Central Arbitration Committee rules Deliveroo riders are self-employed

22 / 11 / 2017

We’ve seen a spate of cases recently dealing with employment status in the gig economy (see our update on Uber’s appeal outcome here).

In the latest case of this kind, the Central Arbitration Committee (“CAC”) has ruled that Deliveroo’s riders are self-employed and do not come under the definition of “worker”. The CAC’s decision focused on one main determining factor: that riders were able to substitute other riders to do their work for them.

The right to substitute brings a key distinction between the self-employed when compared to workers or employees. Both employees and workers have an obligation of personal service and are engaged to perform the work themselves, whereas those who are genuinely self-employed very often have the right to appoint a substitute in their place to perform the role or services they are engaged to do.

When determining employment status, one of the important questions that will be asked is whether the individual does genuinely have the right to appoint a substitute. It is quite common for a contract to include a substitution clause in an attempt to prove there is a self-employed relationship, but if the reality is that this clause is never (or could never be) used in practice, then it will most likely be found to not be a genuine indicator of self-employment.  In this case, the CAC was satisfied that Deliveroo allowed an “almost unfettered right of substitution” and therefore found that the riders were genuinely self-employed.  The CAC reached this conclusion despite the fact that the new contractual substitution clause was introduced only 11 days before the hearing.  Although it was noted that the vast majority of riders did not exercise their right to appoint a substitute, they could if they chose to do so.

The riders’ ability to substitute makes the contractual relationship between Deliveroo and its riders different from that in place between Uber and its drivers: Uber drivers cannot freely substitute other drivers to take a pick-up in their place and are in fact suspended or blocked from using the app if they do not accept at least 80% of trips. Although it was not clear to the CAC as to why Deliveroo riders would actually want to substitute since they had no such minimum obligations, it found that in practice, some riders did often appoint a substitute.  The CAC noted that the rider would need to have a high level of trust in its substitute, as they would require access to their individual account and passwords, but this does not appear to have deterred all riders from this practice.

Deliveroo’s response to the CAC’s decision has been quite interesting. It has publicly said that it wants its riders to remain self-employed, but wishes to pay sick pay and offer insurance cover to its riders, without prejudicing that status.  Sick pay and benefits such as insurance are indicators of an individual being a worker or an employee rather than self-employed and so as the law stands, if Deliveroo offers these benefits, there is a risk its riders will become workers and entitled to the national minimum wage and holiday pay.

Following the CAC’s decision, there has been another call for employment law to be updated to ensure that companies operating in the gig economy are unable to “exploit loopholes” that currently exist. Because of its finding on the genuine right to substitute, the CAC considered it “unnecessary to dissect the other features of the contractual relationship”.  However, the recent Taylor review recommended that the right of substitution should not be seen as a key factor when determining employment status because this led to unfair results.  In addition, more than 40 riders are bringing an Employment Tribunal claim against Deliveroo, claiming that they are employees (the CAC was considering the question of employment status only for the purposes of deciding a union recognition application, something the self-employed are not entitled to have) and so Deliveroo are likely to be in the press again in due course.

As the concept of employment status becomes more fluid in reality, we expect to see changes to employment law to keep up with these trends and ensure that a balance is struck between flexibility and protection.