Another major employment status case has come to a close. The long-running case concerning Addison Lee drivers has confirmed that they should be classified as “workers” rather than self-employed, entitling them to loss of earnings, holiday pay, and other rights.
This case, while not directly related to IR35, serves as another warning to businesses engaging individuals on a self-employed basis – and for contractors, it reinforces the importance of understanding your employment status.
Employment Status: it’s not just black and white
For those unfamiliar, UK employment law isn’t a simple “employed or self-employed” scenario. There’s a middle ground – the “worker” status. This means there are actually three main classifications:
1. Employees – with full employment rights, including unfair dismissal protection and sick pay.
2. Self-employed – individuals running their own business with full autonomy, but without the safety net of employment rights.
3. Workers – the in-betweeners, entitled to some employment rights (like holiday pay and national minimum wage) but without full employee benefits.
Addison Lee drivers were fighting for recognition as ‘workers’ rather than self-employed – and they won.
The Addison Lee ruling: a brief overview
Following the notorious Uber and Pimlico Plumbers rulings, the Addison Lee case was another test of employment status under UK law, spanning several years. A 2017 tribunal found that three drivers were “workers” and entitled to minimum wage and holiday pay, but Addison Lee challenged this decision.
After the 2021 Supreme Court ruling in Uber’s case, Addison Lee settled out of court in early 2024. However, the firm then attempted to argue that the earlier ruling didn’t apply to other drivers bringing similar claims.
In hearings held in late 2024, around 700 drivers contested Addison Lee’s classification of them as self-employed contractors. The Tribunal ruled in their favour, meaning the drivers are entitled to worker rights, including national minimum wage and holiday pay, setting yet another precedent that businesses cannot sidestep employment law simply by labelling individuals as self-employed.
The Tribunal was highly critical of Addison Lee’s conduct, highlighting that senior employees falsified key evidence. The ruling also made clear that changes Addison Lee had implemented since 2017 did not alter the drivers’ worker status.
The Status Tests – relevant to IR35
For those with an interest in IR35, the findings in relation to the employment status tests are of note:
Control: Addison Lee exercised significant control over drivers by requiring them to accept jobs and use branded vehicles. Drivers were expected to accept jobs allocated to them, facing potential penalties for refusals.
Mutuality of obligation: Although Addison Lee claimed that drivers could refuse work, in practice, they were expected to accept assignments without real autonomy. The Employment Tribunal noted that drivers remained under Addison Lee’s rules between jobs, indicating an overarching contract with mutual obligations.
Substitution: True self-employment often allows for substitution; however, Addison Lee drivers were required to perform the work personally, with no right to substitute another individual to undertake the work on their behalf.
Lessons for Engagers
For businesses engaging independent workers, either as sole traders or through limited companies, the Addison Lee ruling reinforces some crucial points:
1. Labelling is not enough – simply calling an individual “self-employed” does not make it so. Courts and tribunals will look at the reality of the working relationship, not just the contract.
2. Consistency is key – Employment status assessments should be thorough, regularly reviewed, and consistently applied across the workforce.
3. IR35 implications – While this is an employment status case rather than an IR35 tax case, the principles of control and mutuality of obligation mirror those seen in IR35 disputes. If an engagement looks like employment, outside IR35 determinations could come into question.
Lessons for Sole Traders
For contractors and freelancers, this case shows why employment status is so important:
• Understand your status – just because a client labels you as self-employed does not mean you truly are. If your working conditions resemble employment, you may have rights you are unaware of.
• Contracts matter, but reality matters more – even if your contract says you are a self-employed contractor, what actually happens day-to-day is what counts in the eyes of the law.
• Know your rights – If you are being treated as a worker but not receiving corresponding rights, you may have grounds to challenge your classification.
