GIG ECONOMY – EMPLOYEES, WORKERS OR CONTRACTORS?

GIG ECONOMY – EMPLOYEES, WORKERS OR CONTRACTORS?

Introduction

The term “gig economy”, to which we are all becoming more and more familiar, defines a labour market where labour is exchanged for money between individuals or businesses via digital platforms, on a short-term and/or payment by task basis (as opposed to permanent jobs)[1].

In 2017, research carried out by the Chartered Institute of Personnel and Development estimated that 4% of UK working adults aged between 18 and 70 (equivalent to approximately 1.3 million people) were working in the gig economy[2]. Of these, nearly 40% fell into the 18-29 age range, compared to just 21% of workers who do not work in the gig economy. Although the research does not tell us with any certainty whether these people are doing so to supplement other work or to substitute employment entirely with this type of work, it is believed that 58% of those engaged in gig economy work are permanent employees who supplement their income.

As pointed out in the Taylor Review[3], on the one side this emerging new type of work is certainly adding flexibility to the UK labour market (which is seen as a positive characteristic). On the other, however, it raises issues in relation to the definition of the employment status of those working in the gig economy sector: this issue impacts on the ability of the gig economy workers to identify and understand their rights.

Indeed, often the individuals engaged in the gig economy are not employees nor workers, but self-employed contractors, who have the freedom to accept work or reject it. As we will see in the following paragraphs, however, such an employment status has been challenged (with success), giving gig economy workers increased protection.

Like the UK, the rest of Europe is also witnessing a rapid growth of this business model and struggling to define the employment status of those engaged in the gig economy. Therefore, as part of this analysis, we will also comment on some decisions of the Italian, French and Spanish employment courts on this matter.

Finally, we will consider the fact that the new way of working introduced by the gig economy poses questions about the suitability of the current employment law framework and the ways in which the UK Parliament and the European Union are addressing this issue[4].

Employee, worker or self-employed?

The Employment Rights Act (ERA) 1996 provides definitions of the terms “employee” (s. 230(1)) and “worker” (s. 230(3)(b))[5], although these are not comprehensive and the case law has added substantial contents to such definitions. By exclusion, anyone who is neither an employee nor a worker will be self-employed for employment law purposes. The system, therefore, comprises three types of work statuses[6].

In particular, s. 230(1) of ERA 1996 reads “In this Act “employee” means an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment”, whereas in accordance with s. 230(3)“In this Act “worker” (except in the phrases “shop worker” and “betting worker”) means an individual who has entered into or works under (or, where the employment has ceased, worked under)— (a) a contract of employment; or (b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual; and any reference to a worker's contract shall be construed accordingly” (workers are also referred to as “limb (b) workers”).

Undeniably, the statutory definitions quoted above are ambiguous and open to much interpretation (so that only courts can fully differentiate employees from workers based on the above basic principles), to the point that the Taylor Review advocated for the Government to make the legislation clearer and more transparent in this respect[7]. A change in the law appears even more advisable in light of the new emerging models of working such as the gig economy.

Indeed, clarity becomes crucial as the most extensive employment rights are limited to employees. Individuals who qualify for worker status are entitled only to some core rights (e.g. National Minimum Wage, regulated hours of work and annual leave, protection from discrimination due to part-time worker status, protection from detriment on the grounds of trade union membership or activity, protection from detriment or dismissal when whistleblowing, protection under the Equality Act 2010), whilst those who are genuinely self-employed are entitled to very few statutory protections at work.

It follows that the correct definition and understanding of somebody’s employment status matters greatly (and not just in relation to the application of statutory protections, but also contractual obligations, statutory duties and tax treatment)[8].

However, clarity is not simply a matter of statutory definition. It is also a matter of interpretation of the terms of the contract between the parties and of their genuine intention as regards the type of relationship they wish to create (beyond the terms expressly set out in the contract and with regard to the bargaining positions of the parties)[9].

The interpretation of the real terms of the agreement between the parties is difficult to achieve without recourse to formal channels such as employment courts, which apply a series of tests and look at a number of factors to determine an individual’s actual employment status.

These clues include (but are not limited to): the contents of the job advertisement; the contents of any written agreement between the parties; the tax status of the worker; the extent of control exercised by the employer over the worker; the arrangement of a replacement if the worker cannot attend work; provision of equipment or professional insurance; financial risk (factors sometimes referred to as “general indicators”); existence of a staff handbook or collective agreement governing the individual’s work; formal induction process or provision of training; receipt of sick pay; exercise of disciplinary power; presence of restrictive covenants (“specific pointers” towards employee or worker status); performance of work from the individual’s own premises; personal liability for expenses; issuance of invoices before receipt of payment; (“specific pointers” towards self-employed status).

The test of employment status (s.230(1) ERA 1996) is the requirement of a personal service and mutuality of obligation, that is an ongoing obligation on the employer to offer work and an obligation on the employee to discharge the work offered. There must be some level of control; the employer must broadly direct how, when and where the work is undertaken. In the case of more senior employees, there is less day-to-day supervision.

It is in this context that some gig economy workers have challenged their formal employment status of self-employed contractors, seeking the application to their work relationship at least of the core rights recognised to workers.

Gig economy in the case law of English courts

English courts so far have decided five cases where the judges have been presented with the preliminary task of assessing the actual employment status of gig economy workers. We will now briefly describe the outcome of their analysis.

Uber BV and others v Aslam [2018] EWCA Civ. 2748

The claim was originally brought in 2016 by London-based Uber drivers against the respondents (Uber BV, Uber London Ltd and Uber Britannia Ltd) for failure to pay the minimum wage and provide paid leave. The Employment Tribunal (ET) was, therefore, required to determine at a preliminary hearing whether the drivers were workers for the purposes of s.230(3)(b) of ERA 1996 at all times when they had the Uber App switched on. Uber argued that drivers were independent contractors and that they were under no obligation to switch on the App or accept any assignments offered to them. Such freedoms, according to Uber, were incompatible with the existence of any form of employment or contract for services.

