Self-employed drivers: elephants are not giraffes

As they say: ‘if it’s grey and has a trunk then it’s likely to be an elephant – even if you call it a giraffe.’

The Senior Traffic Commissioner has issued (17 July 2018) many draft changes to the Statutory Documents which give guidance and directions to Traffic Commissioners and which also provide very useful information for drivers, transport managers and operators.

Amongst many amendments is the addition of material about self-employed driver status.

Self-employment status of drivers

Drivers are not self-employed because they say they are or because the business for whom they work says they are: it is a question of the reality of the situation based on the facts of the case.

The Senior Traffic Commissioner view of self-employed status, in very broad terms, is summarised as follows:

In general someone is self-employed if they are in business on their own account and bear the responsibility for the success or failure of that business. Conversely they will be employed if they personally work under the control of their engager and do not run the risks of having a business themselves.

It is commonplace for a business to say that driver X or Y is ‘self-employed’ when the reality is that this is simply not the case. This issue has been of significant concern within the sector for some time: businesses may knowingly be avoiding HMRC obligations and rights that drivers would have as employees or workers (and thereby be gaining an unfair commercial advantage) or they may not understand employment law in this area and the way HMRC views matters.

In the new guidance the Senior Traffic Commissioner sets out the HMRC approach with regard to the employment status of drivers stating that:

it is concerned that haulage operators are wrongly treating workers as self-employed or are hiring workers through their own companies in ways that are not compliant with tax laws and therefore fair competition amongst other operators. Their position is that in road haulage it is rare for someone to be genuinely self-employed unless they are an owner-driver.

This last point refers to those drivers who will require their own operator’s licence (unless exempt of course). Of course, an operator’s licence will only be applied for by (and can only be granted to) a business that needs to transport goods for its commercial activities. The licence may often authorise only one vehicle.

The HMRC approach is also referred to in the new draft guidance which in event is already the view and approach of Traffic Commissioners. HMRC has internal guidance for staff to consider cases relating to all industry sectors and with regard to the general approach to drivers this states:

Drivers who only provide their labour, driving vehicles owned, maintained, and insured by contractors, are likely to be employees. Drivers who also provide the means of transport, that is the vehicle, are likely to be self-employed even if they work mainly for one principal. The vehicle may be one which they own or lease….

It is often said by businesses that they engage that they engage drivers on only a short-term basis or the drivers drive for various different businesses in any given period. The HMRC view of this is also covered in the HMRC internal guidance:

Hauliers sometimes claim labour-only drivers are not employees because they are engaged on a job-by-job basis with no guarantee of future work. Even if they are engaged on a job-by-job basis, the contract for each engagement may well amount to a contract of employment…. In some cases, the regularity of work done may indicate that there is a continuous contract…..

It will often be the case that drivers lease a vehicle from the business for whom work is being conducted. The HMRC contemplates this may or may not amount to genuine self-employment and that a considered approach needs to be taken:

If a driver claims that he or she is providing a lorry which has been leased from the haulier for whom he or she is driving, the arrangements should be examined carefully. Agreements, which succeed in establishing a driver as self-employed, are likely to:

• give the lessee total control of, and responsibility for, the vehicle for the duration of the lease
• make the lessee responsible for the maintenance, insurance and fuel
• provide for a commercial rent protecting the investment of the lessor
• result in the driver being responsible in law for obtaining an operator’s licence from the Vehicle and Operator Services Agency (VOSA).

An example of an agreement which fails to establish self-employment is one which:

• leaves the control and responsibility for the vehicle with the haulier enabling it to be used by other drivers
• leaves the responsibility for maintenance, insurance, and fuel with the haulier
• allows the driver to ‘pay’ for the vehicle through a deduction from earnings based on, for example, hours of use, mileage, or a clearly non-commercial amount per day or week.

The draft guidance simply deals with the question of Traffic Commissioner approach to self-employment status of drivers. It does not deal with wider employment law issues where an individual is not self-employed and may be either an employee or worker with certain employment rights as flagged up in the recent Pimlico Plumbers case and the Taylor Report.

The consequence of the new draft guideline is that Traffic Commissioner will almost certainly formally adopt this approach. In turn this means operators can expect to have to justify how drivers, other than owner-drivers, can be self-employed contrary to the HMRC approach. In certain cases ‘good repute’ might come into play. Traffic Commissioners do not want operators avoiding their legal and financial obligations thereby gaining commercial advantage.

Of course, every case will turn on its own facts: what is called a giraffe may sometimes be a giraffe though in most cases will indeed be an elephant!