Rachael Lloyd
Posted on 11 Aug 2020

CitiSprint couriers held to have worker status and entitlement to holiday pay, despite a change to their terms of engagement.

O'Eachtiarna and others v CitySprint (UK) Ltd ET/2301176/18

In O'Eachtiarna v CitySprint, the Employment Tribunal (ET) considered whether same-day cycle couriers, who were referred to as self-employed under their terms of engagement, were in fact workers. The Claimants brought claims for unpaid holiday pay, entitlement to which depended on a finding that they were workers, rather than self-employed individuals.

Background

In January 2017, the ET found that a cycle courier engaged by CitySprint was a worker under the Employment Rights Act 1996. CitySprint subsequently introduced new terms of engagement on 12 November 2017, which simplified their "self-employed cycle courier tender terms using plain English … to clarify [their] respective positions, paying particular emphasis to the degree of flexibility and lack of control and direction that self-employed cycle couriers enjoy."

The Claimants contended that the new terms had no practical effect on their engagement and thus, the Tribunal should find that they were workers, as it had done in respect of the Claimant in the previous claim in January 2017. CitySprint asserted that the new terms of engagement meant that the Claimants were not workers and, in any event, they had been paid rolled-up holiday, which should be set-off against any claim for holiday pay.

The Tribunal considered (i) whether the cycle couriers were workers both before and after a variation to the terms of their contracts in November 2017, and (ii) if they were found to be workers, whether they could claim unpaid holiday as far back as the commencement of their engagement with CitySprint.

Holiday Pay for Workers

Under the Working Time Regulations 1998 (Regulations), workers are entitled to 5.6 weeks' paid annual leave (pro-rated for those who work part-time hours). The Regulations do not expressly set out the correct approach to take when calculating annual leave and pay for casual workers.

In the event of an underpayment, and subject to eligibility and jurisdictional requirements, workers have the right to bring a claim for unlawful deductions from wages. In most circumstances, the relevant backstop date to which any underpayments can be claimed is two years prior to the date of the claim. One exception where the two-year backstop does not apply is where the worker has not been permitted to take any annual leave. In this situation, the worker continues to carry over their statutory entitlement indefinitely until termination, where it becomes payable.

One approach used is to "roll-up" holiday pay. This essentially means that any accrued holiday pay is automatically added onto the worker's hourly rate, regardless of whether any leave is actually taken. Despite the fact that this has been held as unlawful by the European Court of Justice (ECJ), the ECJ also commented that rolled-up holiday can be set off against holiday pay claims, provided that the payments were made transparently and comprehensively. Subsequent UK case law has set out the need for a consensual agreement identifying a specific sum properly attributable to periods of holiday. As such, the position on rolled-up holiday is unclear, however, provided the use of rolled-up holiday is transparent, comprehensive, and attributable to periods of holiday actually taken, it seems to be the case that any remedies for its use are currently limited.

What was held?

The Tribunal considered that the new terms of engagement reflected the reality of the employment relationship and were clear. Even recognising the imbalance of power, these terms could not simply be disregarded. However, despite this, the Claimants were held to be workers for the following key reasons:

  1. The right to a substitution was only a theoretical right and had never been exercised. A dominant feature of the contract remained personal performance and this was key.
  2. Most of the cycle couriers did not provide their services as a cycle courier elsewhere, or market themselves as such. Accordingly, even after November 2017, the couriers were workers when working "on the circuit".
  3. There was a default assumption of acceptance by the cycle couriers for jobs until they signed off at the end of the day. If they wished not to accept, the obligation was on them to inform the control room.

As such, the cycle couriers were workers for the period that they were "on the circuit" and, as such, were entitled to holiday. On this point, it was held that the rolled-up holiday pay clause, whilst consensual, was not sufficiently transparent or comprehensive to satisfy the requirements. The ET held that CitySprint should have identified a specific sum referable to the holiday pay or period and set out how this was to be calculated. Whilst remedy has not yet been determined, the two-year back-stop to the claim for unpaid holiday pay will not apply for the reasons set out above.

What should employers take from this?

This judgment, whilst only a first instance decision, follows a significant number of cases on employment status and gives a helpful indication of the liabilities that may arise if worker status is identified (see our recent article on the Uber case, here).

The ET placed emphasis on the terms of a contract being of central importance to the situation and, therefore, employers should be particularly mindful of how their contracts are drafted when engaging self-employed individuals on a regular basis. Focus needs to be placed on whether the terms reflect the relationship between the parties in practice – an example, in this case, was the substitution clause. The Tribunal considered at length whether the clause had ever been exercised and, if it had, whether, in practice, the substitution could take place as anticipated by the terms.

In addition, employers who seek to rely on rolled-up holiday as a means for paying its employees or workers need to ensure that this is transparent, comprehensive, and attributable to periods of holiday actually taken. Given that, strictly, this method has been deemed unlawful by the ECJ, ETs are likely to be particularly stringent when considering what is permitted.

This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact Rachael Lloyd or Siobhan Murphy to discuss any issues you are facing.