Based on the evidence presented, the ET found that:

(1)    When the Uber App was switched on, any driver who was in the geographical area in which he is authorised to work and is able and willing to accept assignment is working for Uber under a worker contract;

(2)    Uber is a business supplying transportation services: it does not simply sell software, it sells rides;

(3)    the notion that Uber in London was a mosaic of 30,000 small businesses linked by a common “platform” as a means of Uber helping them to “grow” their businesses was faintly ridiculous. Uber did not work for the drivers; the drivers worked for Uber by providing the skilled labour through which the organisation delivered its services. Drivers had to operate strictly on Uber's terms and were in no position to “grow” except by spending more hours at the wheel;

(4)    Uber's proposition that the only contract in existence was between the driver and the passenger was absurd, and pure fiction bearing no relation to the real dealings between the parties: the driver does not know the passenger’s identity, he does not know the destination to which he should drive the passenger until the journey begins, the route is prescribed by Uber from which driver is not free to depart, the fee is calculated by Uber and is paid to Uber (which in the situation envisaged by Uber, would be a third party to the contract);

(5)    the drivers fall full square within the terms of ERA 1996, s. 230(3)(b): they undertake to provide their work personally, they provide their work for Uber and they do so pursuant to a contractual relationship;

(6)    the second respondent, Uber London Ltd (ULL), a UK company holding a private hire vehicle operator’s licence for London, was the employing entity. It recruited, instructed, controlled, disciplined and dismissed the drivers;

(7)    the drivers’ working hours were “unmeasured work” within the meaning of reg.45 of the national Minimum Wage Regulations 2015. A driver’s hours spent returning to his territory to continue working after an out-of-territory trip counted as reckonable time. However, drivers living outside the London territory could not count their travelling to and from home as travel "for the purposes of...work" within reg.47.

The ET’s analysis focused on the actual manner in which the drivers performed their activities and the actual relationship with Uber, interpreting the terms of the contract between the parties and of their genuine intention as regards the type of relationship they wish to create, thus applying the principles set out by the Supreme Court in Autoclenz v Bercher.

Uber appealed the ET decision, contending that: (1) the ET had erred in law in disregarding the written contractual documentation presented as evidence by Uber (there was no contract between the drivers and ULL); (2) the ET had erred in relying on regulatory requirements as evidence of worker status; (3) the ET was not correct in concluding that the claimants were required to work for Uber; and (4) the ET failed to take into account relevant matters relied on by Uber as inconsistent with workers status.

On 10 November 2017 the Employment Appeal Tribunal (EAT) dismissed the appeal brought by Uber BV against the decision of the ET which had concluded that ULL employed drivers as “workers”, for the purposes of ERA 1996 c. 230(3)(b). The EAT found also that the ET had been right in rejecting the label of agency and the characterisation of the relationship between the drivers and ULL in the written documentation as self-employment, since not properly reflecting the reality.

Uber sought permission to appeal the EAT decision directly to the Supreme Court (bypassing the Court of Appeal – so-called leapfrogging), but the Supreme Court refused the application, so Uber brought the case before the Court of Appeal (Civil Division).

The Court of Appeal heard Uber’s appeal on 30 and 31 October 2018[10] and confirmed that Uber drivers are to be considered workers as they are under a positive obligation to be available for work while the app is on, and that that amounts to “work” for the purpose of the Minimum Wage Regulations 2015 (Lord Justice Underhill dissenting)[11]. The Court of Appeal has granted Uber leave to appeal to the Supreme Court.

Pimlico Plumbers Ltd v Smith [2018] UKSC 29

On 13 June 2018 the Supreme Court considered whether Mr Gary Smith, a plumber engaged as an independent contractor, was actually a worker for the purposes of s. 230(3)(b) of ERA 1996. It found that the main feature of the relationship was the personal performance of work and therefore Mr Smith would fall within the definition of worker.

The claim had been originally brought by Mr Smith, who carried out plumbing work for Pimlico Plumbers between August 2005 and April 2011. He complained that, following a heart attack, he was unfairly or wrongfully dismissed and claimed his entitlement to pay during medical suspension, holiday pay and arrears of pay. The respondent company relied on a written term in the contractual documents stating that the claimant was an independent contractor of the company, under no obligation to accept work. The ET, the EAT and the Court of Appeal had found in favour of Mr Smith’s contentions.

The ET found that, despite the claimant being able to reject particular jobs, deciding his own working hours and being unsupervised in relation to the plumbing work, there was not an unfettered right given to the claimant to appoint a substitute to carry out the work and in fact Mr Smith was under the obligation to provide work personally for a minimum number of hours per week. Moreover, the ET found that the respondent company exercised very tight control on the claimant in most respects (that included a degree of restriction on the claimant’s ability to work in a competitive situation, which suggested that he was not in a business on his own account and was inconsistent with the respondent being a customer of any such business). Finally, the ET stated that in reality the claimant was an integral part of Pimlico Plumbers Limited’s operations and subordinate to it.

Therefore, the ET found (and the EAT and the Supreme Court confirmed) that, during the period that the claimant worked for the respondent, he was a worker within the meaning of the Employment Rights Act 1996 s.230(3)(b) and the Working Time Regulations 1998 reg.2, and his working situation fell within the definition of “employment” in the Equality Act 2010 s.83(2)(a).

Dewhurst v Citysprint UK Ltd - unreported[12]

This case was brought by a cycle courier of Citysprint when the respondent failed to pay her for two days’ holiday.

The ET carried out a detailed analysis of the contractual documents executed by the parties (tender to supply courier services to Citysprint), where the relationship was described as a service supply agreement from the cycle courier (defined as “contractor”) to Citysprint as well as of the actual manner in which the relationship unfolded.

The ET found that the manner in which the respondent controlled how the services were performed was not consistent with the above contract, since the courier had no discretion to determine the manner in which the services were performed. Further, the ET found that – contrary to the provisions of the tender document - couriers could not in practice accept and undertake work for others whilst in the process of undertaking jobs for Citysprint nor could they pick and choose jobs when on circuit. In addition, from the ET analysis it emerged that there was no real possibility of substitution of the courier (in reality, a mere swapping of jobs between Citysprint courtiers was allowed).

In terms of work performance, the claimant provided personal performance to the respondent and, even if present, the opportunity of delegation available to the claimant was so small that it could not be said to show that she did not render personal service to the respondent.

The description of the relationship between Ms Dewhurst and Citysprint as a contractor/client relationship did not reflect reality as the claimant was recruited by the respondent to work for it as an integral part and as a worker in a subordinate position, having little autonomy to determine the manner in which her services were performed and no chance at all to dictate its terms.

The ET therefore concluded that the claimant was a worker for the purposes of the Working Time Regulations 1998 during the time that she was on circuit.

Independent Workers’ Union of Great Britain (IWGB) v Central Arbitration Committee [2018] EWHC 1939 (Admin)

The case concerned the Independent Workers’ Union of Great Britain who applied to the Central Arbitration Committee (CAC) to be the recognised union for collective bargaining purposes for a group of Deliveroo riders. The application would only succeed if the riders were workers for the purposes of the Trade Union and Labour Relations (Consolidation) Act 1992 s.296(1)(b).

In contrast to the Uber and Citysprint cases, Deliveroo’s contractual terms with the couriers indicated that the latter could decide whether to log into the app or not, could decline to do a job even after accepting it and had no obligation of a personal service. On that basis, the CAC classified them as independent contractors, hence denying them the right to union recognition.

