The employment status of gig economy workers in Ireland
20 July 2022
Introduction
“In the changing world of work, with the emergence of new forms of employment that often lie in the grey zone between traditional employment and self-employment, the scope of protection offered by labour and employment law has once again become an urgent issue.”
Thus begins the Foreword to the European Trade Union Institute’s 2018 Report on “The Concept of Worker in EU Law’. It is an issue whose urgency has been highlighted by the recent decision of the Court of Appeal in Karshan (Midlands) Ltd t/a Domino’s Pizza v Revenue Commissioners [2022] IECA 124, which marks the latest attempt of the Irish judiciary to grapple with an issue prompted by the internet age. And, not for the first time, the outcome appears to be that the legislation which underpins the court’s decision is ill-suited to a changing world.
The current position in Irish employment law is very much a binary one. A person is either an employee under a contract of service, or a self-employed contractor under a contract for services. In pre-internet times, the principle of a contract for services was more straightforward. Tradespeople would perform tasks in people’s homes or offices; management consultants would undertake specific projects for corporations; barristers would represent clients in court on an ad hoc basis. In all of these situations, it was uncontroversial that the person supplying the services was in business for themselves, could charge their own rate, invoice the client for each task performed, and had the right to refuse to take on a job if they so wished.
The internet age has created a vast range of opportunities for people to earn a living away from the traditional workplace environment. Many of these allow individuals go to into business as self-employed contractors, working their own hours, and a location of their choice, and enjoying the flexibility and freedom provided by this lifestyle.[1] Changes to lifestyles brought about by the COVID-induced lockdown, with a new-found appreciation of working from home aided by enhanced connectivity, have precipitated the erosion of the traditional employment model.
There is some controversy, however, over the position of those people whose work is governed by the use of an online platform, and who operate in what has become colloquially-known as the “gig economy”. Are such workers:
a) employees working under a “contract of service”, or
b) self-employed contractors working under a “contract for services”, or
c) something in between these two traditional positions, as per UK employment legislation?
Before looking at the specific issues concerning this area of law, it is worth considering first the existing position concerning the concept of self-employment.
Employment status: the current law
At the outset, it is worth noting why the employment status of a particular person is important. Aside from the freedom bestowed on the workers themselves, classifying a person as an independent contractor has obvious advantages for the party which uses their services. Firstly, as they are not their employer, they do not have to pay additional Employers’ PRSI.[2] Secondly, they do not have to provide traditional employees benefits such as paid holidays, sick leave, maternity leave, redundancy pay etc. Furthermore, the workers cannot sue for unfair dismissal.
Ireland: The two main cases in this jurisdiction to consider whether a person is working under a contract of service, or a contract for services, are Henry Denny & Sons (Ireland) Ltd v Minister for Social Welfare [1998] 1 IR 34, and Minister for Agriculture v Barry [2009] IR 215.
In Denny, Keane J considered the employment position of demonstrators who handed out samples of products to supermarket customers. In holding that the demonstrators were employees of Henry Denny & Sons, the Court laid down the important marker that it should look beyond the wording of the contract, which in this case explicitly stated that the workers were not employees, and were providing their services as independent contractors. Instead, the Court must look at the reality of the employment relationship between the parties.
The overall test was held to be whether the person performs the work “as a person in business on their own account.” The Court stressed that each case must be considered on its own facts, but considered the following as appropriate factors to differentiate between employees and self-employed contractors:
a) Does the person perform services for another person and not for him/herself?
b) How strong is the degree of control over how work is to be performed?
c) A person is more likely to be correctly working on their own account if they provide the necessary premises, equipment, and some other form of investment, including employing others to assist them.
d) A person is more likely to be correctly working on their own account if their profit depends on how efficiently they do the work.
Barry involved the employment status of veterinary inspectors who worked at a particular meat processing plant, and when this case was ultimately remitted back to the Employment Appeals Tribunal, the workers were held to be self-employed contractors. In the High Court, Edwards J developed the principles laid down in Henry Denny, and while considering that range of factors which needed to be assessed, he held that the question of “mutuality of obligation” was the overriding issue.
