BECTU response on DTI employment status consultation

3 December 2002

BECTU response on the UK DTI (Department of Trade and Industry) consultation on employment status.

1. BECTU welcomes the opportunity to participate in the DTI consultation on employment status. As a trade union representing thousands of freelance workers in the audiovisual sector and of casual workers in the theatre and live entertainment sector, we have particular experience of and interest in this issue.
2. We recognise that the consultation relates to the Government's powers, under Section 23 of the Employment Relations Act 1999, to extend the coverage of employment rights to other categories of working people. This issue is of central relevance to atypical workers such as many of our members and we hope that this much anticipated consultation will lead to real progress in this area.
3. While addressing some of the general issues on which the Government is seeking views, we have naturally focussed in our submission of the particular experiences of our members.

The current framework of rights and the general arguments for change

4. Before considering the specific problems faced by BECTU members, we acknowledge the broader arguments for change. This is in response to the Government's own request for views on 'how clear and easy to understand the current framework of employment protection rights is, in particular the clarity and ease of use of current definitions in employment law'.
5. The position faced by many atypical workers in relation to employment rights in the UK is one of confusion and inconsistency. As recognised in the DTI Discussion Document, many longstanding employment rights - but also the very recent right conferred under the Employment Act 2002 - are limited to 'employees'. A significant number of other employment rights apply to 'workers', including those stemming from the Employment Rights Act 1996, the National Minimum Wage Act 1998 and the Working Time Regulations 1998 - although even this seemingly broader definition has been problematic in its application (as indicated below). At the same time, discrimination legislation and health and safety legislation bring varying approaches to employment status.
6. Faced with this confusion on the basic question of who employment rights apply to, many atypical workers believe strongly that they are disadvantaged in the labour market compared to those individuals who are clearly 'employees'. This basic feeling of unfairness - as reported to us by atypical workers among our members - has led to a number of arguments for change:
• UK employment law appears neither consistent nor adequate when applied to those newly developing atypical areas of the labour market and is therefore in need of modernisation.
• The confusion in the law has left undue room for interpretation on the part of Tribunals and Courts, with an excessive reliance on caselaw (the logic of which is often completely obscure and mystifying to the atypical workers concerned).
• The result, in the view of a number of our members, is that rights which Parliament apparently intended to confer on them (eg in respect of working time) are sometimes in practice denied. This has been a particular problem for some of our freelance members who have failed at Tribunal even to qualify as 'workers'.
• Some of the rights in question stem from European Directives, which are arguably not being implemented properly in the UK. We have particular experience of this in BECTU's own successful case against the Government at the European Court of Justice (ECJ) in respect of working time. We note, in respect of employment status, that the ECJ's judgement in that case argued against the exclusion of workers in 'an employment relationship' (and not just a 'contract of employment') from employment rights.
7. In expressing these views we are also mindful of the Government's interest in 'the affect on the labour market of the extension of all or some statutory employment rights to a wider category of working person'. On this point, we do not accept that the extension of such rights necessarily harms the effective functioning of the labour market.
• Concerns about reduced labour market 'flexibility' are often, at root, simply a concern of the part of some employers at restrictions on their ability to impose lower pay and (a particular problem for some of our members) long hours. This sort of 'flexibility' we are happy to dispense with.
• On the contrary we believe that decent employment rights for all workers allied to investment in training is a preferred model which could be productive of a skilled and motivated workforce, allowing the UK to compete internationally in a way it never can on a low-pay/long hours/deskilled basis.
• We further note that the Government's welcome introduction of new employment rights such as the minimum wage has never - despite the predictions of market-orientated critics - led to widespread unemployment and job losses.