The claimant trade union sought permission to apply for judicial review of the defendant CAC's decision. It argued that under Article 11 of the European Convention of Human Rights (ECHR), collective bargaining laws should cover Deliveroo riders because all people have a right of assembly and association, including the right to form trade unions. The application was granted in part and this was seen as a small but important step towards establishing that gig economy workers must be eligible for basic protection, the same as others who work for more traditional companies.

However, with a decision issued on 10 December 2018 the High Court dismissed the judicial review on two grounds.

First, Article 11 was not engaged. The ECHR case law involved the right to collectively bargain within an employment relationship, whilst according to the High Court the Deliveroo riders were not in an employment relationship.

Second, even if Article 11 was engaged, restricting statutory collective bargaining rights to workers with a contractual obligation of personal service was justified under Article 11(2). The restriction was prescribed by law under s296(1)(b). Further the restriction was proportionate and struck a fair balance between competing interests.

Of the five gig economy cases brought before the English courts to assess the status of gig economy workers (and here analysed), this is the only one where the judges recognised the genuineness of the contractual terms establishing the independent nature of the relationship between the parties. The findings of the court and its ruling appear to comply with the principles set out in Autoclenz v Belcher (as well as the case law that followed).

 Addison Lee v Lange [2018] 11 WLUK 193

This case was brought before the ET in 2017 by a group of Addison Lee drivers asserting an entitlement to holiday pay and to the national minimum wage, which would only exist if they were workers for the purposes of the Working Time Regulations 1998 and the National Minimum Wage Act 2015.

The ET accepted that there was an overarching contract between each claimant and the respondent company and added that its decision should be based on the inferences drawn from that fact, such as the arrangements that brought the drivers into the respondent’s business model. Plainly, they had to apply to be drivers and Addison Lee had to carry out certain checks. The drivers would need the relevant licence. They were interviewed for suitability. They were tested about their knowledge of London. They experienced induction. They then signed two agreements and the second, the Hire Agreement, entailed a serious financial commitment, as well as subsidiary insurance obligations. By this point it was impossible to say that the drivers were not undertaking to carry out driving work for the respondent, in the vehicles they were agreeing to hire. At the very least, they were impliedly and necessarily undertaking to do some driving work.

The respondent was correct to say that formally the drivers were free not to do so and that they could choose when to do it. The commercial reality, however, was that they were undertaking to do work when and as soon as they logged on. They remained under Addison Lee's rules between driving jobs. Their use of the vehicle, for example, was restricted and regulated; and they could not remove the Addison Lee insignia. Underlying all of this was the ongoing vehicle hire charge that endured from week to week (subject to the free weeks being earned).

From an economic standpoint, all this obliged the drivers to log on and drive, so as to cover fixed hire costs. This was the mechanism by which the respondent could be close to certain that its drivers would log on. Addison Lee needed them to log on; and they needed to do so in order to pay the overheads and then start earning money. They knew that once they logged on, they had to accept the jobs that the respondent's system offered them.

The ET therefore concluded that the drivers were workers within the Working Time Regulations 1998 reg.2(1) and that the time spent logged on to the respondent’s system other than break times was working time.

Addison Lee appealed the decision of the ET arguing that there was no overarching agreement between the drivers and the company whereby drivers undertook to do some work. Moreover, the terms of the implied overarching agreement were contrary to the express terms of the driver contract (a contract cannot be implied if it is contrary to the express terms agreed between the parties). The ET’s conclusion that there was an obligation to work conflicted with its own finding that there was no obligation to log on to the company’s system.

The appeal was dismissed. The EAT found that the ET had been entitled to conclude that the agreement between the drivers and the company satisfied limb (b) of s. 230(3) of ERA 1996.

Addison Lee appealed the decision of the EAT. The Court of Appeal heard the case on 21 March 2019 but to date we are waiting for its decision.

In the meantime, across Europe …

As mentioned in the introduction of this article, similar questions concerning the employment status of gig economy workers have also arisen across Europe, in civil law systems. To date, several cases have been reported (in Italy, France and in Spain). The conclusions drawn by the various courts presented with the issue, as can be expected, vary. This is due to the differences in the statutory framework as well as the focus of the courts’ investigations and their respective interpretation of the general indicators and specific pointers from time to time analysed as well as the employment terms and conditions set out in the different contracts.

What follows is a brief summary of the various courts’ findings and a comparison with the decisions of the English courts commented above.

ITALY – Corte d’Appello di Torino, sezione lavoro, decision no. 26/2019 issued on 26 February 2016

The first Italian ruling on the status of gig economy workers, issued by the Employment Tribunal of Turin in May 2018 found that Foodora couriers (also referred to as “riders”) were genuine independent contractors. The riders had brought the case against the food delivery company claiming their entitlement to salary differences, as well as the reinstatement in their work position and the payment of the salary accrued between their unfair or wrongful dismissal (as the case may be) and such reinstatement. They also claimed their right to damages for the violation of their data protection rights and for the violation of their health and safety rights. First of all, therefore, the court had to assess the real working status of the riders, since the awards sought by the riders only apply to employees and not to self-employed contractors.

The Italian court based its decision on a detailed inspection of the express contractual terms agreed between the parties, on the one side, and the actual manner of performance on the other. In particular, the court found that the claimants had no obligation to work nor was Foodora under the obligation to provide work. Furthermore, according to the Italian court the respondent had no power to give the claimants specific orders and indications as to how they should carry out the work (certainly not through the use of the system the riders logged on to accept the jobs) nor did the respondent exercise disciplinary powers over the worker.

Therefore, the judge concluded that the relationship was genuinely one of self-employment. It follows that, according to the Turin court, the riders were not entitled to salary differences nor to reinstatement in their work position nor to damages of any kind.

The claimants appealed against this decision, seeking a complete review of the decision of the court of first instance.

The Court of Appeal of Turin partially overturned the Employment Tribunal’s ruling. More specifically, whilst the court agreed with the Employment Tribunal that the case at issue did not present the characteristics of an employment relationship under s. 2094 of the Italian Civil Code, it took a different view in respect of the alternative status of the courtiers.

On this matter, the Court of Appeal established that article 2 of Legislative Decree 81/2015 had introduced in the Italian system (traditionally, binary) a third employment status – between employment and self-employment – where the principal had the power to organize the modalities in which the tasks and services must be carried out, including in relation to the time and location of the activities, though without any hierarchical or disciplinary power towards the worker. The Court of Appeal stated that this new type of collaboration can be found where there is an actual integration between the worker and the principal’s business organization which goes beyond the simple coordination, as in the case of work carried out by the riders for the digital platform. The provision, according to the judges, acknowledged the changes and evolutions incurred in the Italian employment system due to new technologies.

Consequently, the Court of Appeal recognised the validity of the claims insofar as the claimants should be considered as collaborators under the definition of article 2 of Legislative Decree 81/2015 (though not employees).

Currently the term to appeal the decision of the Court of Appeal before the Corte di Cassazione (the Italian equivalent of the Supreme Court) is pending.