“The requirement of mutuality of obligation is the requirement that there must be mutual obligations on the employer to provide work for the employee and on the employee to perform work for the employer. If such mutuality is not present, then either there is no contract at all or whatever contract there is must be a contract for services or something else, but not a contract of service.”[3]
The Court rejected the idea of there being a single composite test to determine the work relationship between two parties, and stated that it can be “unhelpful to speak of a “control test”[4], or of an “integration test”[5], or of an “enterprise test”[6].” Instead, the Court held that
“Like the question of enterprise, questions of control and integration may also provide a court or tribunal with valuable assistance in drawing the appropriate inferences. All potential aids to the drawing of the appropriate inferences from the primary facts as found stand in their own stead, and no one is subsumed by another. Moreover, those mentioned do not represent an exhaustive list.”[7]
The UK: It should also be stressed that the UK has a different, more naunced method of classifying the relationship between an employer and its workers. Section 230(3) of the UK Employment Rights Act 1996 provides for the position of a “worker”, which covers an intermediate position between a traditional employee and a self-employed contractor.[8] A worker is someone who either works
a) under a contract of employment, or
b) under any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual.
The latter are commonly referred to as “Limb B workers”. This intermediate category means that “workers” are entitled to certain employment rights, including the national minimum wage, holiday and maternity pay and protections in relation to discrimination and working time. They do not, however, have protection from unfair dismissal, the right to notice periods, maternity leave or redundancy pay, which are reserved for traditional “employees.” When UK case law deals with the position of Uber drivers and Deliveroo riders, therefore, it considers them in respect of this position as Limb B workers.
It is important to stress that to qualify as such workers, the person must undertake to perform the work “personally.” This has been held to mean that if a contract contains a “substitution” clause which allows a person to appoint a substitute to carry out their work, then they will not be considered a worker for the purposes of the 1996 Act.[9]
EU law: EU employment law is centred on the concept of “workers”, though there is no central definition of the term under the case law of the Court of Justice. It is important to note that the concept of a “worker” under EU law is not the same as that of a “worker” under the UK Employment Rights Act 1996 (above). In broad terms, it can be described a person who “performs services for and under the direction of another person in return for which he receives remuneration.”
In respect of the factors to be considered in assessing a person’s employment status, the ECJ held In C-692/19 B v Yodel Delivery Network that a person would be considered an independent contractor if they have
– the power to choose the time and place of their work
– the power to appoint subcontractors or substitutes to carry out their work
– the power not to accept work assigned to him
– the power to work for other parties, including direct competitors of his “putative” employer.[10]
What exactly is the “gig economy”?
It would clearly be remiss to discuss the “gig economy” without defining what it entails, and this is where the first problem occurs. The reality is that, as with so many internet law-related expressions, it is used very loosely by a lot of commentators, and appears to encompass different practices depending on which source is used. The Revenue Commissioner’s own guidance – the “Code of Practice on Determining Employment Status”[11], is typical in this regard. The opening sentence of the section headed “Workers in the digital/ gig economy” states that “New forms of work have emerged in the so-called ‘digital/gig/platform/crowd’ economies.” The listing of these types of employment, without any explanation as to what each involves, or how and whether each differs from the other, is symptomatic of a lack of understanding of this form of employment.[12]
In simple terms, the “gig economy” is clearly predicated on the performance of “gigs” – ie once-off, contractor-based tasks with the worker being paid for each individual task they perform. In this regard, it can be understood to encompass just about every type of work performed by self-employed contractors, in that plumbers, taxi drivers, management consultants and barristers would all appear to fit that definition every time they are engaged by a client.
The term is now used more narrowly to describe tasks which are performed with the involvement of an online platform[13] which links the customer requesting the service with the person providing the service, with payment usually made via the online platform rather than directly between the customer and the provider of the service. For this reason, the term “platform economy” is commonly used to describe this type of work, and in reality it is a term which is perhaps more appropriate.[14]
Even with this narrower focus, however, difficulties arise due to the subtle differences between services ostensibly covered by this understanding of the gig economy. Airbnb, for example, simply involves the sharing of accommodation via an online platform, with the provider not being obliged to perform any task other than make their property available. With the ride-sharing platform Uber, however, while the service provider similarly shares their property – the car – they have to additionally perform a task by physically driving the customer to their desired location. While Uber drives are clearly performing a “gig”, it is not so straightforward to see what type of gig the owner of the Airbnb accommodation is performing.
