Worker status confounds legal expenses insurance provision

Since 2016, battle lines have been more firmly etched than ever before to clarify the distinctions between being an employee, a worker or a self-employed contractor.

In particular, the government’s independent review of working practices, Good work: the Taylor review of modern working practices, conducted in July 2017 by Matthew Taylor, chief executive of the Royal Society of Arts, centred on the burgeoning gig economy. This, in turn, highlighted a potentially new employment status – the ‘dependent contractor’, who is eligible for worker rights but is not an employee.

Alongside these investigations, trade unions have been actively taking gig economy employers to court in order to classify previously categorised self-employed individuals as workers, so that employment rights such as holiday pay and the minimum wage can be received.

The most famous of these cases revolved around taxi and private hire firm Uber. In October 2016, a UK employment court ruled that its drivers are workers rather than self-employed individuals. More recently, in October 2018, the Supreme Court ruled against Uber’s bid to contest this decision.

Insurance impact

But, how does this discussion impact on the insurance industry? The main rub regards legal expenses insurance (LEI) relating to employment disputes, such as unfair dismissal or discrimination.

Typically, employees can access LEI as an add-on service to a core insurance product, such as home contents insurance; this would normally cost an extra £20 to £30 on customers’ premiums.

Fiona Martin, director and head of employment law at Martin Searle Solicitors, also confirmed that LEI can be a bolt-on with some bank accounts, building insurance policies or, even rarer, some car insurance offerings.

Self-employed individuals, however, are able to purchase business LEI – this is designed to help defend an organisation in the event of a dispute with an employee.

So, how do workers fit in here?  Workers are defined as being contracted to perform work personally, yet they do not manage or run their own business. Sitting plum between employees and self-employed individuals, are workers able to use LEI ?

“Employees have got a lot more protection than anyone self-employed, but workers have rights not to be discriminated against,” added Martin. “They may not have claims for unfair dismissal, they will have claims for being discriminated against.”

David Haynes, underwriting and marketing director at LEI provider ARAG, agreed: “Some of these workers, you have sometimes quite a grey line as to whether they are deemed an employee or not. That’s the difficulty: where do a lot of these people fit in? We’re still at the early stages of determining that.”

Providing cover

For Haynes, workers should receive the same LEI privileges as employees if tackling a discrimination dispute.

“[Workers] would be treated as employees. What you have to do is firstly establish whether they have employment rights or not, if they are classed as workers. If they are, then they would be classed as an employee [for LEI purposes],” he explained.

“If we had a claim from someone that the employer said [was] classed as self-employed, we would get advice on whether we think they are an employee or not.”

Haynes recommended that insurers investigate fully whether an individual has employment rights as a first port of call. Referencing Uber’s landmark case as an example of this, Haynes added:

“What you’ve potentially got is a whole group of workers that will have minimum wage, holiday pay and if they’re dismissed, they could face claims for unfair dismissal.”

Another group that could cause question marks for insurers are those that work in the charity sector, as these individuals could be classed as full employees or simply volunteers.

“They might be completely voluntary, but still have grievances or claims,” Haynes said. “Again, we would establish first of all whether they are classed as an employee and if it’s deemed that yes, they are, then we would take on their case.”

To date, there has been no government or official guidance on how workers should be treated in respect of LEI, confirmed Haynes.

Applicable insurance

Some insurers, however, are making their stance clearer in terms of the worker versus employee debate.

For example, LEI specialist DAS Insurance does not distinguish between employees and workers with regards to, its personal LEI provision, while charity workers are covered under the firm’s family legal protection policy. If an individual is claiming to be an employee or worker, yet this classification is being contested, then DAS’s policy will cover the individual until a tribunal decides their employment status - if deemed to be self-employed or an office holder, then cover ceases.

Haynes noted that additional services provided with LEI can also prove beneficial.

He said: “[Insurers and brokers] need to be aware of the opportunity to sell extra benefits. Legal expenses is often the product at the end that they come to once they’ve dealt with all the other core products and they perhaps need to be aware of what benefits they can get.

Not just in employment – legal expenses for things like motoring prosecutions, motor contract, legal expenses involved in buying and selling the vehicle.

“There’s lots of areas within legal expenses. Even access to a legal helpline where these people can actually ring up and maybe say ‘I work on this basis for this business, how am I classed? What are my rights?’ Those services are available with all legal expenses products. Brokers should make themselves familiar with them.”