One of the major factors in determining whether an individual is an employee or a worker for the purpose of employment rights depends on whether they have the right to substitute someone else to do their job for them. In Stojsavljevic and Turner v DPD Group UK Ltd, the Employment Appeal Tribunal (EAT) held that, as both claimants had the right in practice to appoint a substitute driver, they could not be employees or workers.
The two claimants worked for DPD, a large parcel collection and delivery company, between 2013 and 2017. Both of them signed up to the company’s standard written franchise agreement which stated they were independent contractors. This was also how they were treated for tax purposes.
Under section 18 of the Owner Driver Franchise (ODF) Operating Manual agreement, they were entitled, as franchisees, to use permanent and/or temporary drivers (known as “Ninety Day Drivers”) to carry out the work, either instead of or in addition to themselves. As a franchisee, each of them was responsible for any breaches or non-compliance with the franchise agreement or the ODF manual by a driver whom they engaged.
The claimants argued that, in reality, they operated as individual drivers who were required personally to undertake the work of collecting and delivering parcels and that the “degree of control” by DPD over them meant that there was no sense in which they could be said to be carrying on a business in their own right. In particular, they argued that any substitute driver had to be approved by the company, thereby operating as a restriction on their right of substitution.
The company accepted that it exercised a “not insignificant degree of control” over the way in which its services were provided but argued that this was very typical of franchise agreements.
The tribunal found that as franchisees, the claimants were contractually entitled to substitute individuals of their choice as drivers. Although there were criteria that these drivers had to satisfy (such as being conversant with company practices), the tribunal held that these were “not such as to amount to a fetter on the claimants’ contractual entitlement to engage a driver of their choice”.
The tribunal therefore concluded that neither Mr Stojsavljevic nor Mr Turner were employees or workers for the purposes of section 230 of the Employment Rights Act 1996 (ERA). They appealed against that decision.
Dismissing the appeal, the EAT held that the tribunal had correctly analysed the contractual obligations between the parties consistent with the principles set out by the Supreme Court in the cases of Autoclenz Ltd v Belcher and ors (weekly LELR 233) and Uber BV v Aslam and ors (weekly LELR 717).
It was also correct to conclude that the terms of the written franchise agreement between the two men and the company reflected what actually happened in practice. In other words, the agreement allowed them to appoint a substitute and did not require them personally to perform the service of collecting and delivering parcels.
As neither of the franchisees could prove a requirement of personal performance, the tribunal was right to conclude that neither of them was an employee or a worker for the purposes of the ERA.
The EAT therefore agreed that “there was, both on paper and in practice, an unfettered right of substitution”. As both parties agreed that “a genuine right of substitution which is inconsistent with personal performance is [also] inconsistent with both employee and worker status, the tribunal was right to determine the preliminary issues which were before it” in DPD’s favour.
In this decision, the EAT is again reinforcing the importance of the requirement for personal service in order to meet the legal status of “worker”. While disappointing for the claimants in this case, this is not surprising following the judgment in Uber BV v Aslam in which the lack of a right of substitution was a key factor in deciding that Uber drivers benefitted from worker status.