Ask About... Retail, Fashion & Hospitality
12 December 2017
Many of our clients in the retail, fashion and hospitality sector face similar HR issues. Each month one of the members of our team will identify an issue, ask how you would deal with it and provide our advice. This month we asked Laura...
I wonder if you can help me? I’ve been referred to you by my brother, Nigel Kringle. He says that you are the people to talk to about problems with your staff at work. I run a gift delivery service (“Kris Kringle Delivers”) which, I might humbly note, is rather successful - particularly at the end of the year. I started out with just one sled and a small team helping with deliveries. These guys were really just part of the family - my “little helpers” as I affectionately called them - although for some reason Mrs Kringle started calling them “the Elves”.
The business expanded massively and the service now delivers worldwide. As I couldn’t do all the deliveries myself, most of the delivery work has now been outsourced to the Elves who are based across the world. They run the deliveries themselves although I co-ordinate all the jobs and payments for them centrally.
I’ve recently developed a nifty little “Elf Yourself” app, which makes things a lot easier. The Elves notify me, via the app, when they will be available to do shifts. As far as I’m concerned, they are completely independent – ‘elf-employed, you might say – and can decide whether or not they are going to do any shifts. They know there are plenty of other Elves out there who can do the work if they don’t want to!
But anyway, I digress slightly from the point of my email. I’ve just received a so-called “grievance” from one of the Elves in the UK, Arthur, who says that I should be paying them for all the time they are signed into the “Elf Yourself” app, even if they are not actually delivering. He mentioned the national minimum wage (NMW) and claimed they should also be getting paid holiday! I mean, really???
Do I have to pay the Elves the NMW and holiday pay?
- Elves, you say? I don’t think you have much to worry about, Kris - I’m pretty sure they don’t have employment law rights.
- Gosh this sounds complex. Do the Elves actually carry out the deliveries in the UK? If they work all over the world, you may need cross-jurisdictional advice. Let’s have a conference call on this and I can reach out to my international colleagues.
- Well, it depends on whether the Elves fall within the legal definition of “worker”. This covers either an employee (which the Elves may not be) or someone who agrees (via a contract) to work personally and who is not running their own business.
- Yes! Elves have rights too, you know, Kris.
The correct answer is C.
This is a pretty topical issue in the UK as this type of work is becoming more common in the expanding “gig economy”, in which individuals are paid for individual jobs or assignments rather than working in an ongoing relationship. You may be aware that other global operations like yours, such as Uber and Deliveroo, operate similar apps to “Elf Yourself”. These and other organisations offering similar “gig” based work (e.g. Addison Lee ,Pimlico Plumbers) have faced legal challenges recently regarding the status of the individuals working via their apps or other arrangements.
The employment status of individuals is significant because it determines the extent of their employment rights, or indeed whether they have any at all. In the UK there are three different categories in which people can work: employee, worker and self-employed. Employees have more rights than workers, who in turn have more rights than the fully self-employed:
- Workers are entitled to the NMW, paid holidays and rest breaks under the Working Time Regulations, and protection against unlawful deductions from wages.
- Employees qualify in addition, among other things, for protection against unfair dismissal, maternity/paternity leave and sick pay.
- The fully self-employed do not enjoy any of these rights. They are regarded as having greater power and autonomy than workers and employees, and so less in need of protection.
The label that the parties give their relationship in a written contract is not conclusive, and it is not always easy to know what working status an individual has.
In an employment relationship, there is “mutuality of obligation” - an obligation to turn up to work on one hand and an obligation to provide work (and pay for it) on the other. There is also an obligation of “personal service”, in that an employee cannot send along a substitute to do their job instead, and the individual must be sufficiently under the “control” of the employer. These are the three most important factors pointing to employee status, but there are a host of others which might point one way or the other - such as who takes the financial risk, who provides the equipment, how pay is determined and how integrated the individual is into the organisation.
All employees are also “workers”, but not all workers are employees. While statutory definitions vary slightly, for most purposes a worker (who is not also an employee) is someone working under a contract - not an employment contract - through which they undertake to perform work personally for someone who is not by virtue of that contract their client or customer. In other words, they agree to work personally and they are not running their own business.
The recent cases are all very fact specific so will not necessarily help decide whether your Elves are workers as Arthur has asserted. There is a risk, however, that they may be workers with the associated rights. To give you a clearer answer we’d need to look at the arrangements for the Elves’ work in more detail, considering a number of questions including:
- Do you have any documentation controlling the relationship you have with the Elves?
- In reality can they decide how much work they do and, indeed, whether they work at all?
- Alternatively, do you expect them to work a certain amount and at certain times?
- Are you obliged to provide them with a certain amount of work?
- Do you provide them with any equipment or uniforms to do the work?
- Do the Elves have to do the work themselves, or can they provide a substitute?
- Are the Elves still very much part of the Kringle family and do you invite them to your end-of-year work party??