Hermes couriers win landmark employment status case

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Another day, another tussle over employment status. In the latest round, an employment tribunal in Leeds has ruled that a group of Hermes couriers are workers, not independent contractors.

The decision means that the group of 65 workers are entitled to the National Minimum Wage (NMW) and holiday pay. And crucially, the Hermes couriers can now reclaim the unlawful deductions from their wages, made when they were classified as self-employed.

The case is the latest to be brought by the GMB union over the gig economy. The union has been active in its campaigning against what it sees as disguised employment by gig economy firms like Uber and Deliveroo.

This ruling affects the 65 Hermes couriers who have already brought claims, but is also likely to affect the wider network of 14,500 Hermes couriers who are engaged under the same contracts as the couriers.

There will now be a further hearing in the Employment Tribunal to calculate the exact amount of holiday pay, national minimum wage and any unlawful deductions due back that the couriers should receive.

Commenting on the decision, the GMB’s general secretary Tim Roache said, “This is yet another ruling that shows the gig economy for what it is - old fashioned exploitation under a shiny new facade.

“Bosses can't just pick and choose which laws to obey. Workers' rights were hard won, GMB isn't about to sit back and let them be eroded or removed by the latest loophole employers have come up with to make a few extra quid.”

Dave Chaplin, the CEO and founder of ContractorCalculator, an online portal that provides free advice and information to freelancers and contractors, noted that the decision won’t resolve the persistent problems around employment status.

“New judgements like we have seen today with the Hermes case, alongside the recent Pimlico Plumbers case, demonstrate a major problem whereby firms have forced workers into false self-employment.

“Perversely, the newly proposed reforms to tax the self-employed – known as Off-Payroll Working – will introduce rules that enable firms to classify self-employed workers as ‘employed for tax purposes’, whilst circumventing their obligation to give them employment rights. This directly opposes the intentions of the Government’s ‘Good Work Plan’ and is wholly unacceptable.

“To prevent this, Parliament must enact a very simple rule: self-employed workers classed as ‘employed for tax purposes’ should automatically receive full employment rights.”

The Hermes decision follows hot on the heels of the Supreme Court decision involving Pimlico Plumbers and a former worker named Gary Smith. Smith had worked worked as a well remunerated sub-contractor until a heart attack inhibited his ability to work.

Smith retroactively claimed worker status, enabling him to get sick pay. When he announced the decision, Lord Wilson said Pimlico’s terms “enabled the company to exercise tight administrative control” over Smith “to impose fierce conditions” on when and how much it paid to him.

Crucially, though, none of these judgments have laid down new principles in law. The confusion persists and it increasingly looks like a matter that only government legislation can untangle.

About Francois Badenhorst

Francois

I'm AccountingWEB's business editor. Feel free to get in touch with comments, tips, scoops or irreverent banter. 

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By 0098087
26th Jun 2018 08:53

Why do you think the right wing want Brexit. All these laws will be changed so empoyment rights will be watered down to nothing. Liam Fox has already gone on record as he wants no fault dismissal. Hope the fools who voted for this nonsense realise the mess they've got us into

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to 0098087
26th Jun 2018 15:54

'Hope the fools who voted for this nonsense realise the mess they've got us into'

Hahahahah!

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to Rammstein1
03rd Jul 2018 07:41

As I was not much aware about Hermes couriers who are engaged under the same contracts as the couriers because by profession I am educator. But glad to find here tips to boost client retention rates which also helpful for my students to complete their academic task on related topic. Thanks..!!

Emily,
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to 0098087
01st Jul 2018 03:54

Left wing snowflake idiot, you are as slack as a bag of knackers.

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26th Jun 2018 16:25

About time.

However I am not sure new legislation is required, but simply the existing legislation enforced, such as in this step here.

Its been there a very long time, and under any normal interpretations of the rules I was taught when training these are blatantly not self employed positions.

However lackluster compliance from HMRC has meant companies think the rules don't apply to them.

