REUTERS | Mike Blake

Can contract law handle the gig economy?

Employment status is one of those fractally complex areas of law. Initially, it seems as if it should be relatively simple. But, as you look more closely, it starts to look more complicated. And if you continue to examine it, it becomes more difficult still. It’s not clear (to me at least) that the nearly five decades of caselaw since Ready Mixed Concrete v Minister of Pensions and National Insurance have made anything much clearer.

Mark Freedland and Jeremias Prassl have recently written on Employees, Workers and the “Sharing Economy”. They argue that the rise of the gig economy has significantly increased the importance of worker status, distinct from either that of employees or the truly self-employed. This, they argue, has created a new tripartite taxonomy of work: employee, worker and genuinely self-employed. This tripartite approach exists in parallel to the more traditional binary division between employee and self-employed, because employee status is still a requirement for most employment rights.

The Uber, City Sprint and Pimlico Plumbers cases highlight both the importance of the relatively new worker status to the rising numbers of gig economy workers and the fact that worker status is no less difficult a concept than the status of employee.

Freedland and Prassl argue that the existence of both the binary and tripartite approaches (together with the subtly different distinctions between employed and self-employed status under tax law) is fundamentally confusing and unsatisfactory. Many employment lawyers (and perhaps even more employers and employees) would agree.

Prassl has gone on, in a paper with Martin Risak, Uber, Taskrabbit, & Co: Platforms as Employers? Rethinking the Legal Analysis of Crowdwork, to propose a “functional” approach to the contract, where employment status is determined by considering who is responsible for various work related functions – such as provision of pay or decisions to terminate employment. Radically, they propose that employment relationships might be split between multiple employers, each responsible for a different set of functions.

Given the extent of the current impasse, a radical solution is certainly attractive. But I’d like to suggest that the problem is more fundamental and calls for an equally radical, but different solution.

Contract law is the wrong legal approach to employment relationships. Contract law is conceptually based on two assumptions. First, that there is a considered agreement between two parties of equivalent bargaining power. Second, that the agreement is performed within a contained timeframe, with changes to the agreement taking place in a relatively considered and formal matter.

Employment relationships are almost entirely outside this paradigm. They rarely involve considered agreements between equal partners; and employment relationships mutate over time – often with no explicit agreement about how they are changing.

A system of employment rights based on the foundation of contract law; involving analysis of the types of contract involved and the characteristics of their terms will almost inevitably prove unsatisfactory. Moving away from the mixed tripartite and binary classifications would require either a massive expansion in the scope of employment rights (by extending the protections currently given only to employees to all workers) or an equally massive reduction (by removing the protections currently given to workers who are not employees). Neither approach is likely to be politically palatable (although the Labour Party manifesto out this week promises the former solution, together with a full-scale review of the law of employment status).

Rather, the nature of employment protection should be based on the nature of the relationship between the parties – in a manner much more akin to tort law than contract. That would free us both of the unsatisfactory confusion of the concurrent binary/tripartite splits – and might also allow for the sorts of split employment relationships envisaged by Prassl and Risak. It would also reduce, if not eliminate the unattractive contractual arms race in which parties draft with the purpose of achieving a particular legal outcome for themselves, rather than as a true record of the agreement.

Jeremias Prassl will be speaking on Humans as a service – work in the ‘gig’ economy at the Industrial Law Society Spring Conference on Saturday 20 May 2017 and there will be an opportunity to debate the issues afterwards (or in the comments section below).

Free Representation Unit Michael Reed

Leave a Reply

Your email address will not be published. Required fields are marked *