BECTU members and employment status

8. The Discussion Document seeks views on 'whether there are any categories of working people currently excluded from statutory employment rights who require protection by some or all rights'. We can definitively refer to the category of freelance (Schedule D) workers in the audiovisual sector. We can also refer to a particular situation in which casual workers in theatres fail to gain proper access to certain employment rights.
9. We note that the Discussion Document lists 'certain types of working person' for whom employment status is a relevant issue, including a specific section on casual workers. However, while the document refers in passing to freelances, we do not believe there is any serious address nor even perhaps awareness of the problems faced by this category of atypical worker.
10. We have approximately 10,000 freelance members who work in areas such as the independent production sector for film and television; commercials and corporate audiovisual productions; and directly for broadcasters. While the broadcasters have a (shrinking) core of permanent staff, the labour market in the rest of the audiovisual sector is overwhelmingly freelance. Within this freelance labour pool, some workers are classified as PAYE for tax purposes; some are Schedule D; and some may move between PAYE and Schedule D within the course of a tax year (if they work in different capacities on different engagements). Each freelance may undertake a number of engagements within any given year - ranging from single days (on commercials) to months at a time (eg on feature films). The amount and nature of work obtained is unpredictable. They are classic atypical workers.
11. A further point of note is that the overwhelming majority of these workers are not freelance by choice - to all intents and purposes, there are simply no permanent jobs to be had in this sector. This situation is partly the result of the media policies of the previous Conservative Government, which introduced the independent production quota into broadcasting - leading to widespread redundancies and job losses in both ITV and BBC, with many former staff members forced to transfer into the freelance labour market.
12. For some of these freelances - especially those classified as Schedule D - the consequences in terms of employment rights have been serious. Even though they may work side by side with broadcasters' staff and with PAYE freelances on the same projects in the same locations and under the same collective agreements, they have in some significant instances been denied equivalent employment rights.
13. A principle focus of concern is on Working Time rights. The freelance audiovisual sector operates in a 'long hours' culture - with pressure from employers to waive working hours as specified in collective agreements in favour of long daily and weekly hours and a reluctance to make any provision for holiday entitlements. Dissatisfaction is extremely widespread but freelances - facing great pressure simply to obtain further work - rarely have the time or energy to pursue Tribunal claims on the denial of Working Time rights. The very few Schedule D freelances who have been prepared to do so have found that they are regarded as falling outside the scope of employment law. In particular:
• In a case against the BBC, a freelance cameraman was ruled as not being a 'worker' for purposes of the Working Time Regulations.
• In a case against Meridian Broadcasting, another freelance cameraman was ruled as not being a 'worker' (for Working Time purposes) and not an 'employee' (for purposes of a challenge to the non-renewal of a fixed term contract).
14. Such decisions have, in our view, been based on misconceived perceptions of freelance work in this sector. In particular, the argument in the BBC case (and others) that the individual freelance was not 'economically dependent' because he worked for a number of different employers as well as the BBC flies in the face of reality. Such freelances work within a single labour market and are drawn from a single labour pool. Their ability to negotiate truly independent terms and conditions is, in practice, non-existent for all but an elite. They are economically dependent on the freelance labour market and are subject to its prevailing terms and conditions. They certainly have no realistic alternative of permanent employment in their occupation.
15. The notion that the ability to work for more than one employer implies economic independence is therefore a complete fiction. Freelances move from engagement to engagement not out of independence but necessity; and the prevailing terms (on like for like jobs) will apply wherever they go. The classic freelance experience is not one of independent choice but of fear of unemployment (and therefore of a compulsion to accept the prevailing terms). In our view, such workers are clearly and unambiguously 'economically dependent' and should not be regarded as otherwise merely because they work for more than one employer in any given year.
16. Another inappropriate justification for the denial of employment rights for freelances has rested on the contractual possibility of sending a substitute. Since this may virtually never happen in practice, it is an unacceptable reason for the denial of employment rights.
17. A further and final point on the economically-dependent Schedule D freelances is that the common attributes of freelancing (such as VAT registration or supply of their own equipment or a service company simply supplying their own labour) should not be used as a pretext for reclassifying such individuals as 'business undertakings'. They are not entrepreneurs or significant economic enterprises making their own work but remain as workers dependent on the freelance labour market.
18. A second and more particular area in which BECTU members face exclusion from employment rights concerns some casual workers in theatres. The issue concerns 'regular casuals' who may in effect work for more than a year for a particular employer, with exactly the same amount of working weeks as permanent staff at the same theatre (ie excluding some periods when the theatre is closed either because of a gap between productions or rehearsal periods).
19. These regular casuals are recognised within the relevant collective agreements between BECTU and the Theatrical Management Association and the Society of London Theatre. However, they are not recognised as full 'employees' and are regarded as dismissible without legal redress. In our view, regular casuals exceeding one year's service should clearly qualify for unfair dismissal rights regardless of their 'regular causal' status.

