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07 July 2020

250: European Court of Justice clarifies employment status of ‘workers’

In B v Yodel Delivery Network Ltd, the European Court of Justice (ECJ) has provided clarity on the factors relevant to determining the ‘worker’ status of an individual, following a referral from the Watford Employment Tribunal, which considered that the UK definition of a ‘worker’ might be incompatible with EU law.

In this case, a Yodel parcel courier had brought claims under the Working Time Regulations 1998 (WTR), which apply to ‘workers’ but not to the self-employed. B’s agreement with Yodel stated that he was a self-employed independent contractor. Other terms of his engagement included that:

  • he was required to use his own vehicle and mobile phone to make deliveries;
  • payment was a fixed rate for each parcel;
  • he could appoint a substitute, although Yodel could veto his choice of substitute if they did not have an adequate level of skills and qualification;
  • he was personally liable for any acts or omissions of a substitute;
  • Yodel was under no obligation to offer him work, and he could reject jobs or fix a maximum number of deliveries;
  • he could also set his own delivery times and routes, within parameters set by Yodel; and
  • he could work for other delivery companies, including Yodel’s competitors.

When B brought claims under the WTR, the Employment Tribunal referred the question of whether he was a ‘worker’ or a self-employed contractor to the ECJ. The Tribunal noted that the WTR define a ‘worker’ as someone who undertakes to perform work personally. This meant that the right of substitution in B’s contract would be fatal to his claim of ‘worker’ status. The Tribunal also asked the ECJ for a ruling on whether this requirement for personal service in the WTR was compatible with the EU Working Time Directive.

Rather than issue a full judgment, the ECJ made a ‘reasoned order’, a procedure used where it considers that the answer to a question referred to it may be clearly deduced from existing case law or where there is no reasonable doubt.

The ECJ noted that the Working Time Directive does not define the term ‘worker’, but case law has established that the essential feature of an employment relationship is a person performing services for and under the direction of another in return for remuneration. It was up to national courts to determine whether this was the case based on the circumstances. This means that being classed as an ‘independent contractor’ under national law does not stop someone from being classed as a ‘worker’ under EU law, particularly if their independence is only notional. The definition of ‘worker’ in the WTR was therefore not incompatible with EU law.

The ECJ identified the significant factors relevant to determining worker status, including being able to choose work and how it is performed, and having the freedom to recruit staff. Applying these factors to B’s case, the ECJ noted that he had a great deal of latitude and did not appear to have a relationship of subordination with Yodel, and that this independence did not appear to be fictitious. He was free to accept or reject work, had the right to work for Yodel’s competitors, and there were very few limitations on his right to provide a substitute.

Whilst this is a relatively straightforward gig economy case, the ECJ’s confirmation of the factors to be taken into account when assessing worker status is useful. Although it will ultimately be for the Employment Tribunal to decide the final outcome of B’s case in the UK, the ECJ has clearly suggested that he is a self-employed contractor, rather than a ‘worker’. The government has indicated that it will legislate to improve the clarity and certainty of employment status tests, but no timescale has yet been set.

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