MPs also hear gig economy firms wouldn’t go out of business if they provided benefits such as pensions and sick pay
Courier firm Deliveroo is to remove a clause in its contracts that bans workers from contesting their self-employed status at employment tribunals, after its legality was questioned by a cross-party group of MPs.
While being questioned by members of the work and pensions select committee this week, Deliveroo’s managing director, Dan Warne, said the company needed to “revise the contract”.
“This is not something that’s enforced, so there’s no need to have it in there… In practice, if they wished to contest their status [as self-employed workers] they could do so and we wouldn’t challenge them on that,” he said.
Hannah Ford, senior associate at law firm Stevens & Bolton, said Deliveroo’s move demonstrated that the company “finally acknowledged” that their contracts have a “serious puncture”.
Garry Pike, employment lawyer at Bond Dickinson, added: "While the clause in Deliveroo's contracts would certainly have been unenforceable, it would likely have put its couriers – many of whom will have no legal knowledge and some may not speak English as a first language – off from bringing a claim to challenge their employment status.
"Worker status was specifically designed to give basic employment protections to people who are in a subordinate and dependent position with their employers, and we can expect more developments in this area in the near future."
Also under the committee’s gaze this week – which is examining the support given to self-employed workers to reduce reliance on the welfare system – were the chief executives of Amazon, Uber and Hermes, who admitted to MPs that their companies would continue to function if they moved away from the gig economy business model and employed staff under traditional terms instead.
Currently, self-employed workers for these firms do not receive sick pay, pensions or a guaranteed minimum wage, and are often on zero-hour contracts. But in giving evidence to the inquiry, representatives from Deliveroo and Uber insisted they would be unable to offer flexibility or provide as many job opportunities if they were forced to provide greater employment benefits.
Simeon Spencer, partner at employment law firm Spencer Wyatt, dismissed the “less flexibility and loss of job opportunities” claims as a “red herring”, because those working for the companies on a self-employed basis were still effectively workers. “There is no reason that simply properly relabelling the delivery people as ‘workers’ changes how they currently operate,” he said.
But Minal Backhouse, director at Backhouse Solicitors, told People Management that it was reasonable that flexibility and work opportunities would be reduced if greater employment benefits were provided, as it would move Deliveroo away from a cheap business model that embodies the gig economy.
She said: “At present these businesses do not view themselves as employers and this means they do not pay sick pay, holiday pay, guaranteed minimum wage or pensions to the workers who deliver their services. The benefit to those workers of the current business model is that they can choose their hours and have a degree of autonomy, which means that they may also earn more than they would as employees.”
Backhouse warned that new businesses seeking to rely on the gig economy model could find it more difficult to grow if the working relationship between them and their staff required them to provide workers with basic employment rights: “In a tight financial situation, the additional costs might tip a profit-making business into a loss-making one.”
Deliveroo and Uber’s comments this week were at odds with previous evidence given in January, when they told MPs at the Business, Energy and Industrial Strategy Committee review that their companies would not be able to “function” without self-employed drivers. At the time, People Management reported that the takeaway delivery company claimed the business “would not be able to attract the numbers of people [they] require”.
James Tait, employment partner at UK law firm Browne Jacobson, said: “This highlights the ongoing issue of the wider legal dispute over the employment status of workers of companies such as Uber and Deliveroo. The current direction of travel is that people working for these organisations are in reality workers, as opposed to self-employed contractors.”