ITALY - Tribunale di Milano, sezione lavoro, decision no. 1852/2018 issued on 10 September 2018

The claimant of this second Italian case brought an action against Foodinho s.r.l., a food delivery company, seeking to be found an employee of the company, rather than an independent contractor.

In analysing the evidence presented by the parties, the Milan court found that the express terms of the contract between the parties excluded any obligation of accepting or providing work through the company’s platform, provided for the rider’s autonomy in deciding when to work and how long for and that he could even reject a job after having initially accepted it. On the facts, the evidence showed that the rider received no specific instructions on the performance of work nor was he subjected to disciplinary powers.

On that basis, the court found that the rider was genuinely self-employed.

FRANCE - YZ v SAS Deliveroo France – Court d’Appel de Paris Pole 6 – Chambre 22 novembre 2017 n. 16/12875

The French court of appeal reached a decision similar to the ones reached by the Italian courts in establishing that a Deliveroo France rider was not an employee of the company, but a genuine independent contractor.

The court of appeal found that the terms of the contract between the parties would not themselves reveal the existence of an employment relationship and, furthermore, that the actual manner of the performance would suggest that there was no imposition on the rider of specific instructions (for instance, on the itinerary to be followed by the rider or on the means to be used by him) or working time.

The Paris court concluded that the contract was genuinely of self-employment, thus rejecting the worker’s appeal.

SPAIN - Jose Enrique v RooFoods Spain S.l. (Deliveroo) Juzgado no. 6 de Valencia, decision no. 244/2018

The Valencian court reached conclusions that are in stark contrast with those of the other European courts (mentioned above), as it found that the claimant, a Deliveroo rider, was an employee of the food delivery company.

It did so by recognising that (1) the rider had to download an app developed and managed by the respondent, (2) the respondent decided the geographical area in which the worker had to perform his work, (3) although the claimant had communicated the time slots in which he would be available to work, this would have to be within the programme set out by the respondent, (4) the respondent provided specific instructions to the claimant on the terms of his performance, its timing and standards of behaviour and (5) the company could always localise the rider through the app, monitoring the timing of each food delivery

The Spanish judge further considered that it was the respondent who set the contractual conditions with the restaurants using its service as well as the contractual conditions with the ultimate clients who required the food delivery. The rider had no knowledge of the number or identity of the ultimate clients. In addition, the court found that the rider did not work independently in the market but using the respondent’s logo, thus promoting the respondent and representing its image.

Based on the above considerations, the Valencian court concluded that the rider was an employee of the respondent.

Interestingly, the above Spanish decision was followed only a few months later by a ruling of the court of Madrid (delivered on 3 September 2018) which declared that a rider of the food delivery company Glovo was an independent contractor, arguing the significance of the will expressed by the parties in the express contractual terms executed.

* * * * * *

As a general comment, it is worth noting that the various courts’ analysis covers similar factual aspects of the relationships. These are the provisions of the contracts entered into by the parties and the actual manner of the performance of the gig economy workers, with a focus on the power of the employing companies to direct and instruct the workers, to control their performance and to exercise disciplinary powers over them (although English courts seem more focused than their European counterparts on the right to substitution of the worker).

Despite that, the conclusions reached by the judges are sometimes completely different from one another. Surprisingly – at least for who is writing – the courts of the jurisdiction that is notorious for being more favourable to employers rather than employees, the English courts, have recognised more protection to gig economy workers than continental courts.

The main reasons for these results may be certainly found in the different contractual documents (and their structure) as well as the different manner in which work is actually performed by the gig economy workers and their relationship with the platform. However, more importantly, the different conclusions reached by the English courts are due to the peculiar legislation of the English system. Indeed, while other countries have a binary and clearer definition of the forms of working relationship (employed/self-employed), in England and Wales there is a three-tier approach to employment, which sees the worker as a blurred figure in between the employee and the independent contractor, enjoying some but not all the protections of the employee status. One wonders whether the English courts would have granted gig economy workers the full employment protections if the intermediate status had not existed in the system or whether they would have confirmed them as independent contractors, especially where the social aspects of the gig economy (such as the need to supplement an existing income) cannot and should not be taken into consideration in construing the will of the parties.

Looking ahead

While we wait for the decision of the Supreme Court on the Uber case, we should also look at the future of the gig economy and its workers in the UK and in the European Union.

The Taylor Review called for a clarification in the legislation but maintaining the three-tier approach. Indeed, for the authors of the Review “the status of worker provided in employment law is helpful in being able to apply basic protections to less formal employment relationships”. Clarity, in their opinion, would be achieved by having an intermediate category covering casual, independent relationships, with a more limited set of employment rights applying, with the introduction of a new name to refer to the category of people who are eligible for worker rights but who are not employees. The Review recommends that the legislation refer to this group as “dependent contractors”.

However, Parliament does not seem to have embraced this approach, proposing instead an amendment in the law to adopt a binary definition. The Workers (Definition and Rights) Bill (the date of its second reading is yet to be announced) aims at consolidating a single statutory definition of the people to whom employment rights and duties apply and at clarifying the nature and status of workers. This is achieved by amending the definition of worker in various pieces of legislation (such as ERA 1996 and TULRCA 1992) and providing for a single employment status for workers and employees for the purposes of employment rights and employer responsibilities in the workplace.

The Bill’s approach appears to be preferable and more effective, providing a clear cut distinction between those benefiting from employment rights and those who are self-employed, whilst the creation of yet another category of workers (the “dependent contractors”) suggested by the Taylor Review seems to be the cause of even more problems of identification of employment status.

Other investigations and initiatives relating to the gig economy have also taken place (not all of which employment law related). Among these, of particular interest appear to be: (1) the Cross-Government Working Group on Employment Status, which should review the rules for employment status across government and consider the possibility of moving towards a more uniform set of tests on employment status across tax, employment rights and the welfare and social security system; (2) a series of employment status consultations launched by the government in February 2018.

At an EU level, on 16 April 2019 the European Parliament passed a resolution approving the proposal for a new Directive on transparent and predictable working conditions in the EU. The proposed Directive (which could become applicable in 2021/2022) aims to set new rights for all workers, particularly addressing insufficient protection for workers in more precarious jobs, while limiting burdens on employers and maintaining labour market adaptability. The proposed Directive includes a statutory definition of worker, to whom the EU employment rights would apply. Application of the proposed Directive in the UK will depend on the ratification by the UK of the agreement on the withdrawal of the UK from the EU and on its terms.

In conclusion, the employment law challenges created by the development of the gig economy – and particularly the definition of the employment status of gig economy workers and the set of rights applicable to them – is being addressed by courts and legislatures across Europe in similar ways: on the one hand, by analysing the genuine and true will of the contracting parties based on the actual manner in which the relationship between workers and platforms unfold. On the other, by seeking to provide clarity in the legal definitions and the entitlements which ensue.


