Employment lawyers will be all too familiar with the existing three categories of employment status: employee; self-employed; and worker. The developments in case law over recent years have resulted in the three categories essentially becoming points on a spectrum. Despite the statutory definitions of employee and worker in the Employment Rights Act 1996 (ERA), using the traditional tests to decide which category is appropriate for a particular person can be very difficult.

This is particularly the case in the gig economy where digital platforms facilitate the way in which short-term work can be provided to individuals (see feature article “The gig economy: shifting sands in employment status”). This issue forms the basis of a number of employment tribunal cases (see News briefs “Employment status and the gig economy: a drive for workers’ rights”, “Worker status: a busted flush?”, Dewhurst v CitySprint UK Ltd ET2202512/2016).

The report is critical of the current state of the law. Ordinary members of the public are in a state of confusion as to which rights they may or may not have. In order to try to provide much needed clarity to the law around employment status, and to make it easier for individuals to enforce their rights, Mr Taylor has recommended that:

Taken together, these suggestions amount to a fairly substantial change to the current system and will not be possible without significant rewriting of current legislation. Giving clear guidance on the distinction between the categories will be easier said than done, and redefining the terms in statute could lead to further litigation and uncertainty. Views appear to be split on the necessity of relabelling workers as dependent contractors; however, it is clear that the current system is causing a large amount of confusion and is not fit for purpose, for both individuals and organisations, in relation to modern working practices.

The report proposes that gig economy workers who make themselves available for work at times when there is very little work available should be paid on a piece-work basis, providing that the employer supplies information about the likely hourly wage available at the time the worker makes himself available for work. This would reflect workers’ productivity rather than the time they spend on the job and would be calculated by reference to Chapter 4 of the National Minimum Wage Regulations 2015 (SI 2015/621).

This suggestion is already proving controversial, and trade unions and the Labour party have both condemned it as a step backwards for workers’ rights. However, guaranteeing an hourly rate is likely either to lead to increased costs to customers to cover loss-making periods, or a limit on the available supply of work when demand is low, neither of which fits with the current business models of many gig economy employers.

The report concludes that zero-hours contracts and agency workers are beneficial to both employers and employees in certain circumstances, but recognises that the current system is open to abuse.

To combat this, Mr Taylor has suggested that individuals working on zero-hours contracts should be given a statutory right after 12 months to make a request to move to fixed hours, which employers should be obliged to consider, in much the same way as flexible working requests are currently treated.

The report also recommends that changes should be made to make it easier for individuals who work on flexible contracts to accrue continuous service by extending from one week to one month the length of non-employment which breaks continuous service. It also suggests that further protections should be extended to workers on zero-hours contracts who are pregnant or on maternity leave as they are vulnerable to employers reducing their hours to zero without expressly dismissing them.

Mr Taylor also recommends that agency workers should have the right to request a direct contract of employment if they have worked somewhere for a year. The so-called “Swedish derogation” in regulations 10 and 11 of the Agency Workers Regulations 2010 (SI 2010/93) provides an exemption from agency workers’ rights to equal treatment with regard to pay. Mr Taylor has called for the Swedish derogation to be abolished so that all agency workers will be entitled to the same basic rights as permanent staff after a short probationary-type period.

In addition, the report calls for greater powers to be given to the Low Pay Commission, including a recommendation that it looks into giving a higher national minimum wage to those on contracts with low guaranteed hours to incentivise employers to provide guaranteed hours where possible.

By themselves, these changes will not eradicate exploitation. Unscrupulous employers will not be put off by rights to request. But there will always be a tension between the workers who value flexibility and freedom, and those employers who abuse the system that provides flexibility.

In order to address the underlying forces shaping the market, the report concludes that it is necessary to find a consistent and equal way of taxing labour as, at present, the self-employed pay far less in tax than employees. Moves in this direction did not go down well in the 2017 Budget, so it could be a while before anything is done in this regard (see News brief “Spring Budget 2017: key tax measures for businesses”).

Most of the report’s recommendations will require substantial amendments to the statute book. The government has said that it will consider the recommendations in the report over the summer and outline proposals by the end of 2017. Given the reduced majority of the Conservative government following the June 2017 election, and the reaction from Labour and the trade unions, the government may prefer to prioritise parliamentary time on other areas.

That said, the issues raised in the report, in particular in relation to individuals in the gig economy, need to be addressed and are not going to be resolved satisfactorily without government intervention. If nothing else, the report is a useful contribution to the ongoing debate into the future world of work.

The report is available at www.gov.uk/government/publications/good-work-the-taylor-review-of-modern-working-practices.