Tax

20. As indicated above, we are concerned that Schedule D freelances are being denied access to employment rights. We believe their economically dependent status is irrefutable and that the attribution of schedule D status for tax purposes should not be seen as a justification for the denial of such rights.
21. The Inland Revenue at one point appeared to take a view that Schedule D status was incompatible with Working Time rights. This was challenged, and in a clarificatory letter in February 2000, the Paymaster General set out the view that 'where an individual receives rights such as entitlement to holiday pay as a result of the Working Time Regulations, this fact should not be used to determine or change that individual's employment status for tax and NI'. We wholly agree with this view and believe that an individual's tax status should not affect their status in relation to the entirely separate issue of employment protection (just as it does not affect their status in relation to discrimination law).
22. In the light of this, we do not support the proposal that, in conjunction with employment status, there should be a broader review of tax and NI status. This is an entirely separate issue and such a review would introduce a substantial and unacceptable delay in the employment status review. We hope the government will continue to focus on the employment protection remit originating from Section 23 rather than broadening the scope to totally different policy areas.
23. However, arguing against any such general tax/NI review, we do not deny the need for attention to specific anomalies such as those affecting some of our own set crafts freelances (eg carpenters, stagehands, plasterers) who are often treated as PAYE for tax purposes and yet perversely as Class 2/4 for NI purposes.

An alternative approach to employment status

24. In line with the TUC, we believe the current confused and inconsistent approach to employment status should be replaced by a single and more inclusive definition of employment status which should determine access to the full range of employment protection rights.
25. Key elements in such a new approach would be:
• A single, new and inclusive definition of 'worker' determining access to all employment rights.
• A statutory presumption of coverage for all workers; and a burden of proof on the employer to show that an individual is not a 'worker'.
• Exclusions only in restricted and justifiable circumstances such as 'entrepreneurs'. The previous exclusion of the 'genuinely self-employed' should be dropped as obscure and unworkable.
• An acceptance that tax status is a separate area and should not in itself be regarded as determining employment status ie there should be no incompatibility between Schedule D and 'worker' status.
• Clearer guidelines for Tribunals and Courts, including clarification that working for a number of employers within any given year is not incompatible with remaining 'economically dependent'; and that the constructual possibility of sending a substitute - when in reality this virtually never occurs - is not a sufficient reason for denial of employment status.
• Strong discouragement to any attempts to contract-out of or waive employment rights.
26. We believe such a new and inclusive definition of 'worker' should offer access to the full range of employment rights - including family-friendly, trade union, unfair dismissal, time-off and minimum wage rights. We recognise that, given the current qualifying periods for some rights, many freelances and casuals would not automatically qualify for all rights.
27. It is particularly important, in our view, that any such new definition deals with the current anomalous exclusion of Schedule D freelances even from the category of 'worker', let alone that of 'employee'. Such freelances, as indicated above, currently stand to lose access to Working Time rights - a particularly serious drawback in a sector notorious for long hours and one that is surely contrary to the spirit and intention of the Working Time legislation.
28. A further and specific exclusion to the detriment of some freelances is in relation to insolvency rights - whereby access to the right to 8 weeks back-pay is limited to 'employees', leaving many freelances as totally unsecured creditors. This is particularly harmful in a sector characterised by many small, speculative projects and in which - as we are all too aware - a higher than average rate of insolvencies. This should be remedied under any new definition.
29. Finally, while we recognise that it is not the intention of this review to encompass the whole of health and safety law, there is nonetheless the serious and relevant anomaly whereby freelances outside the definition of 'employee' lose the ability to appoint safety representatives. This is unfortunate - especially since the prevalent use of temporary locations by freelances is likely to lead to greater health and safety hazards. Again, we believe this anomaly should be addressed under any new definition governing access to employment rights.

Conclusion

30. We welcome this Employment Status review, since we believe atypical workers such as many of our members currently face a situation of confusion and inconsistency in terms of access to employment rights. We believe that many freelance (Schedule D) workers in the audiovisual sector have been denied access to working time and other rights (and that some regular casuals in theatres have been denied access to unfair dismissal rights, even with qualifying service). We hope these anomalies can be addressed through a new, inclusive definition of 'worker' giving access to all employment rights. Classic atypical workers such as our members should not be allowed to fall between all the categories and should now, in our view, be granted equal access to all employment rights.