[1] Department for Business, Energy & Industrial Strategy, “The characteristics of those in the gig economy” (7 February 2018) - https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/687553/The_characteristics_of_those_in_the_gig_economy.pdf.

[2] Chartered Institute of Personnel and Development (CIPD), “To gig or not to gig? Stories from the modern economy” (17 March 2017) - https://www.cipd.co.uk/knowledge/work/trends/gig-economy-report.

[3]Good work: the Taylor review of modern working practices” (11 July 2017) - https://www.gov.uk/government/publications/good-work-the-taylor-review-of-modern-working-practices.

[4] Workers (Definition and Rights) Bill (HC Bill 114) - https://services.parliament.uk/bills/2017-19/workersdefinitionandrights.html and Transparent and Predictable Working Conditions in the EU - https://ec.europa.eu/social/main.jsp?langId=en&catId=1313.

[5] Statutory definitions of the above terms are also provided for by the Equality Act 2010 and ss. 295 and 296 of the Trade Union and Labour Relations (Consolidation) Act 1992, as well as a number of statutory instruments governing various aspects of the employment relationship such as working time, part-time and agency working, maternity and parental leave.

[6] As we will see, this is a crucial difference from other jurisdictions, such as the Italian one, where there is a binary system. This characteristic has a direct impact on the employment courts’ findings in relation to the employment status of gig economy workers.

[7]Good work: the Taylor review of modern working practices” (see note 3), page 34.

[8] The matter is not exclusively a UK issue: at EU level, in May 2016 the European Commission launched a platform to facilitate co-operation in tackling undeclared work, including false self-employment. The platform brings together enforcement authorities (such as labour inspectorates, tax and social security authorities) and other actors (including social partners) involved in fighting undeclared work allowing them to build know-how and showcase transferable practices to tackle undeclared work - https://ec.europa.eu/social/main.jsp?catId=1299&langId=en.

[9] See the seminal decision Autoclenz v Belcher [2011] UKSC 41.

[10] Uber BV and others v Aslam and Farrar, Court of Appeal (Civil Division).

[11] Uber BV v Aslam [2018] EWCA Civ. 2748.

[12] Dewhurts v Citysprint UK Ltd, Employment Tribunal, 5 January 2017 – Case No 2202512/2016.

Chiara Muston, LL.M - 5.06.2019

This article is a summary of recent developments and, whilst every care has been taken to ensure the accuracy of the information provided, it should not be regarded as a substitute for advice in any particular case. Every case is different and you must not act solely on the basis of information contained here. BILA and the article’s author make no warranties as to the accuracy of the information contained in the article and are not responsible for the content of external websites. Where opinions have been expressed, they are the personal opinions of the author and do not constitute professional advice on any level, nor do they represent the opinions of BILA.

Brexit: legal and constitutional implications

When we hear about Brexit, one of the most heard (and abused) expressions is: “in the old days we knew where we were, nowadays we are where we are”. Perhaps it may be useful to examine how we got where we are.

“We wouldn’t have had a referendum at all had it not been for the Conservative Party – and had not been for David Cameron” *

During the 2015 general election campaign, David Cameron, then leader of the Conservative Party and Prime Minister, included in his manifesto commitment that he and the Conservative Party would introduce legislation for a referendum on the UK's membership of the European Union. Cameron and the Conservative Party won the general election and Cameron was appointed for the second consecutive term in sequence as Prime Minister.

 The planned referendum was included in the Queen's Speech on 27 May 2015.  The European Union Referendum Bill 2015, which authorised it, went before the House of Commons just three weeks after the election.  The Scottish National Party voted against it. In contrast to the Labour Party's position prior to the 2015 general election under Miliband, acting Labour leader Harriet Harman committed her party to support a EU referendum by 2017.

To enable the referendum to finally take place, the European Union Referendum Act 2015 was voted and passed by Parliament in Westminster and received Royal Assent on 17 December 2015.

The question that appeared on ballot papers in the referendum before the electorate under the act were:

Should the United Kingdom remain a member of the European Union or leave the European Union?

with the responses to the question being (to be marked with a single (X)):

Remain a member of the European Union           

Leave the European Union                                 

The referendum was held on Thursday 23 June 2016. Leave won by 52% to 48%. The referendum turnout was 71.8%, with more than 30 million people voting.

England voted strongly for Brexit as did Wales. Scotland and Northern Ireland both backed remaining in the EU. Scotland backed Remain by 62% to 38%, while 55.8% in Northern Ireland voted Remain and 44.2% Leave.

Shortly after the referendum, David Cameron (a Remain campaigner) resigned from his office and Theresa May was appointed as Prime Minister in his place.

“There is no opt-out from Brexit”*

From a strictly legal point of view, the referendum did not repeal or abolish any existing legislation. It has only firmly advisory value under the EU Referendum Act 2015. Therefore, although politically the Government is taking into account the results of the referendum, the legal position grants the Government the freedom to ignore them.

Theresa May in relation to the EU referendum was also part of the “Remain” camp. The political agenda of Theresa May shortly after her appointment became: “Brexit means Brexit”.

“Brexit means Brexit”*

Theresa May has set up a new government department, to be headed by David Davis, a Leave campaigner, to take responsibility for Brexit. Liam Fox, who also campaigned to leave the EU, has been given the job of international trade secretary and Boris Johnson, who led the Leave campaign, is foreign secretary.

The “Three Brexiteers” have been empowered to conduct negotiations with the EU and seek out new international agreements, with Theresa May having the final say. It is now clear that the government had not carried out any emergency planning for Brexit ahead of the referendum to assist in the negotiations of the withdrawal from the EU and to assess the best possible outcome that Britain could negotiate.

“We will invoke Article 50 no later than the end of March next year”*

The process of severance from the EU will only start when a formal notice is given by the Prime Minister to the European Council in accordance with art. 50 of the Treaty on the Functioning of European Union (TFEU also known as the Lisbon Treaty) (“Notice”).

Once the Notice is given, the clock will start ticking and a maximum period of two years (“Notice Period”) will run during which the UK will remain a Member State and will have to negotiate the terms of a withdrawal agreement with the European Union.

Once the Notice is given it cannot be withdrawn (there is no provision to this effect in art. 50 TFEU).  Should the United Kingdom wish to change its mind, it needs to make a fresh application (pursuant to art. 49 TFEU) as any other applicant State wishing to join the EU.

Once the Notice is given the United Kingdom will remain full member of the EU during the course of the withdrawal negotiations – albeit its credibility as a member will be severely undermined - and it will no longer be a Member State of the EU in the following circumstances:

(a)        before the expiry of the Notice Period, if the withdrawal agreement has been entered into;

(b)        on the expiry of Notice Period (and the TFEU will cease to apply to it even if the terms of the withdrawal agreement have not yet been agreed); or

(c)        after the expiry of the Notice Period, if there is consent of the United Kingdom and unanimous vote the remaining 27 Member States accepting an extension of the Notice Period).

