actually been diagnosed with the virus.

Matt Hancock MP, UK Government Minister for Health, thinks that current legislation does cover such situations and individuals who take precautionary measures, as outlined above, should benefit from sick pay provisions.

With all due respect to Mr Hancock, what he thinks and what current legislation or a contract of employment states might be entirely different realities. That said, Mr Hancock does have the support of the highly regarded Advisory Conciliation and Arbitration Service (ACAS) which is recommending that employers pay self-isolating employees who have taken such a precautionary measure (see link below).

https://www.acas.org.uk/acas-publishes-new-advice-on-handling-coronavirus-at-work

Conclusion

Clearly, COVID-19 is presenting a number of challenges to traditional practices or orthodoxies in the field of employment law. This is a serious issue given that recent estimates are predicting that up to 20% of the UK workforce could be in danger of contracting the virus and, consequently, they will be absent from work.

In some respects, the UK Government has been caught napping on the issue of extending employment protection e.g. entitlement to sick pay to people who do not have a contract of service and the COVID-19 outbreak has really exposed this shortcoming.

As Jonathan Rennie of law firm, TLT, had noted (as recently as this week) the UK Government has failed to implement any of the recommendations of the Taylor Review which favoured extended employment protection to workers who did not have a contract of service. It is somewhat ironic that the virus outbreak has forced the Government to break cover and extend some employment protection rights.

A link to an article on the BBC website about the predicted impact of COVID-19 on the UK workforce can be found below:

https://www.bbc.co.uk/news/uk-51718917

Copyright Seán J Crossan, 4 March 2020

California dreamin’?

Photo by Ross Sneddon on Unsplash

I’m currently in the fourth week of Semester 2 and I’m teaching Employment Law to a group of second year students. I usually begin this course by discussing the importance of an individual’s employment status.

In today’s world of work, the great divide very much rests upon whether a person has a contract of service OR a contract for services.

An employee is said to have a contract of service as defined by Section 230(1) of the Employment Rights Act 1996. Having this status potentially allows someone to acquire employment protection such as the right not to be unfairly dismissed; the right to a redundancy payment; the right to be the beneficiary of family friendly and flexible working practices.

After the first few lectures have been completed on employment status, I usually ask the students if they think this is an important issue?

Hopefully, if I have been doing my job properly and they have been listening to me, the penny will have dropped: it is more often better to be an employee than someone who works under a contract for services (e.g. zero hours workers, casual and atypical workers, freelancers and the genuinely self-employed).

There are notable exceptions (aren’t there always?): high earning British television celebrities (e.g. Lorraine Kelly) or a number of BBC news journalists have preferred to be treated as freelancers or self-employed persons. Why? They can then minimise their exposure to income tax liability in a way (often via the medium of personal service companies) that would not be possible because if they were employees they would almost certainly be taxed at source on a PAYE (pay as you earn) basis.

We have seen an explosion in the type of work that is often characterised or labelled as the ‘gig economy’. This work is often characterised by a distinct lack of employment rights; irregular working patterns; chronic insecurity; lack of long term career progression; and low pay. It is often impossible for such individuals to complete the necessary periods continuous service to acquire employment rights.

Companies such as Deliveroo, Lyft and Uber have become synonymous with the ‘gig economy’, as have whole sectors of the employment market e.g. catering, cleaning and hospitality services.

Admittedly, the UK Government of Prime Minister Theresa May (2016-19) did commission Matthew Taylor to review employment status. The main conclusion reached by the Taylor Review was that a minimum level of employment protection should be extended to workers – after all these individuals pay their National Insurance contributions too.

Links to the Taylor Report and the UK Government’s response can be found below:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/627671/good-work-taylor-review-modern-working-practices-rg.pdf

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/679767/180206_BEIS_Good_Work_Report__Accessible_A4_.pdf

In Scotland, the devolved Government has also established a Fair Work Convention with the aim of promoting better and progressive employment practices by 2025 (see the link below):

https://www.fairworkconvention.scot

Admittedly, an employee does not gain these rights from day 1 of employment. They become entitled to claim certain rights as they build up their continuous service with the employer. So, for example, an employee (generally speaking) has the right not to be unfairly dismissed in terms of the Employment Rights Act 1996 if they have completed 2 years of continuous service with the employer.

Meanwhile, on the other side of the world …

… or California dreamin’

It’s not just in the UK that debates about employment status are currently playing out. At the tail end of 2019, it was with particular interest that I read about a story from the United States which highlighted many of the issues which I have just been discussing in this Blog.

A study, carried out in 2015/16 by economists (Professors Lawrence Katz and Alan Krueger at Harvard and Princeton Universities respectively) calculated that “12.5 million people were considered independent contractors, or 8.4% of the U.S. workforce.”

https://scholar.harvard.edu/files/lkatz/files/katz_krueger_cws_v3.pdf

Interestingly, in 2019, Professors Katz and Krueger appeared to disown or play down certain of their findings – especially in relation to the number of American gig economy jobs:

https://edition.cnn.com/2019/01/07/economy/gig-economy-katz-krueger/index.html

Assembly Bill 5

The US State of California has just enacted a law, Assembly Bill 5 2019 or AB5 (known more popularly as the gig economy law) giving those individuals working in the gig economy more employment rights. The law came into force on 1 January 2020.

