Some commentators have defined the Gig Economy as ‘a labour market characterised by short term contracts or freelance work, as opposed to permanent jobs’. The contracts are seen by many as beneficial due to the flexibility they offer to both parties.
They appeal to employers because they only pay the staff when the work is available. They do not incur staff costs when demand is low. This can be particularly attractive for new business ventures during the start-up phase. The reason is that those working in the Gig Economy are likely to be considered independent contractors. But “gig” work is proving to be a grey area.
A number of employers have operated on the assumption that their staff are self-employed. In some instances, whole business models have been financed on that assumption. However, the Employment Tribunals and appeal courts have found different types of people in the Gig Economy were not independent contractors for employment law purposes. Whilst they are not employees, the courts have held them to be “workers”, entitling them to some basic rights such as holiday pay and National Minimum Wage. Such cases have involved taxi drivers, cycle couriers, and even plumbers.
The Court of the European Union has also held that a worker who was not paid when taking holidays was prevented from exercising his EU rights to paid time off. The Court went so far as approving the claim for all backdated holiday pay from the start of the contract. This sets a further precedent that could be costly to employers whose independent contractors are found to be workers. In theory, such backdated claims could go back as far as 1998 when the Working Time Regulations first became law, if the worker has been with the employer that long.