Report calls for online dispute resolution for the self-employed



Back in 2016, HM Courts & Tribunals Service (HMCTS) launched a reform programme which set out to modernise the UK’s justice system. With a budget of £1.2bn, the programme sought to improve how people access justice, and make the processes surrounding this more effective.

Some of the changes brought in under the programme include the digitising of paper-based services and the introduction of virtual courts.

However, one area which the Fabian Society believes has been neglected is dispute resolution for the self-employed. In a report called “The Self-Employment Justice Gap,” the think-tank calls for a dedicated online dispute resolution (ODR) service for the self-employed. It argues that the current system puts low-paid self-employed workers at a disadvantage and insists there is a need to close the justice gap.

The importance of closing the justice gap

Over the last decade, the number of individuals classified as self-employed has risen dramatically. It now rests at above 5 million. This is up from 3.2 million in 2000, and is set to rise over the next year. On top of this, there has also been a significant increase in the number of people working under incorrect employment status. This is also known as “bogus self-employment” or “false self-employment”. Under this status, a worker performs services for a company or contractor under the control of said company or contractor. They also use the company’s equipment, and are paid under the company’s dictated rates. However, these workers provide services without the benefits provided by statutory rights.

Citizens Advice conducted a survey in 2014/5 which estimated that around one in ten surveyed were working under bogus self-employment. Its report said if scaled up this could translate into as many as 460,000 UK-wide. Now, Unite, the largest trade union in the UK, says the issue has worsened, especially in the construction sector. A startling 60% of manual construction workers in the UK are wrongly registered as self-employed. These workers are being accompanied by Uber drivers, delivery drivers/cyclists and warehouse workers, who consistently earn below the national minimum wage, and receive no workplace protections.

This has become especially concerning during the Coronavirus pandemic, whereby many workers have missed out on financial aid due to their bogus self-employment status. The Fabian Society believes that an ODR service would help to tackle this issue.

At the same time, the service would also help to eradicate the lack of clarity around self-employment rights. It would serve to enable these workers to establish their tax status, safeguard workers’ rights and ensure that late payments are paid.

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Issues facing self-employed workers seeking justice

The Fabian Society’s report outlines that low-paid self-employed workers face a number of challenges when it comes to accessing justice around workers’ rights. Firstly, those who are contesting their employment status, or are seeking to ensure workers’ rights are upheld, must attend either an employment tribunal or court hearing. This becomes increasingly difficult if the individual has limited time and resources. Although the report states that employment tribunal fees are illegal, unless the worker is backed by a union, they will have to find representation. Considering that only 7% of self-employed workers are members of a trade union, this places many workers in a difficult position.

In addition to this, years of austerity measures have seen significant cuts made to legal aid. This means that self-employed workers can no longer access this aid for employment tribunals. The only exception to this relates to workplace discrimination cases. Further to this, such cuts mean that many self-employed workers no longer have access to the legal advice and support they need.

Data collected from the Legal Aid Agency directory of providers and the Office of National Statistics found that in the UK and Wales, 37 million people reside in local authorities areas without community care legal aid providers. Moreover, a shocking 78% of local authorities do not have a community care legal aid provider.

Despite this lack of access to legal guidance, those pursuing late payments from a contracting party must use courts when all other efforts have failed. The report states that this is both impractical and also may damage the relationship between the worker and the client.

Another significant challenge faced by self-employed workers is the absence of written contracts, or contracts that are lacking in clarity. As a result, due to many self-employed workers relying on verbal agreements as their contract, it can be incredibly difficult to enforce these contracts. This leaves them open to exploitation. Consequently, when faced with exploitation, because these workers can not rely on employment law protections, besides “minimal” anti-discrimination and health and safety regulation, they may be unable to challenge the treatment they experience.

Embracing technology

Considering the costly, time-consuming and often ineffectual nature of face-to-face justice systems for the self-employed, the Fabian Society recommends embracing technology and moving much of it online. The experts interviewed for the report agreed unanimously.

The think-tank’s report suggests that a standalone ODR service should be created, specifically targeted at closing the justice gap for self-employed workers. It also argued that this service should be accessible without a lawyer or professional adviser. Additionally, the report recommends that this should be developed collectively by HM Courts and Tribunal Service, ACAS, HMRC and the Small Business Commissioner, using a “a small allocation” from the modernisation programme.

In order for the system to be functional and effective, the report outlines six stages that would need to be part of the system. Firstly, a dedicated ODR portal would supply users with personalised advice on employment status and tax status, by using data generated through  online questionnaires and information databases.

In the second stage, the self-employed worker would initiate action by using the ODR portal to notify the company/contractor of their issue, and request a resolution. The other party would then be required to respond, or the claim would be “automatically upheld”. If a resolution is not reached, the third stage would involve the ODR system providing negotiation and provide both parties with the ability to make successive proposals using the online portal.

If these negotiations are unsuccessful, the fourth stage would introduce a trained conciliator online via video link, who would propose another resolution. In the case that this is rejected, the fifth stage would ask both parties to agree to arbitration, and the ODR system would introduce an independent arbitrator to review all documentation, and make a legally enforceable decision.

The report then outlines that in this stage, the complainant could request a transfer to a tribunal, although alternatively, proceedings could continue online, through a remote court hearing. In the sixth and final stage, both parties would have to confirm the ruling had been implemented in a set time. If the ruling had not been implemented, the ODR system would apply for “rapid enforcement action”.

Commenting on the need for such changes to be introduced, and the wider impacts of these changes, Andrew Harrop, General Secretary of the Fabian Society said: “The growth of the gig economy and other new forms of self-employment means we need to act now to help the UK’s self-employed workforce secure their rights without having to go to court. The Covid-19 pandemic has laid bare the inadequate protections available to the self-employed. Not only do contract workers have fewer rights, they lack the mechanisms available to employees to ensure they are enforced”.

He added: “This is an issue not just for workers but for the economy as a whole. The Fabian Society is calling on the Justice Secretary to establish an ‘online dispute resolution’ service to address the self-employment justice gap. By stopping disputes escalating, our plan will save workers, businesses and the courts’ time and money, while demonstrating politicians’ commitment to the self-employed”.

Clearly, it is time to improve this broken system which bars so many low-paid self-employed workers from accessing justice. Further to this, a standalone ODR service would also provide those individuals working under the incorrect employment status with the employment rights they are entitled to. This would help to defeat the shadow economy which profits off the vulnerable.

Article Created By Madaline Dunn