To complicate matters, the above examples involve the substantial service being performed by the service provider using their own property. With food-delivery platforms such as Deliveroo and Just Eat, however, a further party is brought into the process – the food outlet which provides the product to be delivered. In these cases, it is arguable that the person engaged by the online platform is merely an intermediary in the principal transaction between the customer and the food outlet providing the goods.
And to complicate matters even further, we have the proceedings which are the main subject of this article – Karshan t/a Dominos Pizza v Revenue Commissioners. Almost universally described as being a case about “gig economy” workers, such commentary overlooks one inconvenient fact. There was no online platform involved in the subject matter of these proceedings. Instead, the pizza delivery drivers were rostered directly by the pizza restaurants in a traditional, face-to-face manner, without the use of an online platform, and the source of contention was the agreement between the drivers and the restaurants themselves. While the principles to be derived from Karshan are certainly relevant to gig economy workers, the fact that this issue is almost entirely overlooked simply illustrates the confusion that so often permeates any discussion about internet-based issues of law.
Existing jurisprudence on the status of gig economy workers
The position of workers in the gig economy has been considered by the ECJ and UK Employment Tribunals, and it is useful to first consider these decisions before turning to the decision in Karshan.
The position of Uber drivers was very recently considered by the UK Supreme Court in Uber BV v Aslam [2021] UKSC 5, in which the court held that Uber drivers are “Limb B” workers and are entitled to the range of statutory rights which that position provides. Uber’s position had always been that its drivers are self-employed and running their own business, with Uber simply being a third party agent which connects the business owner (the taxi driver) to the customer.
The online platform relied on the wording of the written contract with its drivers, which described a driver as an “independent company business of providing transportation services.” The UK Supreme Court, however, stressed the need to look at the reality of the relationship between the parties, held that “the true agreement will often have to be gleaned from all the circumstances of the case, of which the written agreement is only part”. In this regard, at least, the position in the UK is echoed in this jurisdiction.[15] In holding that the Uber drivers were workers, the Supreme court emphasised the fact that Uber set the fares for each “ride”, the driver could be penalised for refusing to accept rides, Uber handled any customer complaints about the driver, and Uber restricted the way in which passengers and drivers communicate.
The decision is not a blanket ruling that applies to all businesses using self-employed contractors in the gig economy. This is evidenced by the decision which held that Deliveroo riders were not to be considered “workers” by the Central Arbitration Committee in Independent Workers’ Union of Great Britain (IWGB) v Roofoods Limited T/A Deliveroo (2017 WL 05632856. Emphasis was placed by the Committee on the substitution provision in the contract provided by Deliveroo, which allowed riders to sub-contract their work to others, and also to the fact that riders were free to work for direct competitors of Deliveroo.
Karshan (Midlands) Ltd t/a Domino’s Pizza v Revenue Commissioners [2022] IECA 124
In 2014, the Revenue Commissioners first determined that individuals who delivered pizzas on behalf of Domino’s were employees of the company. This was despite the fact that the company’s contracts with the drivers explicitly described them as independent contractors. This decision was upheld by the Revenue Appeals Commissioner, who based their decision on the fact that the relationship between the parties involved a hybrid contract – an “overarching umbrella contract” under which drivers were free to work whenever they chose, and a series of individual contracts based on the availability of the drivers and the requirements of the company. The Commissioner held that once a driver notified the company of their availability, and the company rostered a driver for a shift, there was a contract in place which contained mutual obligations.
The company appealed the decision to the High Court[16] which upheld the findings at first instance, and held that the Commissioner did not err in their consideration of whether a mutuality of obligation existed. This resulted in a further appeal to the Court of Appeal, which delivered its decision on 31 May 2022. Costello J and Haughton J allowed the appeal, and Whelan J delivered a dissenting judgment.
Mutuality of obligation: The overriding importance of the “mutuality of obligation” test was re-iterated by the Court of Appeal, stressing that it is the first hurdle which must be overcome before any person can be considered to be an employee.[17] Unless there is an obligation on the employer to offer work to the person, and a corresponding obligation on the person to carry out that work, then the position of the person must be that of a self-employed contractor.
