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The Changing Ways of Working – the “Gig” Economy

The “gig” economy workers

The “gig” economy refers to “a labour market that is characterized by the prevalence of short-term contracts and freelance work, as opposed to permanent jobs”. In the “gig” economy, workers get paid for the “gigs” that they do, rather than a weekly pay or regular pay. This type of employment relationships is very common in food delivery services or car ride services, where workers would be required to deliver food or take passengers when orders arise. There is no promise that work can be provided on that day, since the demand is determined by market force. Thus, such kind of relationship cannot fit into the traditional employment relationship, which requires mutuality of obligation – ie the promise to provide work and the promise to accept work.[1]

No doubt, gig economy workers enjoy the benefit of flexibility. They are only required to accept work when it arises. They are even allowed to deny work, and control how much work they want to take and when. This allows workers to juggle other commitments, such as other jobs or caring for families. Gig economy is beneficial to employers too, as they only need to pay for the gigs done, thus there is no fixed salary and cost can be reduced.

Lack of protection of rights?

Gig workers may enjoy enough flexibility, but, on the other hand, they are sacrificing their employment rights as well. Since employee status can hardly be established in these loose relationships, they are not protected by many statutory rights which require employment status to be established. These rights include protection from unfair dismissal, right to redundancy payments, right to receive national minimum wage, paid holiday and sick pay.[2]

But such result is not desirable at all – it means that in these relationships, employers can utilize the chance to exploit the rights of workers without facing any consequences. In fact, the labour market is changing fast and is becoming more and more flexible. In the UK, it is estimated that five million people are employed in the “gig” economy. This raises the question whether the law has developed to keep pace with the changing labour market.

The Court responses

In fact, the “worker” definition was introduced earlier on to give effect to encompassing a larger proportion of the labour force.[3] The court has further developed this “worker” definition in common law. In James v Redcats[4], the court held that a parcel courier, who was paid per parcel delivered and accepted by HKRC as self-employed, was in fact a “worker” and thus entitled to national minimum wage.

The Uber case was perhaps the most striking case in recognizing the rights of flexible workers in this new age. The case concerns about UBV which operated its business through a smartphone app, which basically notifies the drivers nearby when it receives any request from riders. The ULL claimed that it was just operating as an “agent”, connecting drivers and riders together. But the Court held that this was a sham, and Uber drivers were regarded as “workers” for the company, and was entitled to holiday pay, rest breaks and national minimum wage.

The effort to respond to the changing market was further shown by a case at the Employment Tribunal earlier this year, concerning a courier working for a logistics firm City Sprint. The court held that the courier should be classified as worker rather than independent contractor, thus entitling her to certain rights.

Future development

Thankfully, the government is continuing to find ways to include these flexible workers within the statutory framework. Following the Taylor Review of Modern Working Practices, the government is responding to its consultation on employment status and related consultations on rights for gig economy workers. Greg Clark, the business secretary, also announced that new legislation will be introduced to simplify the process of determining employment status and enhance the protection of rights for workers.[5]

On the other hand, those who are identified as gig workers, who are essentially classified as self-employed, raise concern as to how these workers should be taxed. Philip Hammound has proposed new tax rules for self-employed contractors in the autumn budget[6], but how these rules operate in practice is to be seen.

All in all, the workplace is changing and the way of working is changing – it is important to develop changing rules and laws to respond to the shifting labour environment.

Stephen Lau

Employment Law Section Editor

10th December, 2018


[1] Carmichael v National Power Plc [1999] ICR 1226

[2] Employment Rights Act 2996

[3] Employment Rights Act s 230(3).

[4] [2007] ICR 1006.

Disclaimer: The views expressed are that of the individual author. All rights are reserved to the original authors of the materials consulted, which are identified in the footnotes above.

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