I had a n enquiry this week for someone working for a large business in the sales team. He is essentially the gang leader of a team of door knockers. The lot of them self employed, apparently, on the basis its commision only. But they all wear the company uniforms, work only for the company and have the whole system dictated to them in terms of how the unit is run. Its a completely bogus set up.

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By alec247
28th Jun 2018 11:00

The judgment: https://www.leighday.co.uk/LeighDay/media/LeighDay/documents/Employment/...

Unless I'm misreading this it is a very odd ruling.

Ignoring the factors around control of the couriers (which aren't the overwhelming issue) the key point (4.1-4.5 in the judgment) seems to be that personally arranging a substitute is as much part of providing a personal service as actually delivering the parcels!

Using that logic it's impossible to ever be genuinely self-employed if you sign a contract which requires you to provide cover whether or not you're able and willing to provide the service yourself - i.e. to act like a proper business. It turns the whole concept on its head.

The circumstances surrounding the substitution clause seem to me to be entirely analogous with Express and Echo Ltd v Tanton, without any complications introduced by rulings in subsequent cases.

To be clear, I think that natural justice says that they should be classed as 'workers' but I really can't see that the current law has been correctly applied in this case.

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28th Jun 2018 11:23

The accounting for contractors/self employed is muddy at best. You have people quoting IR35 to not pay for training, whilst still allowing use of a canteen and parking facilities.
There is a big difference between the person who does an occasional perfume promotion gig and a company like Hermes, where frankly it's very difficult to suggest that the individual can pick and choose the work they do.

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By alec247
to clairebear
28th Jun 2018 11:30

clairebear wrote:

There is a big difference between the person who does an occasional perfume promotion gig and a company like Hermes, where frankly it's very difficult to suggest that the individual can pick and choose the work they do.


The point is that in this case the evidence was that they could pick and choose. Hermes presented the evidence badly and tried to over-egg the pudding but if they'd stuck to the facts there was clearly both a theoretical and actual right to substitution, albeit only to people who Hermes didn't consider unsuitable.
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28th Jun 2018 11:29

The problem stems from the fact that there is no definition of self-employed. There are guidelines and, of course, the stupid tribunal decision that decided on substitution etc.
All this is to do with employers NI. Is it really wrong for a company to re-classify its workforce (if they are willing) to become more profitable?
I bet there are couriers out there that are really [***] off.
The ball is in this wishy washy governments hands. We have all been telling them for years employment status needs sorting.
It's all coming to a head, exciting times.
So Hermes get a big tax bill and go bust - great. Or won't HMRC try to impose a retrospective approach?

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By alec247
to johnjenkins
28th Jun 2018 11:57

It won't have any effect on the tax position, the first paragraph of the judgment makes that clear: "There is no dispute that these couriers are self-employed". The judgment says that they're also 'workers', as well as self-employed, and entitled to workers' rights.

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to alec247
28th Jun 2018 12:30

Then the judge has made a big error.
This is EU crap. In my mind you're either employed or you're self-employed. If you're employed you get all the trimmings. If you're self-employed you don't. Then along comes the EU with a "worker", entitled to holiday pay etc. Yes there are greedy people that want the best of both worlds and look what a mess employment status has now become and with the EU law becoming enshrined in ours, more mess to come.

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By andye
28th Jun 2018 12:33

The Government is learning that it was the Gig economy that got us into mess with people having to work all hours with no basic protection. like zero hours where individuals have to sit by their phone to find out if the are working that day. This cannot be right.I mentioned this before HMRC rules state you cannot be classed self employed unless you have 3 sources of income. Its sad that it has taken the courts to rule on this. May says she hears the the "forgotten" part of the population but in reality its the courts who rule that this setup is not fair

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By alec247
to andye
28th Jun 2018 12:47

"HMRC rules state you cannot be classed self employed unless you have 3 sources of income"
It's very well established in law that this is not the case.