The focus of the Court’s decision was clauses 12 and 14 of the contract between Domino’s and its drivers:
12. The Company accepts the Contractor’s right to engage a substitute delivery person should the Contractor be unavailable at short notice. Such person must be capable of performing the Contractor’s contractual obligations in all respects.
14. The Company does not warrant or represent that it will utilise the Contractor’s services at all; and if it does, the Contractor may invoice the Company at agreed rates. The Company, furthermore, recognises the Contractor’s right to make himself available on only certain days and certain times of his own choosing. The Contractor, in turn, agrees to notify the company in advance of his unavailability to undertake a previously agreed delivery service.”
Costello J was critical of the Commissioner’s finding that a driver who was unable to complete a delivery, having been rostered to do so, was “obliged” to find a substitute, an issue which had been considered to enhance the fact that a mutuality of obligation existed between the parties. She held that clause 12 of the contract “confers a right to engage a substituted driver but does not confer an obligation … it is, by definition, an obligation of notice, not of performance of work.”[18] The absence of obligation was strengthened by the fact that even if a driver failed to turn up at a time for which they were rostered, no sanction would be imposed on them. For this reason, there was no mutuality of obligation even in each of the individual discrete contracts which existed following the rostering of a driver.[19]
Furthermore, Costello J rejected the finding of the High Court that mutuality of obligation does not require an obligation to provide work on an ongoing basis, holding instead that “Irish authorities on mutuality of obligation are unambiguous in requiring an ongoing reciprocal commitment to provide and perform work on the part of the employer and the employee respectively.”[20]
While the finding in respect of Mutuality of Obligations disposed of the issue, the Court nonetheless went on to consider the questions of substitution, integration and the terms of the written contract between the parties. In each of these, the original decision of the Commissioner was left undisturbed. Of particular note is the finding concerning the contractual terms, with Karshan having placed emphasis on the fact that the contract stressed that drivers were free to work “when he or she chooses.” The High court, however, refused to overturn the finding to the contrary of the Commissioner, holding that the terms “were interpreted by the Commissioner at first instance with an eye on the reality of the relationships between drivers and the appellant.” This re-stated the position that the language used in the contract will not necessarily be determinative.
Where to now for gig economy workers in Ireland?
The binary position in Irish employment law is not the fault of the Irish judiciary, who are obliged to hold that if a person is not an employee, then they can only be an independent contractor. Gig economy workers do not fall into the traditional category of employee, as they are free to choose the time and place where they work, and are also free to work for various, often competing, parties simultaneously. But to categorise a person who makes food deliveries, with little more than a bicycle and smartphone to their name, as an “entrepreneur” running their own business appears incongruous. This point was made at first instance in the long-running Aslam v Uber case in the UK, which dismissed Uber’s position that it was a platform which joined together 30,000 small businesses as being “ridiculous”.
The age of online platforms such as Uber and Deliveroo, as in several other internet-related areas, has created new challenges for the legal system, and two new pieces of legislation which purport to deal with this issue are worth briefly considering.
The European Commission plans to take action to protect “platform workers” with the proposal for a “Directive on improving working conditions in platform work”, published on 9 December 2021.[21] There will be a presumption of an employment relationship between the platform and the worker, which will guarantee certain legal protections for the latter, and it will be up to the platform to rebut that presumption. Significantly, the platform will be able to do so if they establish that “the contractual relationship in question is not an employment relationship as defined by the law, collective agreements or practice in force in the Member State in question.” This essentially means that in this jurisdiction, as the platform worker does not meet the test of being an employee, then they can only be considered to be self-employed, with no employment relationship in existence between them and the platform.
Furthermore, the fact that it is confined to “platform work” means that it would appear to exclude workers such as those drivers employed by Dominos’ Pizza, the subject of the central case in this article. The same can be said of a Bill introduced in May 2021[22] by a group of senators which is also focussed on “platform workers.” In seeking to clarify the distinction between an employee and a self-employed contractor, the Bill draws from the definition of a “worker” under UK Employment legislation. Unlike the UK, however, the Bill proposes to expand the definition of an “employee” to include what are terms as “workers” under UK legislation.
