Does Hermes’ Union Deal Predict the Future of Gig Economy Workers’ Rights in the UK?

Does Hermes’ Union Deal Predict the Future of Gig Economy Workers’ Rights in the UK?

In a deal reached earlier this month with one of the UK’s largest trade unions, the courier company Hermes is offering its self-employed drivers the option to obtain some of the rights enjoyed by regular employees, including a guaranteed minimum wage and holiday pay, the Guardian reported:

Under the agreement with the GMB union, Hermes’ 15,000 drivers will continue to be self-employed but can opt into contracts with better rights. The deal comes after almost 200 Hermes couriers won the right to be recognised as “workers” at an employment tribunal last summer in a case backed by the GMB. Under employment law, “workers” are guaranteed rights including holiday pay, the legal minimum wage, minimum rest breaks and protection against unlawful discrimination.

The GMB has been active in advocating for the rights of British workers in the gig economy, also backing similar labor tribunal cases against other companies operating on an independent contractor model, including Uber, which lost a landmark case in 2016. Other British unions and union federations have also supported claims regarding the rights of gig economy workers, with tribunals ruling in favor of the workers in most of these cases. The settlement reached this month means that Hermes will drop its planned appeal against the ruling last year, while the GMB will refrain from pursuing further litigation against the company.

The “worker” classification in UK employment law defines a space between employees and the self-employed, but the tests for classifying workers as such are primarily defined by case law and increasingly unclear as technological shifts have brought about changes in the way people work. The Taylor Review of modern working practices recommended in its 2017 report that the government relabel “workers” as “dependent contractors,” write a clearer definition of this category into law, and make it the default status for companies that have a self-employed workforce above a certain size. The government said last year that it would adopt most of the review’s recommendations, but did not commit to writing this “worker by default” model into law.

Yvonne Gallagher, A partner at the London-based law firm Harbottle and Lewis, commented to Personnel Today that the Hermes deal would raise some questions about these drivers’ tax and national insurance obligations:

She added that it will be interesting to see whether HM Revenue & Customs asserts that these “workers” should in fact be paying employees’ tax and national insurance through the PAYE system, with Hermes making the additional Employers NI contribution of 13.8% of earnings. The additional burden of employer’s national insurance contributions is thought to be a powerful factor influencing the structures companies use in relation to their workforces.

“Hermes notes that many of its workers choose self-employed status because they value the freedom to work when they want, to manage their other commitments in life, such as family responsibilities. That has no doubt influenced the agreement, but may not be compelling for HMRC purposes, given that there is nothing preventing employers from granting employee status and allowing a high level of flexibility to drivers as to when tasks required are completed.”

“The direction of travel appears to be firmly in favour of gig economy workforces having at least worker rights,” Gallagher stressed. Other experts, however, told People Management that the deal might not be as good as it looks, and would not necessarily set the precedent the GMB is hoping it will:

Simon McVicker, director of policy and external affairs at the Association of Independent Professionals and the Self-Employed (IPSE), warned the new model was only “muddying the water”. He called for the government to create a legally binding definition of self-employment.

“Instead of creating this new and unnecessary status, Hermes should simply give their drivers the full package of benefits they are entitled to,” he said. “We believe the way to clear the confusion about employment status is for the government to write into law a statutory definition of self-employment.” …

This view was echoed by David Greenhalgh, head of the employment practice at law firm Joelson, who said the deal “does not represent the landmark precedent GMB would have us believe”. He added that any pressure for other firms using gig economy workers to follow suit would be “reputational rather than on the back of a new legal precedent having been set”.

Michael Hibbs, head of employment law at Shakespeare Martineau, gave the agreement high praise in an opinion piece at Personnel Today, calling it “a shrewd move by the business and …a significant milestone,” and predicting that it would influence how the government addresses the rights of gig economy workers in its planned employment law reforms:

In breaking the repetitive tribunal and appeal cycle of gig economy employment cases so far, Hermes has delved right to the heart of the issue: evolving ways of working that require more creativity from employers in terms of the packages they offer to their workers. Additionally, with the UK on the brink of being at full-employment, staff retention will become more important than ever before and offering all workers and employees contractual options that match their lifestyles and expectations is central to that.

While the new self-employed plus status is revolutionary in many ways, it is unlikely to lead to widespread legislative change quite yet. The government, under its Good Work Plan, has proposed to improve the rights of those on unstable contracts by giving them the right to a written statement of their entitlements from their first day in a role and by repealing a loophole that allows agency staff to be paid on lower rates. Hermes’ decision will no doubt influence any further plans and could help form the basis of a more standardised approach to how gig economy arrangements are structured.