Ronnie Neville, Partner, and Lynda Nyhan, Associate, on our Employment Law and Benefits team, recently published an article on the gig economy. The article appeared in 'The On-Demand Economy' prepared by The International Bar Association Global Employment Institute.
Nature of relationships
The ODE in Ireland is much less developed than in some other jurisdictions. In Ireland, there is no ‘other’ category to describe on-demand workers; they are either employees or independent contractors. If a worker is needed on an on-demand basis, this will be referred to as an ‘if-and-when’ contract, which is used to describe the relationship between an employer and an on-demand worker. However, in all cases the worker will either be employed or engaged as a contractor for the specific period required.
The Competition (Amendment) Act 2017 has been enacted to end the application of competition law restrictions to collective bargaining by self-employed contractors. This has been achieved by providing that certain categories of workers will no longer be considered as ‘undertakings’. Accordingly, self-employed workers are now subject to fewer restrictions from a competition law perspective.
Separately, the Employment (Miscellaneous Provision) Act 2018 commenced on 4 March 2019 and protects workers who are working shorter hours or who are lower paid. Specifically, this legislation aims to:
• ensure that workers are better informed about the nature of their employment arrangements and in particular their basic terms at an early stage of their employment
• strengthen the provisions around minimum payments to low-paid, vulnerable workers who may be called in to work but not provided with work during that period
• prohibit zero-hours contracts, except in cases of genuine casual work or emergency cover or short-term relief work for that employer
• ensure that workers on low-hour contracts, who consistently work more hours each week than provided for in their contracts of employment, are entitled to be placed in a band of hours that reflects the reality of the hours they have worked over an extended period and
• strengthen ‘anti-victimisation’ provisions (bullying, harassment and so on) for employees who try to invoke a right under these provisions
Equality law in Ireland covers both employees and independent contractors. All workers, however classified, enjoy full protection against discrimination in the workplace. Undoubtedly, fewer contractors bring discrimination claims, probably because of a lack of awareness.
Termination claims for ODE workers are a grey area in Irish employment law. In relation to on-demand workers hired as employees (effectively for fixed-term contracts), because there is no mutuality of obligations in an on-demand worker relationship, it can be that there is no obligation to provide work or 54 IBA Global Employment Institute indeed for the on-demand worker to accept work, in between the periods of work. However, a third party may determine that an employment relationship does exist, for example, if there has been a consistent pattern of re-employment. Clearly, the on-demand worker is employed for the duration of the contract, and so the employee is protected under Irish employment law for that duration.
The key question will be whether the periods in between (or gaps in) employment should still count towards an on-demand workers’ continuous service or whether they terminate at the end of every employment until subsequently re-employed. Some adjudicators may be willing to count the periods in between contracts, which may give rise to employment rights such as unfair dismissal (after a year of service), or statutory redundancy (after two years’ service). This may lead to the perverse situation that it may be less attractive to engage an ODE worker than an employee.
A further issue involves the risk that an on-demand worker engaged as a self-employed contractor may be reclassified as an employee, if the features of the relationship warrant such a reclassification.
In terms of protections for the employer or client, the employer/client can put in place various measures to reduce (but not eliminate) the aforementioned risks. For example, for self-employed contractors, although one of the main tests will be ‘substance over form’, the contract wording is important. Also, ‘clients’ can put in place measures to reduce the risk of a de facto employee claim. For on-demand workers with employment contracts, an employer should keep the duration of all combined periods of employment to under one year and issue a P45 (a form regarding the details of an employee leaving the work) at the end of the last assignment.
Health and safety and liability issues
In relation to vicarious liability, an employer is likely to be vicariously liable for the actions of an on-demand worker (either employed or independent contractor). However, the client can secure an indemnity for liability incurred for the duration of the contract from any on-demand worker who is a contractor.
Health and safety laws apply to both on-demand contractors and employees. However, there are more rigorous legislative requirements for an employer of an on-demand employee than of a client of an on-demand independent contractor.
There is no worker compensation in Ireland. In the event of injury of an on-demand worker, the worker can pursue a claim under common law or statute against the negligent party, who might be the employer/client/third party.
IP protection and confidentiality
At common law, an on-demand employee owes a duty of confidentiality to the employer. However, a lesser duty arises for an on-demand independent contractor. For both on-demand employees and contractors, there is no protection for confidentiality post-employment/post-engagement, unless expressly provided for in the contract or a related agreement.
Similarly, at common law, IP vests in the employer of an on-demand employee. Conversely, IP does not automatically vest in the client in an on-demand independent contractor situation. It is therefore recommended that the contract should expressly set out what confidentiality and IP provisions the company wishes to protect. For both the on-demand employee and contractor, there is no protection for IP post-employment/post-engagement, unless provided for in the contract.
Social security and tax issues
In terms of social security, an employer that hires an on-demand employee must deduct at source all relevant social security of the employee. There is no flexibility in this regard. However, an on-
demand contractor is liable to pay all of their own social security contributions.
In relation to tax, the employer that hires an on-demand employee must also deduct all relevant tax at source with respect to amounts payable to the employee. There is no flexibility regarding these obligations. However, tax liabilities fall on an on-demand contractor to pay. The client may request an indemnity to this effect from the on-demand independent contractor.
If an on-demand independent contractor has been incorrectly classified when in actual fact they are a de facto on-demand employee, they may be subsequently reclassified as an employee and the employer will be liable for any underpayment of tax/social security liabilities and penalties.
Market trends and emerging issues
Traditional employers have always used ‘seasonal’ workers. These workers are effectively on temporary part-time or full-time contracts for a period of time and are very popular within the retail, hospitality and restaurant and pub sector. In the hotel sector, for example, a hotel can determine whether it requires staff, depending on the demand of customers throughout the week.
With the rise of the ODE, there has been a move away from consistent seasonal staff, whereby the client/ employer engages in a much looser arrangement with on-demand workers. An important consequence of this is greater negative publicity towards perceived abuses of the on-demand worker. Many on-demand workers are given consistently low hours over many years and may never have security of tenure.
Companies using the on-demand worker model benefit from greater flexibility and are seen to be modern or forward-thinking by exploring new ways of working. For on-demand workers providing professional services, negative perceptions are less likely than for employers engaging on-demand workers on a minimum wage, which are increasingly viewed negatively and met with scepticism.
It is mostly technology companies that are seen as important users of on-demand workers, because it is they who currently attract scrutiny in the news. Technology companies view their relationship with the workers as being with a self-employed person that uses their platform to engage in their own employment. The platforms are, in their opinion, a service provider as opposed to an employer.
Traditional companies that have tended to veer towards seasonal staff and thus create an employee/ employer relationship are, however, seeing and understanding the options and benefits relating to on-demand workers, and are increasingly engaging them. As the use of on-demand workers has become much more prevalent, we anticipate changes to the legal system, to protect on-demand workers in general, regardless of sector. That being said, the Uber model is somewhat unique and may be treated differently and result in sector-specific, new legislation.
This article, written by Ronnie Neville and Lynda Nyhan, appeared in The IBA Global Employment Institute: The On-Demand Economy in 2019.
The content of this article is provided for information purposes only and does not constitute legal or other advice.