For the withdrawal agreement to be finalised, the draft has to be approved first by the European Parliament by simple majority vote and second by the European Council by qualified majority vote or unanimity depending on the nature of the provisions in the agreement.

Any withdrawal agreement reached by the Government will then necessarily have to be ratified by Parliament by legislation in order to be recognised and enforced in the domestic system of laws in force in the UK.

“It is not for the House of Commons to invoke Article 50 and it is Government alone”*

Article 50 (1) of the TFEU states:

“Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements” [emphasisadded].

In the United Kingdom, there is no written constitution which serves as a basis of the country’s legal system. The source of constitutional law is the legislation made by the Parliament, the judicial precedent (also known as common law) and constitutional conventions. 

A domestic constitutional conflict has now arisen between Government and Parliament.

The Government’s position expressed in the statement above is that, following the referendum, the Government has taken a decision to leave the European Union and the Government has the power and the authority using the royal prerogative to notify the European Council of that decision without seeking prior authorisation from Parliament; in other words, the Government enjoys complete discretion about as to serve the Notice.

For clarity, the royal prerogative is a collection of executive powers held by the Crown, since the Middle-Ages, and by the Government to enable them to perform their constitutional functions. Such powers are not set out in statute or written legislation.

Parliament has instead expressed the view that the Government should not trigger Article 50 without consulting Parliament and that it is constitutionally appropriate that Parliament should make the decision to act following the referendum. The Selected Committee on Constitution of the House of Lords expressly stated: “Parliament should play a central role in the decision to trigger the Article 50 process, in the subsequent negotiation process, and in approving or otherwise the final terms under which the UK leaves the EU”.

Proceedings for judicial review have been brought in the High Court of Justice in London before The Lord Chief Justice, The Master of the Rolls and Lord Justice Sales in order to obtain a declaration from the Court on whether, under UK constitutional laws, the Government can lawfully use prerogative powers to give notification to the EU under art. 50 of the Lisbon Treaty without the Parliament’s formal authorisation. The argument before the Court is that only Parliament has the power to invoke art. 50.

A judgment is expected in the following weeks and it is certain that the matter will be “leapfrogged” to the Supreme Court for a final decision in the event of an appeal.

A similar action in respect of the Brexit process was commenced in Northern Ireland in the High Court of Belfast and judgment has been reserved.

“Let’s get this plan for Brexit right”*

The negotiating process is certainly not straightforward and it is enormously complex. Any negotiation will have to be based on three fundamental issues: single market for goods and services, immigration and undertakings made by the UK to contribute to European budgets, which has been estimated in the region of €20 billion. The outcome will determine a “hard Brexit” or a “soft Brexit” in consideration of the level of agreement (or disagreement) reached with the EU.

The Government has suggested repealing the European Communities Act 1972 (which currently implements the rights and duties of the EU treaties into UK domestic law) with the Great Repeal Bill which would convert all existing EU law (estimated in the number of 12,295 regulations) into national law with one statute and perhaps with no proper debate in the House of Commons. It is suggested, however, that this will be insufficient.

Brexit has not been started yet and we are still a long way from it. It will only commence with the triggering of Art. 50 of the Lisbon Treaty and at moment we can only wait and see who will eventually decide on its exercise – Parliament or Government.

* The headings of this article are extracts from Theresa May’s speech to the Conservative Party conference on 2nd October 2016. 

 

Rocco Franco

Partner at Pini Franco LLP, 22-24 Ely Place, London EC1N 6TE

+ 44 20 7566 3140

rfranco@pinifranco.com

This article is a summary of recent developments and, whilst every care has been taken to ensure the accuracy of the information provided, it should not be regarded as a substitute for advice in any particular case. Every case is different and you must not act solely on the basis of information contained here. BILA and the article’s author make no warranties as to the accuracy of the information contained in the article and are not responsible for the content of external websites. Where opinions have been expressed, they are the personal opinions of the author and do not constitute professional advice on any level, nor do they represent the opinions of BILA.

 

 

Procedure for dealing with the English Estate of an Italian National or Italian domiciliary having no English Will

Summary

In the event that the client dies resident in England but domiciled in Italy with an Italian Will which appoints no executors, an application to a District Judge or Registrar will be required to obtain a Grant of Probate in England.

The application would have to first be made by the person who is entrusted with the administration of the estate in Italy.  Where there is no such person, then the beneficiaries will be entitled to apply for the grant.

If the Will was written in English and appointed executors, or if the Will referred to someone and described their role in the capacity of an Executor, this would enable a Grant of Probate to be obtained without an application to the Court.  In addition, where the whole or substantially the whole of the English estate consists of immovable property, a Grant in respect of the whole estate may be made in accordance with law which would have been applicable if the deceased had died domiciled in England and Wales.

Details

By virtue of S.1 Wills Act 1967, “a will shall be treated as properly executed if its execution conformed to the internal law in force in the territory where it was executed, or in the territory where, at the time of its execution or of the testator’s death, he was domiciled or had his habitual residence, or in a state of which, at either of those times, he was a national.”

It is normally necessary that the will should dispose of an estate in England and Wales or contain a valid appointment of an executor.  This would suggest that providing the English estate is specifically disposed of in the Will itself, it is not essential that the Will appoints an executor.

The procedure for making grants where the deceased died domiciled out of England and Wales, is governed by the Non-Contentious Probate Rules 1987 – Rule 30.  This provision is copied out below.

Rule 30 sets out two main circumstances in which the Grant of Probate will be issued.

The first involves an application to the Court in which a District Judge or Registrar may order that a Grant be issued to a number of people.

The first eligible person is the person entrusted with the administration of the estate by the court having jurisdiction at the place where the deceased died domiciled.  A Grant in this capacity is made only where there is a Grant, Decree or other Order of a court clothing some person with authority substantially similar to that conferred upon an English Personal Representative, ie empowering him to collect in and administer the estate.  A decree or order merely declaring who are the heirs of the deceased is not normally accepted as sufficient to enable such persons to be treated as entrusted with administration.

An Order which simply declares who are the heirs may however be sufficient to show who are the persons beneficially entitled to the estate.

Under Rule 30(1)(b), where there is no person in authority, the Grant may be issued to the person beneficially entitled to the estate by the law of the place where the deceased died domiciled or, if there is more than one person so entitled, to such of them as the District Judge or Registrar may direct.  Therefore, the beneficiaries under the Will may well be in a position to apply for the Grant.