Section 5 of the Bill proposes to provide a non-exhaustive list of factors that will be used to assess whether a person is genuinely self-employed, the overarching test being that they are in business “on their own account, that is to say as a free agent with economic independence of the person.[23]Many of the factors relate to the more traditional forms of self-employment (owning their own business; having a premises where equipment is stored; being free to set a price for the work; being free to employ others to do the work on their behalf etc). The Bill, unfortunately, does not appear to have progressed beyond the first stage of debate in the Seanad since it was first introduced.
Conclusion
It would not be appropriate to draw general conclusions about the state of gig economy workers in this jurisdiction, given the fact that the contracts under which they work differ to each other in significant ways. Whether a person, when performing a task such as a food delivery, is doing so under an individual contract of service, or an individual contract for services, will depend on the reality of the terms and conditions under which the platform has engaged them to perform that task.
The fact that the High Court in Karshan found that Dominos were the employers of its drivers, does not mean that a similar finding would be arrived at for another platform, such as Deliveroo for example. Furthermore, the different factors to be considered depending on the nature of the proceedings – be they to do with taxation, redundancy payments or employment rights – makes it even more difficult to draw general conclusions about gig economy workers. It may appear anomalous that various bodies have their own tests to ascertain whether or not someone is an employee or a self-employed contractor, these decisions are not binding on each other, and different bodies often arrive a different decisions based on the same facts. In Barry, for example, it was uncontested that for the purposes of pay, the Department of Agriculture looked after the inspectors’ taxes, paid employers’ PRSI and, when issuing them with P60s each year, the Department described itself as the “employer” and the inspectors as “employees”. Despite these facts, the courts were satisfied to treat them as self-employed contractors for the purposes of redundancy payments legislation.[24]
In her dissenting judgment in Karshan, Whelan J made a perceptive comment about the difference between the ad hoc nature of most work carried out by self-employed contractors, and the nature of the work required by Deliveroo – “by contrast with much of the case law relied up on, where the requirement for services could be exceptional, episodic or occasional … the need for drivers was a continuing and fixed requirement integral to the business being operated by the company.”[25]
Another difference between gig economy workers, and those self-employed contractors which which the law has traditionally dealt, is the very nature of those who perform these modern-day “gigs.” Workers in the gig economy tend to perform unskilled work, requiring little more than a phone and a mode of transport, and often work unsociable hours for low pay. Furthermore, as the pool of enterprises offering such work is small, and the workers are numerous, often young, unskilled non-nationals with little knowledge of their legal rights, those enterprises have little need to incentivise the workers with better pay or conditions.
One of the benefits of self-employment has always been that if you perform your job to a good standard, you have the ability to grow your business as favourable word of mouth may encourage others to engage your services. How you deploy your skills, in short, may have beneficial consequences in the medium to long term. This is clearly not the case with the gig economy, where the only benefit of doing your job well is to maximise your income on that particular day. There is no carry-over benefit into the next day, and no opportunity to grow your income on the basis that your customers consider you to have done a good job.
Ultimately, it may be stated that while the decision in Karshan may appear unsatisfactory, and fails to vindicate even the most basic employment rights for the Domino’s drivers, the Court was bound by the law as it currently exists in this jurisdiction. The Court of Appeal pointedly remarked that the High Court erred in believing it was entitled to adapt Irish law to recognise modern means of engaging workers, with Costello J holding that “it was not open to the High Court to introduce such a significant change (or indeed this court) either. Such a change is for the Oireachtas and must be prospective.”[26]
Ends.
[1] Social media “influencers”, who are paid to promote goods and services to their followers on channels such as Instagram, are a good example of such entrepreneurs.
[2] This equates to approximately 10% of an employee’s gross salary.
[3] Minister for Agriculture v Barry [2009] IR 215, at para 47. Curiously enough, the Revenue Commissioner’s own guidance document – the Code of Practice on Determining Employment Status – does not appear to echo this settled law. It lists the key factors in making a decision on employment status – mutuality of obligation, substitution, the enterprise test, integration and control. It then states that “none of these factors if determinative on its own.”[3] This statement is clearly inconsistent with the decision in Barry, which states in definitive terms that the mutuality of obligation test is determinative, and in the absence of this factor, a person cannot be considered to be an employee.