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to alec247
28th Jun 2018 14:19

In a lot of cases HMRC rules are not law nor do they come anywhere near an interpretation of the law. However as no one has reprimanded them they feel they can do what they like and on many occasions get away with it.

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By alec247
to johnjenkins
28th Jun 2018 14:29

It's not even HMRC 'rules' though. Whether it was in the past I don't know but certainly since their manuals have been available online there has been no suggestion that they operated that rule. And to my personal knowledge from being in business since 1982 they haven't operated any such rule.

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to alec247
02nd Jul 2018 09:18

Don't you remember the "6 month rule". HMRC decided that if you worked for one company for more than 6 months you had to re-classified as employed. They got away with it for a while.

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01st Jul 2018 03:48

Hermes couriers are a bunch of thieves. I know this because I had first hand experience as a customer Services advisor whilst at the same time being a customer.

The couriers message said “delivered at 8:45 signed for by customer”

My wife and I were both at work at 8am and the signature was not ours.

I telephoned the courier immediately and he ummed and aarghed when I advised him that as well as being the customer services advisor I was also the customer.

He concocted a story about him leaving it in the back garden. My wife went home at lunch time but the parcel was not in the back garden, however it was there at 6pm when she arrived home after work.

This was typical of 90% of complaints received in customer Services.

Thieving bar stewards

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01st Jul 2018 03:53

Presumably, as workers, they will start paying tax at source (PAYE) and won’t be able to re-claim their motoring costs (travel and purchasing costs).

Be careful of what you wish for.

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By alec247
to Wilbyman
02nd Jul 2018 11:26

No, because the judge made it clear that there's no dispute that they are genuinely self-employed. The ruling was that they're classified as workers for employment rights, not as employees for tax purposes.

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to alec247
02nd Jul 2018 11:47

How can a judge award "Employment" rights when you are not "employed". When you work for yourself "self-employed" you make your own rights so how on earth can you be entitled to other business rights. Oh yes, of course, the EU says you can.

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By alec247
to johnjenkins
02nd Jul 2018 14:06

Well that's exactly what the Hermes couriers went to court to prove - that they are self-employed 'limb (b) workers'.

'Limb (b)' refers to Section 230 paragraph (3)(b) of the Employment Rights Act 1996 - UK legislation which is over 20 years old. It is though, as you correctly suggest, enacting an EU definition of 'worker'.

Without that EU definition these couriers would be very clearly self-employed under UK law and not entitled to any employees' rights at all.

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to alec247
02nd Jul 2018 14:33

And that is exactly how it should be. "Workers" in this case are clearly using the term to try and get the best of both worlds.
I have to presume, under EU law, that the judges hands were tied.

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By alec247
to johnjenkins
02nd Jul 2018 15:18

Reading between the lines I suspect that the judge decided that the Hermes representative wasn't playing with a straight bat and handed down this perverse judgment so that the case would get bounced to a higher court.

As I said, it might be a morally correct judgment but I don't think it will stand in law. And Hermes get another two bites at the cherry to get it right of course. An appeal might still side with the couriers but I'd be astonished if it was on the basis that arranging a substitute could be regarded as part of the personal service the courier is alleged to be obliged to provide. I fully understand the argument but it's ridiculous.

Personally I think that the evidence from the couriers that they used family members to carry out work and one of them had several rounds with people carrying out work for him is enough to prove that, according to the law, they're self-employed rather than workers or employees. Can a judge send her son into court to carry out her work? Can a shop-worker send his mother in?

Something obviously needs doing about this but misapplying existing law isn't the answer.

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to alec247
02nd Jul 2018 16:24

I wonder if a franchisee can be classed as a "worker".

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By alec247
to johnjenkins
02nd Jul 2018 17:37

My thinking exactly. If I was trying to avoid this issue then the couriers would all be franchisees with the 'right' (and obligation) to deliver all parcels in their allotted area. Job done, no chance of ever being deemed a worker or an employee. And they could actually operate as the businesses the company wants them to appear to be.

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