The EAT has upheld a decision that individual owner driver franchisees who provided delivery services were neither employees nor workers.
The facts
To be a worker, an individual must be obliged to carry out services personally. If the individual has a genuine and unfettered right of substitution, they are not considered to be under such an obligation and will not be a worker. Under existing case law, a right to substitution that is fettered only by the need to show that the substitute is as qualified as the contractor will usually be inconsistent with personal performance. This case looked at whether there was a genuine right of substitution for drivers in the franchise agreements.
DPD Group UK Ltd engaged owner driver franchisees (ODFs) through its standard form franchise agreements. Under these agreements, the ODFs were contracted to provide a driver (either the ODF or another person) to perform delivery and collection services. There were some restrictions on who the other driver could be. They had to:
- be over the age of 21 and hold a current driving licence; take appropriate training;
- submit an application form; and be authorised by DPD.
The ODF’s brought claims in the employment tribunal which were dependent on them being either employees or workers. In order to decide if this was the case, the employment tribunal had to decide whether the ODF’s were independent contractors or employees/workers. Despite the fact that in practice only other ODF’s or drivers of other ODF’s were used as cover drivers, the tribunal held that the ODF’s were not personally required to perform the service because there was a genuine right of substitution and that they were not employees nor workers. The drivers appealed to the EAT, and the EAT upheld the tribunal’s decision.
The EAT and tribunal both considered that the franchise agreements were genuine and represented the true agreement between the ODF’s and DPD. The EAT also agreed with the tribunal’s finding that DPD’s right to satisfy itself that a proposed driver met the criteria set out in the franchise agreement was consistent with a right to check that the substitute was as qualified as the driver. Beyond this, DPD had no broader right to refuse a substitute driver:
there was no requirement that the cover driver had to come from one of the current ODF’s and in the EAT’s view the conditions were not imposed on the right to send a substitute but on the substitute themselves. The ODF’s therefore had a genuine right to substitute, and were not required to provide the services personally.
What does this mean for employers?
This is a welcome decision clarifying the vexed issue of when there is a genuine and unfettered right of substitution. The distinction between fettering the right to substitute itself (by only allowing certain people to be put forward as a substitute seen in cases where jobs can be released to a pool of people), and placing conditions on the substitute themselves is a narrow one and will need careful drafting.
