UK court rules Deliveroo couriers are self-employed

The Independent Workers’ Union of GB (IWGB) has been embroiled in court battles since 2017 to have Deliveroo riders classified…

Author Photo by Andy Vessey

The Independent Workers’ Union of GB (IWGB) has been embroiled in court battles since 2017 to have Deliveroo riders classified as ‘workers’, with the right to join a trade union and bargain collectively for better terms and conditions. Some Deliveroo couriers argued they should be classed as employees, which would give them access to sick pay and holiday pay.

In the case, The Court of Appeal upheld previous decisions that Deliveroo riders should be deemed self-employed without the right to organise via a trade union. Crucial to the ruling was the riders’ right to use a substitute to undertake the work at their discretion.

This is the fourth time that the case had reached court, and once again the decision reached was that the couriers were deemed as self-employed. We take a look at what was raised in the case and why Deliveroo ultimately won.

Right to substitution for Deliveroo

Had this been a tax case, then these riders may have been assessed as genuinely self-employed due to the right of substitution being evident in the contract. The right of substitution, a key IR35 indicator, points towards a contractor working as self-employed and therefore outside IR35 if they are able to send a suitable replacement in the cover the work.

The Deliveroo contract allows for a rider to use a substitute at any time, and without the need for prior approval by Deliveroo. Not only is the rider responsible for paying any replacement worker at an agreed rate between the parties, but also for ensuring the substitute possesses the necessary skills and training. This sits squarely with HMRC’s concept of substitution and the principles laid down in the leading case of Express and Echo Publications Ltd v Tanton [1999].

Furthermore, the right had been invoked on several occasions by Deliveroo couriers. In the 2017 case of Deliveroo vs IWGB, it was stated that a survey of riders conducted found that 14 out of the 65 who answered the question had either themselves used a substitute or knew of other riders who did.

Judges dismiss Independent Workers’ Union case

Lord Justice Underhill, one of the three judges who heard the appeal, did concede that the verdict might be seen as “counterintuitive”, in that gig economy workers may have particular need of unionising for better pay and conditions. However, he framed this by saying that while they had the right to organise, they did not have the right to do so via a trade union.

The Supreme Court ruling in February, which concluded that Uber drivers should be afforded certain employment rights, had no bearing on this decision. All three judges dismissed the IWGB’s appeal unanimously and refused the union the right to appeal to the Supreme Court.

Employment and the gig economy

The debate will continue as to how gig economy workers should be treated for both employment rights and tax due to the idiosyncrasies of that sector. While the Deliveroo riders’ employment status is resolved, for now, it is a concern that many gig economy workers are lower paid and do not have a sufficient understanding of their tax obligations as a self-employed trader.

Whilst it may be desirable to have a statutory definition of self-employment, that is difficult to pin down, so in the meantime greater support should be given to these workers to help them understand and navigate the tax system.

The result has undoubtedly had positive results for Deliveroo, with it being reported that Deliveroo shares rose by 9% following the ruling.

Deliveroo is the latest business working in the gig economy to be involved in a court battle, following the footsteps of Uber. Conversely, in the case of Uber, they lost their case at the Supreme Court, with it being ruled that Uber drivers must be treated as employed workers. Find out why the drivers were deemed as employees and why Uber lost the case here.

When is a contractor self-employed?

When assessing a limited company contractor’s employment status for tax purposes, the key status tests are mutuality of obligation (MOO), right to substitution and control. In the event of an employment tribunal, these key tests could swing a contractors employment status one way or the other.

Contractors can use an IR35 status tool to have an assessment. One tool available is Kingsbridge’s award-winning IR35 status tool.

For just £50 plus VAT, check the status of your engagement and get a full report which outlines its strengths and weaknesses. The hybrid tool gives an instant result for inside or outside assessments. And in the event of an indeterminate result, the case will be passed to our expert IR35 team for manual review (at no extra cost).

Buy an assessment today for just £50 plus VAT.

Related topics

Contractors News