A link to AB5 as enacted by the California State legislature can be found below:

https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB5

In theory, AB5 makes it much more difficult for employers to classify individuals as independent contractors for services meaning that many more people will be treated as employees with the right to claim the minimum wage and the right to receive sick pay.

The Supreme Court of California laid down very strict criteria for determining whether an individual was an employee or an independent contractor in what is being referred to as the ‘landmark’ decision of Dynamex Operations West, Inc v the Superior Court of Los Angeles County 30 April 2018 Opinion S222732.

The case establishes the ‘ABC Test’ which operates on the presumption that individuals hired by an organisation or business are employees unless the hirer can show otherwise. In this case, the Supreme Court moved away from the ‘seminal’ Borello Test which had been the standard way of determining a person’s employment status since the 1980s. Critically, AB5 reflects the Dynamex criteria.

Essentially, the hirer must satisfy all three parts of the ABC Test in order to prove that an individual is a genuine independent contractor.

The criteria in ABC Test (as contained in AB5) can be set out as follows:

(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

(B) The person performs work that is outside the usual course of the hiring entity’s business.

(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

The Dynamex decision is regarded as a landmark judgement because it overturns the Borello Test which had been the leading precedent for determining employment status in California since the late 1980s (see S. G. Borello & Sons, Inc. v Department of Industrial Relations (1989) 48 Cal.3d 341).

In Dynamex, the Californian Supreme Court made the following statement:

Although in some circumstances classification as an independent contractor may be advantageous to workers as well as to businesses, the risk that workers who should be treated as employees may be improperly misclassified as independent contractors is significant in light of the potentially substantial economic incentives that a business may have in mischaracterizing some workers as independent contractors. Such incentives include the unfair competitive
advantage the business may obtain over competitors that properly classify similar workers as employees and that thereby assume the fiscal and other responsibilities and burdens that an employer owes to its employees.

The Court noted, moreover, that:

In recent years, the relevant regulatory agencies of both the federal and state governments have declared that the misclassification of workers as independent contractors rather than employees
is a very serious problem, depriving federal and state governments of billions of dollars in tax revenue and millions of workers of the labor law protections to which they are entitled
.”

A link to the Dynamex judgement can be found below:

https://scocal.stanford.edu/opinion/dynamex-operations-west-inc-v-superior-court-34584

Legislators in other US States (New Jersey and New York particularly) have expressed a desire to follow the Californian example and Democratic US presidential candidates, Bernie Sanders and Elizabeth Warren are strongly in favour of this type of law.

As you would expect in such a litigious society as the United States, AB5 has already been the subject of a legal challenge (which was unsuccessful). Predictably, Uber and another company, Postmates, were at the forefront of this action.

This legal challenge was hardly surprising, given that The Los Angeles Times reported in August 2019 that Uber and Lyft intended to establish a campaigning fund worth $60 million to fight AB5.

A link to the story can be found below:

https://www.latimes.com/business/technology/story/2019-08-29/ab5-uber-lyft-newsom-lorena-gonzalez-ballot-tony-west

Conclusion

So, even in the land of free enterprise, it would seem that not everyone wants to be their own boss and many people would, in fact, be more than happy to welcome the recognition of their status as employees.

That said, AB5 has, surprisingly, not met with the approval of every worker or potential employee. The California performing arts community has experienced problems with the new law, mainly because of its use of the term ‘fine artist’ which was not defined. Fine artists are exempt from the provisions of AB5, but who exactly is a fine artist? No one seems to be sure and The Los Angeles Times reported that one opera company had cancelled performances because they were unsure whether performers were to be classified as employees (with the additional costs that this would entail) or whether they were genuinely independent contractors.

Lorena Gonzalez, the Californian Assemblywoman who drafted AB5 said that a definition of the term was deliberately omitted from the law and that it the responsibility of the State’s Employment Development Department to clarify this issue.

Readers will find links below to media articles about AB5:

https://apple.news/A_pjrttPvTDSMSpV-VMet8w

https://www.bbc.co.uk/news/business-49659775

https://www.latimes.com/entertainment-arts/story/2020-01-29/ab5-independent-contractor-california-2020-arts

Related Blog Articles:

https://seancrossansscotslaw.com/2019/04/19/the-gig-economy/

https://seancrossansscotslaw.com/2019/07/22/good-work/

https://seancrossansscotslaw.com/2019/03/22/hello-im-lorraine-and-im-definitely-self-employed/

https://seancrossansscotslaw.com/2019/12/21/employee-or-not/

https://seancrossansscotslaw.com/2019/01/17/employment-status/

https://seancrossansscotslaw.com/2019/05/08/call-me-an-uber/

https://seancrossansscotslaw.com/2019/03/25/strippers-are-workers-too-discuss/

https://seancrossansscotslaw.com/2019/02/14/horses-for-courses-the-equine-flu-affair/

https://seancrossansscotslaw.com/2019/04/30/paternity-leave/

https://seancrossansscotslaw.com/2019/02/25/the-work-life-balance-or-utopia-reimagined/

Copyright Seán J Crossan, 13 February 2020