Reform of employment status? Not yet. Government guidance published

The government has published its response to the consultation on Employment Status, which is available here. The purpose of the consultation was to:

  “…explore in a greater level of detail how wider employment status reform, including recommendations from the Taylor Review, could work, both in legal terms and in relation to the realities of the modern labour market, as well as seeking to understand the potential impacts and implications of those proposals.”

The outcome is… drumroll please… not to reform employment status. However, the government has published updated guidance called “Employment status and employment rights: guidance for HR professionals, legal professionals and other groups” (see here for the guidance and below for a summary).

Why no to reform?

It seems that, after quite a lot of navel-gazing, the government has concluded that now is not the time for a reform of employment status. This may come as somewhat of a disappointment for anyone who has recently tried to carry out an employment status assessment, who will know that it is not straightforward (indeed, it can end up requiring a multi-day hearing in tribunal with access to all the relevant documents and witnesses to get a definitive answer).

The government acknowledges as much in its conclusion:

“The Government recognises that, whilst the Employment Status framework for rights works for the majority, boundaries between the different statuses can be unclear for some individuals and employers .”

However, it goes on to decide that:

“…the benefits of creating a new framework for employment status are currently outweighed by the risk associated with legislative reform. Whilst such reform could help bring clarity in the long term, it might create cost and uncertainty for businesses in the short term, at a time where they are focusing on recovering from the pandemic .”

 

The guidance

The guidance does not change the law nor is it a substitute for tailored legal advice. However, it does provide a neatly packaged guide to an often confusing area of the law. The guidance is divided into six sections. In summary:

• There is an easily digestible summary of the three types of employment status in section 2.
  
  
• There are user-friendly tables setting out the entitlement to rights, which category of worker is entitled to them, if there is any requisite qualifying period before the rights arise (also in section 2).
  
  
• Section 3 clarifies the features which typically characterise each of the three main kinds of employment relationship.
  
  
• Section 4 covers other common working types, for example volunteers and interns, explaining their interaction with the three main types of employment relationship.

In addition, the government has published a short Employment Status Checklist aimed at making it easier for employers and engagers to understand which obligations apply to them.

While the guidance may provide some clarity on the rights and obligations associated with different categories of employment status, it seems unlikely to be the “one-stop-shop” claimed by the government. Since (as the government acknowledges) only a court or employment tribunal can make a final decision on employment status, it is likely that the extensive case law in this area will remain influential in informing status decisions (see for example the Supreme Court in Uber v Aslam and Pimlico Plumbers v Smith).

Other potential updates?

While the government has decided not to change the law regarding employment status yet, they did commit to some potential changes in their response to the consultation:

• Updating the “Calculating the Minimum Wage guidance” (here).
  
  
• Recruiting more employment tribunal judges to reduce the delays in the employment tribunals.
  
  
• Working “closely with stakeholders” to ensure the relationship between employment and tax status becomes more clear and usable.

These changes would be welcome, particularly with regard to reducing the delay in Employment Tribunals. However, given the numerous other challenges of the day, and with the Employment Bill nowhere in sight despite years of promises, it is yet to be seen whether the responses to the consultation will be enacted. For more recent legislative developments in Employment Law please see our previous blog here.

If you require further information about anything covered in this blog, please contact Hugh Young or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, August 2022