The alternative position under Rule 30 does not involve an application to the Court.  Instead, Probate of any will which is admissible in proof may be granted to the executor named if the will is in English.  However, Probate would still be granted “if the will describes the duties of a named person in terms sufficient to constitute him executor according to the tenor of the will, to that person” (Rule 30(3)(a)(ii).  Therefore, the provision of person in an executor-type role in the Italian will would make the application for a grant of probate on the client’s death an easier one.

As regards the procedure required for the Court application, the original Grant or Decree issued by the court of domicile, or an officially certified copy of it, including an official copy of the will, if any, should be lodged and this will be retained in the registry.  If the document is in a foreign language, a notarial or other sufficient translation is also required.  The translation must be identifiable with the document translated and usually is annexed to the foreign documents.  The translation should, if possible, be verified by the certificate of an English notary public or a British consul.

Please note that the Grant is in all cases one of letters of administration, with or without will as the case may be, and consequently the usual rule is that the Grant may not issue to a single individual if a life or minority interest arises under the law of the domicile.

Non Contentious Probate Rules

Rule 30 Grants where deceased died domiciled outside England and Wales

(1)        Subject to paragraph (3) below, where the deceased died domiciled outside England and Wales, a distribute judge or registrar may order that a grant, limited in such way as the distribute judge or registrar may direct, do issue to any of the following persons-

(a)        to the person entrusted with the administration of the estate by the court having jurisdiction at the place where the deceased died domiciled; or

(b)        where there is no person so entrusted, to the person beneficially entitled to the estate by the law of the place where the deceased died domiciled or, if there is more than one person so entitled, to such of them as the district judge or registrar may direct; or

(c)        if in the opinion of the district judge or registrar the circumstances so require, to such person as the district judge or registrar may direct.

(2)        A grant made under paragraph (1)(a) or (b) above may be issued jointly with such person as the distribute judge or registrar may direct if the grant is required to be made to not less than two administrators.

(3)        Without any order made under paragraph (1) above –

(a)        probate of any will which is admissible to proof may be granted -

(i)         if the will is in the English or Welsh language, to the executor named therein; or

(ii)        if the will describes the duties of a named person in terms sufficient to constitute him executor according to the tenor of the will, to that person; or

(b)        where the whole or substantially the whole of the estate in England and Wales consists of immovable property, a grant in respect of the whole estate may be made in accordance with the law which would have been applicable if the deceased had died domiciled in England and Wales.

Roy Campbell
Druces LLP  22.05.13
R.Campbell@druces.com

This article is a summary of recent developments and, whilst every care has been taken to ensure the accuracy of the information provided, it should not be regarded as a substitute for advice in any particular case. Every case is different and you must not act solely on the basis of information contained here. BILA and the article’s author make no warranties as to the accuracy of the information contained in the article and are not responsible for the content of external websites. Where opinions have been expressed, they are the personal opinions of the author and do not constitute professional advice on any level, nor do they represent the opinions of BILA.

BILA Committee Member elected onto the Law Society’s Management Board

BILA Committee member and Law Society Council member, Maria Memoli, has been elected to the prestigious Management Board of the Law Society of England and Wales. Not only is she the first Italian national to be on the Law Society Council, but she is also the first Italian national to have been elected to this position.  The Board is a senior committee of the Society with members including Law Society President, Lucy Scott-Moncrieff, Vice-President, Nick Fluck, and the Society’s Chief Executive.

Maria has been a Law Society Council member since 2005.  Amongst her many roles, she has also been a member of the Law Society’s Gazette Editorial Board, on the Membership board for 3 years  and was the Chairman of the Council Members’ Conduct Committee for 4 years.

Promising in her election statement not only to ‘talk the talk’ but also to ‘walk the talk’, Maria says that her background and experience equip her to deal with a range of thorny issues including ‘business planning, governance, VFM, budgets, HR, financial controls and risk management to name but a few’.

Rocco Franco, President of BILA said that:

‘BILA is delighted that Law Society Council members have recognised Maria’s talents and personal qualities in this way. As an active BILA Committee member, Maria has strived to put Italian lawyers on the Law Society’s radar by inviting Law Society office holders to seminars in Italy to such cities as Rome, Venice, Padua and Genoa. Maria’s prestigious appointment is particularly welcome at a time of change for the legal profession across England and Wales, which is of much interest in Italy and may impact on the rest of the world”

Maria Memoli said that:

“I am absolutely thrilled to have been elected onto the Law Society’s Management Board and I am humbled by my fellow Council Members’ confidence in me. It certainly won’t be an easy ride running the Law Society, but to have an Italian flavour at the higher echelons of the Law Society is quite something – definitely a first !”.

That Swiss Account…

That Swiss Account …

On 6 October 2011 the UK Swiss Tax Agreement on Co-operation in Tax Matters (‘the UK Swiss Agreement’) was signed, and it is expected to come into force on 1st January 2013 (subject to the national legislation being in place in both countries before then).  It will have important implications for those who are within the UK tax net and have, directly or indirectly, a beneficial interest in financial assets or bank accounts in Switzerland.  Unless appropriate advice and action is taken those affected could be in for a nasty shock.

The Background

In recent times, UK taxpayers with offshore assets that have not been properly declared in their tax returns have been able to take advantage of offshore disclosure facilities made available by HMRC (‘the Revenue’).  The origin of the foreign assets may be earnings from a business that have been squirreled away without being declared, or an inheritance from a kind aunt.  The taxpayer has placed the funds in an offshore bank account or portfolio because they either do not know what to do about the situation or have chosen to do nothing. The offshore disclosure facilities offered the taxpayer the incentives of allowing these problems to be tidied up with the Revenue and only reduced penalties being charged.  Given that there are possible criminal sanctions for evading tax, and penalties can now reach a maximum of 200% of the unpaid tax, a lot of people have taken advantage of these facilities.  The Revenue, on the other hand, welcomed the collection of tax for past events and the fact that tax will be paid in the future on these assets as well.

The UK Swiss Agreement, however, seeks to attack the problem of those UK taxpayers with financial assets or bank accounts in Switzerland who have so far not made a disclosure to the Revenue.  From next year such taxpayers will be faced with some decisions to make.  Broadly there are two decisions, and for each decision there are two options.  The first decision concerns how to regularise the position to date (‘the one-off payment’), and the second concerns how to regularise the on-going position (‘the lifetime withholding tax’).

UK Resident and Domiciled

For those who are UK resident and domiciled, for each decision there will only be the options of:

1)             maintaining anonymity but paying away part of the capital of the assets or income/gains as they arise (the payments being made to the Revenue via the asset holder (e.g. bank) and Swiss authorities); or,

2)             allowing a disclosure to be made to the Revenue.

As regards regularising the position to date, if the first option is selected then a one-off payment of the capital value of the assets is taken by the asset holder.  The value of the payment is calculated according to a formula and will be between 21% and 41% of the total capital value (calculated according to provisions in the UK Swiss Agreement).  This payment will in most cases clear all liability for income tax, capital gains tax, inheritance tax and VAT, and associated interest and penalties.

