In 2017, another high-profile misclassification case became a hot topic among UK press, reinforcing that daily operational oversight of work often outweigh the contracts put in place when it comes to classifying independent contractors.
Taxi firm Addison Lee was dealt yet another financial blow in September when it found itself the center of a self-employment misclassification case. Three of its drivers claimed to have been wrongly classified as self-employed, which would mean that Addison Lee could potentially owe a significant sum to drivers in the form of holiday pay and wages.
The judge reached his verdict after assessing the criteria under which the three men had been working for Addison Lee. The drivers were subject to a company induction, required to remain in compliance with the Addison Lee Driver Operating Guide, contacted if they hadn’t worked for three or four days, and had to adhere to a dress code.
One of the primary factors in the judge’s decision was the use of technology to monitor the drivers, as this allowed Addison Lee to penalize drivers if they declined work.
These, in addition to numerous other company-imposed criteria, served as sufficient evidence to qualify the men as employers of the London-based firm.
The judge chose to overrule the contracts in place between Addison Lee and the drivers, which stipulated that the drivers were under no obligation to provide their services to Addison Lee at any time. Another such clause read simply: “Drivers are self-employed, and contracted to provide services to, and receive services from Addison Lee on the terms of this agreement.”
The judge deemed the language of the contracts to be in direct contradiction to the reality of driving for the company, and rendered his decision accordingly.
The judge’s ruling stated: “The drivers were not in any realistic sense contracting with Addison Lee,” and instead that, “they were in a subordinate position.”
Addison Lee, who made £61 million in profits last year, uses 3,800 self-employed drivers in London. Now, all would seem to be potentially affected by the case. Their lawyers estimate that holiday pay for each driver could amount to £4,000, with figures for wages yet to come in.
Contracts and Compliance
High-profile misclassification lawsuits are frequenting headlines both in the UK and in the U.S., as the complicated issue of independent contractor classification continues to grow and evolve. While businesses should always have a written contract for all independent contractors they engage, what is written in that contract must be backed up by action or they risk prosecution—as evidenced by the Addison Lee case.
If a contract specifically states that the person you are engaging is an independent worker, then that person may not be treated the same as a traditional employee. Independent contractors operate as their own business, they are free to determine when, where, and how they work, and they are free to openly market their services, among many other factors. When it comes to independent contractor classification, it is important to understand contractor rights, take compliance measures seriously, and ensure your business model includes processes and procedures for proper classification and engagement.
Do you have questions about your company and independent contractor classification? We’re here to help.