Changes to how HGV operators engage their drivers

"How HGV operators engage their drivers has been under scrutiny by the Traffic Commissioners for some time. In recent months, that scrutiny has heightened and as standard in all cases, DVSA (during roadside encounters and operator investigations) and the Traffic Commissioners (both in correspondence and at hearings) are now assessing whether an operator’s arrangements for engaging drivers are compliant – i.e. that drivers are directly engaged by the operator as employees or workers, or are being engaged as ‘temporary’ workers through a bona fides driver agency that supplies drivers to multiple operators.

Any operators found to be engaging ‘self-employed’ or ‘LTD’ drivers, or abusing agency driver arrangements, are expected to regularise the position or face regulatory action against the Operator’s Licence.

Operators should therefore take the opportunity to review the way in which they engage drivers and seek specialist legal advice to ensure they are compliant, as the issue of driver employment status is, in my view, rapidly becoming the ‘brake testing’ issue of the driver management world.

‘Self-Employed’ Drivers - A Recap

The approach taken by DVSA and the Traffic Commissioners to the use of so-called ‘self-employed’ drivers stems from HMRC concerns that HGV operators were wrongly treating drivers as self-employed or hiring drivers through their own limited companies in ways that did not comply with tax laws.

Guidance issued by HMRC stated that it is ‘very rare’ for a commercial vehicle driver to be genuinely self-employed (regardless of the label given to the relationship) unless they are an owner-driver (and have their own Operator’s Licence and vehicle).

The use of ‘self-employed’ drivers was considered by the Upper Tribunal in the case of Bridgestep. In that case, the operator had been called to public inquiry following a bridge strike. At the public inquiry, it came to light that the driver involved in the bridge strike incident was considered by the operator to be self-employed (as were most of the operator’s drivers) and that the operator had provided the drivers with contracts that specifically stated the operator did not “supervise, direct nor control” drivers. The Traffic Commissioner considered whether the ‘self-employed’ label was correct (it wasn’t!) and whether a relationship of self-employment was consistent with an operator’s responsibilities under the Operator’s Licence (again, it wasn’t!).

The Traffic Commissioner found that the operator and transport manager had lost their good repute and the Operator’s Licence was revoked. On appeal, the Upper Tribunal upheld that decision finding that the operator had put the competitive advantage they gained from using ‘self-employed’ drivers before compliance.

The Upper Tribunal confirmed:

· Unless they are an owner-driver, it is very rare for a lorry driver to be legally ‘self-employed’. Drivers generally personally work under the control of the operator and do not run the risks of having a business themselves. They are therefore not genuinely self-employed.

· Engaging ‘self-employed’ drivers, when their status is properly that of a worker or employee, is anti-competitive and prejudicial to fair competition in the industry (as the payment of, for example, national insurance contributions, pensions contributions, holiday entitlement and sickness entitlement, is avoided).

· In this case, the operator had made a conscious decision to enter into an arrangement with the drivers which was highly questionable if not a sham. The consequence of the decision to engage the drivers on a ‘self-employed’ basis was that the company and the transport manager felt unable to control the drivers and did not have continuous and effective management of the transport operation.

HMRC’s guidance and the Upper Tribunal’s approach in the Bridgestep case have been adopted by the Senior Traffic Commissioner in his Statutory Guidance and it is now widely acknowledged that, regardless of the size of the transport business, it will be very rare for a driver to be genuinely self-employed unless they are an owner-driver.

“LTD Drivers”

Earlier this year, Traffic Commissioner, Kevin Rooney, considered the position of “LTD drivers” in the reported public inquiry case of Quick Road Transport Ltd (“QRT”).

In that case, all bar one of the company’s drivers were engaged through a limited company (a so-called “LTD driver”).

The Traffic Commissioner determined that the use of “LTD drivers” constituted lending of the company’s Operator’s Licence to each of the “LTD drivers”. Consequently, the Operator’s Licence was revoked. The Traffic Commissioner also warned of the risk of vehicles operated in such circumstances being impounded by the DVSA.

In reaching his decision, the Traffic Commissioner explained that the drivers of the vehicles were in fact a servant of their own limited company (despite them being the only employee and sole director of that company). They were not the servant or agent of QRT (which is what the operator licensing regime requires given it was QRT that held the Operator’s Licence). QRT had effectively sub-contracted its haulage work to a number of these limited companies to be carried out by their driver(s), which meant that each of the “LTD drivers” should have held their own Operator’s Licence. In the absence of an Operator’s Licence, the “LTD drivers” use of the vehicles was unlawful.

Agency Drivers

In another recently reported public inquiry case (that of Enero Logistics Ltd), Senior Traffic Commissioner, Richard Turfitt considered agency driver arrangements.

In his decision, the Traffic Commissioner recognised that agency drivers provide flexibility for operators to deal with sudden or seasonal increases in work or a shortage of staff but confirmed that operators should not be using agency drivers as long-term solutions. He referred to guidance on www.gov.uk, which advises that a person is an agency worker if they have a contract with an agency but work temporarily for a hirer. That guidance specifically states: “you’re not an agency worker if you use an agency to find permanent or fixed-term employment.” The guidance also offers bullet points to assist in identifying an employee. He also referred to HMRC guidance, which defines temporary employees as people that are contracted to a job for a limited period.

He said it would be a mistake to assume that agency arrangements will not be scrutinised by Traffic Commissioners and emphasised that agency arrangements should not be abused.

In this case, the Traffic Commissioner had cause to scrutinise the agency arrangements, as all the operator’s drivers – who were all used by the operator on a permanent basis - were engaged via a driver agency and had been since the date of the operator’s previous public inquiry (15 months earlier). At the earlier public inquiry, all the operator’s drivers had been ‘LTD’ drivers and the operator had given an undertaking that they would stop using ‘self-employed’ and/or ‘LTD’ drivers. The solution was that the drivers had simply been supplied through a driver agency. The Traffic Commissioner found that the agency arrangements in this case were a sham and were being used as a front for the operator’s continued use of ‘LTD’ drivers. The operator was therefore gaining an unfair commercial advantage over other operators who correctly engaged their drivers.

The Traffic Commissioner made it clear that, where agency arrangements are a sham and being used as a front for self-employed drivers, an operator and transport manager risk their good repute.

He went on to confirm that, even where there is a legitimate agency arrangement, operators must ensure:

· The obligations under the Agency Worker Regulations 2010 are met, including the right to equal treatment for agency workers after a qualifying 12-week period.

· The requirement for all agency workers to be provided with a ‘Key Information Document’ is met.

· They, and the agency, co-operate to ensure drivers receive an adequate induction On the evidence, I was satisfied that there had been efforts to manage the drivers. This was not a case where there was no control.

· They exercise control over agency drivers in the same way they would directly engaged drivers, e.g. the management of infringements and, ultimately, ceasing to use non-compliant agency drivers.

What should operators do?

These cases highlight the need for operators to ensure the way in which they engage their drivers is legitimate and compliant with HMRC and the Senior Traffic Commissioner’s guidance. Ultimately, drivers should be directly engaged by the operator as employees or workers, or as ‘temporary’ drivers through a bona fides driver agency supplying drivers to multiple operators."