At the Labour Party conference a couple of weeks ago, the Business Secretary announced that a forthcoming consultation would seek to address the issue of bogus self-employment. Delphine Strauss wrote about it in the Financial Times – and she was kind enough to quote me sounding a sceptical note about the whole exercise. Why am I such a killjoy? 

Most employment law consists of statutory rights that are given to either employees or workers. Broadly speaking a worker is someone who agrees to perform work for another person but who is not running a business of which that person is just a client or customer. Workers enjoy rights such as minimum wage, holiday pay, most trade union rights and a bunch of others. Employees have a full contract of employment with their employer and enjoy additional rights such as the right not to be unfairly dismissed or to be given a redundancy payment. I could insert a large table here explaining which rights apply only to employees and which apply to all workers but that would be dull. 

Let’s just say that in employment law you will have one set of rights if you are a worker and some important additional rights if you are also an employee. If you are neither of those things then employment law is simply not concerned with you. I try to avoid using the term ‘self-employed’ in this context – it is a term used by HMRC when assessing someone’s earnings and many people who are workers for the purposes of employment law will quite properly be classed as self-employed for tax purposes. 

Ceci n’est pas une pipe

There are always going to be some employers who try to deny that an individual is either an employee or a worker. If the employer can get the benefit of the work without the individual getting the benefit of employment rights, then for many employers that is going to be an attractive option. If that also comes with a lower National Insurance bill then so much the better. 

The problem of ‘bogus-self employment’ is not a new one and we have decades of case law explaining how to spot workers and employees in cases where the employer claims that they are neither. A common thread in those cases is the need to look at the substance of that was agreed rather than just the label attached to the agreement. 

I am writing this while sitting on an office chair. You can tell it’s a chair just by looking at it – it has all the features you would expect to see. My chair does not stop being a chair just because I loudly insist to everyone it is a coffee-table. Similarly, if you put a clause in the contract with an individual saying ‘this is not a contract of employment’ but all of the features of the contract are exactly those that you would expect to find in an employment relationship, then that will not get you very far. 

But suppose you go further – suppose you expressly exclude from the contract certain features that are central to the existence of an employment relationship. Take ‘personal service’ for example. It is an essential feature of both employees and workers that they undertake to perform work personally. It is the individual who is expected to do the work – he or she is not just being asked to ensure that the work gets done by somebody. So if you make it clear in the contract that the individual can send a substitute instead of doing the work themselves then that individual cannot be a worker or an employee. 

Of course, it’s often not put so straightforwardly. Sometimes the employer will want to limit who the substitute can be and when one can be sent – but the more they impose limits, the more it looks like the individual has some obligation to the employer to perform work for them. Nevertheless, an ‘unfettered’ right to send a substitute will, under the current case law, prevent an individual from being either an employee or a worker.

The reality of the agreement

Unless it doesn’t. The courts will not take a blanket substitution clause at face value. If it does not reflect how the parties genuinely envision the contract working in practice, then they may ignore it and find that the individual is either a worker or an employee. In the wonderfully titled Autoclenz v Belcher, the Supreme Court found that a substitution clause in the contract did not reflect what was genuinely agreed between the parties. Whatever the contract said on paper, the Tribunal found that in reality the workers were required to turn up for work every day and do the work that was given to them. The Supreme Court agreed and held that they were employees. 

The FT report makes specific reference to a case involving Deliveroo whose riders were allowed to let someone else use their log-in details and do their deliveries for them. In that case the Central Arbitration Committee – in considering a claim for union recognition – held that the substitution clause relied upon by Deliveroo was genuine. The CAC found that substitution was rare in practice but that it did happen. In a survey, 14 out of 65 Deliveroo riders said that they had used a substitute at some stage. Deliveroo did not attempt to police the practice and one rider gave evidence saying that he regularly engaged a substitute and took a 15-20 per cent cut of whatever the substitute earned. Whatever you think of the ethics of that, it really did seem to be true that someone could be a Deliveroo rider and not actually do any of the riding. On that basis I don’t see that the CAC had much choice given the existing case law. They ruled that the drivers were not workers and rejected the recognition claim. The Supreme Court held that the CAC’s analysis was the right one. 

According to the FT, the key proposal that the Government will make is to ‘de-emphasise’ this test of personal service. It’s not entirely clear to me what that will mean but I can see the argument that the courts have taken too strict a view on substitution clauses – even given their emphasis on the reality of the agreement. In the Deliveroo case the provision of a substitute was very much the exception rather than the rule. Surely it was envisaged that the vast majority of riders would perform the vast majority of their work personally? Shouldn’t that be enough? 

Perhaps in the definition of worker we could have a provision capturing the idea that a substitution clause will not prevent someone being a worker if it is envisaged by the parties that most of the work will be done personally. That could work – but it would require a new Act of Parliament and I really don’t see the Government finding time to legislate on employment status before the next election. I’m not holding my breath.

A broken system

In any event, I think the wider problem of bogus self-employment could be addressed without new legislation. We just need better and more consistent enforcement. Many workers are simply not aware of the rights they already have or that the contracts which tell them that they are self-employed contractors would not stand up to legal challenge. They may not have the means to bring a claim – or be prepared to wait until a year or more has passed before they can get a hearing in the Employment Tribunal. They might be even more discouraged if they found out how hard it was to enforce an Employment Tribunal award and how many awards go unpaid. 

This is where the Fair Work Agency could play a crucial role. With the power to enforce the key rights enjoyed by workers – minimum wage and holiday pay – it could actively pursue cases where the employer spuriously claims that its workers are self-employed. Unfortunately, its budget for 2026/27 is just £60.1 million. That is not much of an increase on the amount that was already being spent on Government enforcement and falls well short of what would be required to make a serious dent in the problem. There is just no avoiding the fact that the solution involves spending a lot more money – and realistically that isn’t going to happen. 

So instead, Government opts for the cheaper and easier option of changing the law itself – or at least announcing a consultation on the issue. But a change in the definition of a worker – even if that does eventually happen – will probably not have much of an impact. There are moves and counter moves. Employers determined to prevent their workforce from having employment rights would look carefully at any new definition and draft contracts specifically designed to get around it. Those contracts might not withstand legal scrutiny, but without proactive enforcement and a working Employment Tribunal system what scrutiny would they get? 

The real way to improve employment rights – and the rights of vulnerable workers in particular – is to make the system work. I would like to see the Government concentrate on the following three things: 

• Giving the Fair Work Agency the resources to take a proactive approach to enforcement and to target the worst offenders. 
• Fixing the Employment Tribunal system so that cases get to a hearing within a reasonable time frame. 
• Taking a serious look at the enforcement of Employment Tribunal awards and actively pursuing those who refuse to comply with them. 

Without these issues being addressed, employment law really cannot do much to help the most vulnerable workers. Tinkering with definitions is no substitute for making the system work properly.