The Rise of the Modern Workforce

The modern workforce is evolving as the pace of technological change and need for agility increase — it is estimated that 1.3 million people are currently engaged in the “gig” economy in the UK, while 31 million workers in the US are predicted to be contingent by 2020.

Technological and digital advancements offer businesses many benefits, such as increased flexibility, reduced costs, reduced administrative burdens and quick access to high-level talent. Increasing numbers of highly skilled individuals have embraced freelance working and can be engaged “on the fly” to fulfill critical job functions.

Creating a fit-for-purpose workforce while protecting your business requires knowledge across many areas of regulation, including employment, remuneration and benefits, mobility, data privacy/protection, tax and protection of confidential information/trade secrets. Nevertheless, the rewards of adopting new staffing models, be it crowd working, employee sharing, fixed-term staffing or other such models, can be considerable.

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When a business engages freelancers/independent contractors, it does not take on the responsibility of a traditional employer and therefore is not responsible for the vast majority of fiscal responsibilities associated with hiring employees.  There is no need to interview, hire or train contingent workers. Given the strict quality control employed by digital platforms and agencies, businesses can be assured that they're getting great talent.
   
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Businesses can engage people as and when they are needed for short-term projects, instead of having employees on permanent payroll. This flexibility also means that businesses can quickly adapt to changes in market conditions. Businesses are increasingly bridging today's skill gap with contingent workers. An increasing number of highly skilled individuals have embraced freelance working and can be engaged "on the fly" to fulfil critical job functions.

Businesses want to know how far they can go within existing legal frameworks, and are naturally wary of the risk factors which new models may bring.

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Misclassification risk
Global businesses need to manage the risks posed by the rise of the modern workforce, one of the most significant being misclassification. The "employee/worker" versus "self-employed" debate has raged on in numerous lawsuits worldwide, with individuals seeking labor protections, additional benefits and the right to legally unionize. In the US, some of the big players have been hit with multimillion dollar settlements, while in the UK companies have been forced to grant additional rights to their workforce. In Germany, dawn raids are par for the course in investigating possible cases of misclassification, and the sanctions are severe. Recent reform there has restricted the use of temporary agency workers and increased sanction in case of bogus self-employment and illegal temporary agency work. Elsewhere in Europe and in Latin America, misclassification of employees carries significant sanctions and liabilities.

What should businesses do to minimize misclassification risk?
To minimize the misclassification risk (that is, the risk that the individual will be viewed as an employee rather than as a bona fide independent contractor), it is critical to ensure that the individual is independent and operating business-to-business rather than employer-to-employee. Ideally, the services should be non-exclusive with a fee provided against invoices issued by the individual or their own independent organization.

If asked to determine the true legal nature of a relationship, courts in many jurisdictions will apply some form of an "overall impression" test, which often involves an examination of various factors, including, but not limited to, those set out in our "overall impression" test.

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We can advise you on modern workforce obligations by jurisdiction and on the likely developments globally. We can help identify countries with the highest reputational, regulatory, financial and employee relations risks of non-compliance.

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We can conduct global compliance audits to assess modern workforce risks in your business. We can advise and provide support to address the risks arising across multiple areas, such as employment, remuneration and benefits, mobility, data privacy, tax and protection of confidential information/trade secrets. Our audit service also enables us to provide practical advice to mitigate risks before a joint/related employer claim is brought.

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Our experienced employment litigators can provide rapid counsel, support and resource planning for misclassification claims, class actions, taxation authority challenges, joint/related employer threats, criminal allegations, dawn raids and information security breaches.

 

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