For the on-going position the taxpayer will need to decide whether anonymity is to be preserved and a lifetime withholding tax is paid on the income and gains of the assets as they arise, or alternatively if disclosure is to be made.  The rates for the withholding tax are in line with, but slightly less than, the top rates of UK tax as they are collected as they arise and so earlier than on a self assessment basis (40% on dividend income, 48% on other income and 27% on capital gains).

The one-off payment and lifetime withholding tax are unlikely to be the correct rates of tax to apply to the particular assets, income or gains, and so disclosure will often be the better option for UK resident and domiciled taxpayers.

If no option is selected by 31 May 2013 as regards the one-off payment then anonymity will be preserved and the tax payment will automatically be taken by the asset holder.  Similarly, the lifetime withholding tax will commence once the agreement comes into force (1 January 2013) unless the option to disclose is chosen.

UK Resident and Non-UK Domiciled

Those who are not domiciled within the UK but are resident here have additional options as regards the one-off payment. As they can also opt out of it, or apply it only to income and gains with a UK source or those that are remitted to the UK.  There will be no or only limited clearance of past tax liabilities if these options are chosen.  The lifetime withholding tax also only applies to income and gains with a UK source or those that are remitted to the UK.  The taxpayer will need to supply the asset holder with a certificate as to their domicile supplied by a lawyer, accountant or tax adviser in order to select this option.

Withholding Tax on Death

There is also provision for a withholding tax (at 40%) to apply when the UK taxpayer dies, but this is only in the case of UK resident and domiciled taxpayers.  Again, there is the option of disclosing the relevant details to the Revenue to avoid a withholding tax being taken.

Liechtenstein Disclosure Facility (‘LDF’)

Thankfully, for those who own Swiss assets but have not paid the correct amount of tax, there is a disclosure facility currently open with the Revenue.  The LDF allows those with offshore undisclosed assets to establish a link with Liechtenstein (if one did not exist already), disclose their position to the Revenue and benefit from the Revenue looking no further back than 1999, much reduced penalty rates and also removing the threat of criminal prosecution for tax evasion (which the UK Swiss Agreement does not).  If the taxpayer acts quickly enough, their tax position can be regularised in a cost efficient manner and the UK Swiss Agreement need not cause such concern.

Andrew Godfrey

Penningtons Solicitors LLP,
Abacus House,
33 Gutter Lane,
London  EC2V 8AR

Andrew.godfrey@penningtons.co.uk
Tel: +44 (0)20 7457 3074

This article is a summary of recent developments and, whilst every care has been taken to ensure the accuracy of the information provided, it should not be regarded as a substitute for advice in any particular case. Every case is different and you must not act solely on the basis of information contained here. BILA and the article’s author make no warranties as to the accuracy of the information contained in the article and are not responsible for the content of external websites. Where opinions have been expressed, they are the personal opinions of the author and do not constitute professional advice on any level, nor do they represent the opinions of BILA.

 

Service of claim form via Facebook

Recently this year, Mr Justice Teare authorised a claimant to serve a claim to a defendant via Facebook for the first time in the High Court.

Australia and New Zealand –both Commonwealth countries with similar legal systems – are well ahead, having allowed service of legal documents by Facebook and Twitter since 2008. However change has been in the air in England for some time, as a similar ruling was made at the County Court in October 2009 whereby permission was granted to serve an injunction via Twitter.

The case is a commercial case and involves a £1.3 million claim by two investment managers against their broker and two of its employees. The broker denied responsibility and argued that in case it was held liable, it was entitled to recover a contribution from the two individuals, however no one was sure of the current address of one of the employees, a Mr Fabio De Biase.

The circumstances of this case were very specific: the defendant was a former employee of the claimant and some of his former colleagues were still working for the claimant and were in contact with the defendant via Facebook. They were therefore able to identify him from his photo and also establish that the account was being used as he had recently accepted some of their requests of friendship. The judge was therefore convinced that it was impossible to have his identity mistaken for someone else with the same name.

The Civil Procedure Rules deal with service of claim forms and other documents in the jurisdiction (England and Wales), in the UK and within the EEA.

There are two underlying principles which are encompassed in all the rules on service: (1) correct dispatch of the claim within its validity period and  (2)  effective service, so that the court has jurisdiction over the dispute. The general aim of the  provisions on service is that insofar as possible documents have to actually come to the attention of the party being served.

Service is defined in the glossary to the CPR as “steps required by rules of court to bring documents used in court proceedings to a person’s attention”.

CPR 6.3(1) provides that a claim form may be served on an individual by any of the following methods:

  1. Personal service in accordance with rule 6.5 (i.e. giving the documents directly to the party)
  2. First class post- dx- or other service which provides for delivery on the next business day
  3. Leave in a specified place as per CPR 6.7, 6.8, 6.9 (or 6.10 in respect of Crown proceedings). In brief those places are: at the defendant’s lawyer, at an address that the defendant has provided or at a default address. The default address will only come into play where personal service is not required under CPR 6.5, and the defendant has no legal personal representative and has not otherwise provided an address.
  4. Fax or other electronic means of communication. The key point to note here is that consent to service by this method is required, which can be given either impliedly or expressly. In particular for service via email Practice Direction 6A requires that the party served should always be asked if there are limitations to the format in which documents can be received and the maximum size of attachments. The claimant should always tag the email so to obtain an electronic receipt confirming that the email has been both delivered and read.
  5. Any method authorised by the court

The place of service will ordinarily be the usual or last known residence of the individual. The claimant must take reasonable steps to ascertain the defendant’s current address or place of business and if unable to do so the claimant must consider whether there is an alternative place or method by which service may be effected. He then must seek an order for alternative service of the claim and this is where the new case establishes a new era for the service of claim forms.

There are no details on how service was then practically effected using Facebook, but it was almost certainly carried out by way of a private message with the documents attached by PDF sent by the solicitors of the claimant. However, at the time of writing Mr De Biase has not yet participated in the proceedings.

What is important here is that the courts recognised the increasing power of social networking sites like Facebook. This is clearly another example of the English case law system being by nature a flexible means in the hands of the judges which allows them to adapt rules of law, which are sometimes old and obsolete, to modern life and modify legal procedure taking into account changes of society.

Rocco Franco
Partner at Pini Franco LLP

rfranco@pinifranco.com

This article is a summary of recent developments and, whilst every care has been taken to ensure the accuracy of the information provided, it should not be regarded as a substitute for advice in any particular case. Every case is different and you must not act solely on the basis of information contained here. BILA and the article’s author make no warranties as to the accuracy of the information contained in the article and are not responsible for the content of external websites. Where opinions have been expressed, they are the personal opinions of the author and do not constitute professional advice on any level, nor do they represent the opinions of BILA.