[4] Whether the person is allowed to arrange for a substitute to carry out the work is central to this test.
[5] To what degree is the work that the person carries out essential to the operation of the business; does the person wear the business’ branded uniform/ promote the business when performing the work etc.
[6] Does the person have the ability to benefit financially based on the standard of the work they perform?
[7] Minister for Agriculture v Barry [2009] IR 215, at para 65.
[8] https://www.gov.uk/employment-status/worker
[9] See Pimlico Plumbers Ltd v Smith [2018] UKSC 29.
[10] So while the issue of “substitution” is an important consideration in assessing whether someone is an independent contractor under EU law, it is not determinative as it is under UK law
[11] https://www.revenue.ie/en/self-assessment-and-self-employment/documents/code-of-practice-on-employment-status.pdf
[12] The 2016 report by McKinsey & Company, “Independent work: choice, necessity and the gig economy” uses the term in its very title, but fails to describe its contours anywhere in the text.
[13] The UK Government is quoted by the World Economic Forum as defining the gig economy thus: “the exchange of labour for money between individuals or companies via digital platforms that actively facilitate matching between providers and customers, on a short-term and payment-by-task basis,” a definition which clearly confines the gig economy to online platforms. https://www.weforum.org/agenda/2021/05/what-gig-economy-workers/
[14] The proliferation of bicycle-based delivery riders in Dublin city, hurrying meals from a food outlet to a customer, is the most obvious manifestation of this phenomenon. The taxi ride-sharing platform, Uber, has failed to gain a foothold in this jurisdiction due to our tight licensing laws governing the operation of taxis.
[15] Minister for Agriculture v Barry [2009] IR 215: “a characterisation or description as to the status of a party contained in a contract intended to govern a work relationship is not to be regarded as decisive or conclusive of the matter.” (at para 64)
[16] Karshan v Revenue Commissioners [2019] IEHC 894
[17] See Minister for Agriculture v Barry [2009] IR 215 above.
[18] Karshan (Midlands) Ltd t/a Domino’s Pizza v Revenue Commissioners [2022] IECA 124, at para 72.
[19] It should be noted that at para 88 in her dissenting judgment, Whelan J queried the reality of this position, pointing to the evidence of one driver who stated that “there would be follow-up if an employee did not attend work having been rostered”, and suggested that they may be penalised by not being rostered in future even if they made themselves available. Whelan J further noted, at para 156, that drivers were often requested to fold pizza boxes at Dominos’ premises while awaiting a driving job, and that if drivers refused to do so the manager often warned them that they might be sent home “That is a considerable sanction consistent with the relationship of employer and employee.”
[20] Karshan (Midlands) Ltd t/a Domino’s Pizza v Revenue Commissioners [2022] IECA 124, at para 110.
[21] Platform work is defined as “any work organised through a digital labour platform and performed in the Union by an individual on the basis of a contractual relationship between the digital labour platform and the individual, irrespective of whether a contractual relationship exists between the individual and the recipient of the service”.
[22] The Protection of Employment (Platform Workers and Bogus Self-Employment) Bill 2021.
[23] These very much reflect the guidelines to self-employment provided by the Revenue Commissioners in their Code of Practice on Determining Employment Status 2021
[24] In the relatively recent case of A Doctor v A Public Service Provider (ADJ-00003277, 20 August 2019), the WRC assessed that the applicant should be considered to be an employee, basing its decision primarily on her having met most of the requirements set down in the Revenue Commissioners Guidelines. This is notwithstanding the fact that the application was brought under the Terms of Employment (Information) Act 1994, as she was seeking to obtain terms of employment, and was not related to her categorisation as being an employee for taxation purposes.
[25] Karshan (Midlands) Ltd t/a Domino’s Pizza v Revenue Commissioners [2022] IECA 124 (decision of Whelan J), at para 71.
[26] Karshan (Midlands) Ltd t/a Domino’s Pizza v Revenue Commissioners [2022] IECA 124, at para 113.