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Behind the smokescreen: bogus self-employment

Even if in the eyes of Michael O’Leary all pilots are ‘glorified taxi drivers’, those two job descriptions have hardly anything in common. Or maybe they do. The latest UK Supreme Court decision declaring Uber drivers to be misclassified employees, entitled to ‘workers’ status, hits home for pilots, just as it does for Uber drivers. Both professional groups have been fiercely fighting against bogus self-employment as the new norm set by unscrupulous employers.

In February, the UK Supreme Court put an end to a long-running legal battle, declaring a group of Uber drivers to be misclassified employees of the company. The Supreme Court ruled that Uber behaved like an employer by setting rates, assigning rides, requiring drivers to follow certain routes and using a rating system to discipline them. Drivers are workers, according to the Court, because of Uber’s level of control over them.

This sounds all too familiar to the thousands of supposedly ‘self-employed’ pilots in Europe. On paper they are self-employed, but in practice, they have little to no control over (how), when and where to fly to. They have no control over the cost or pricing, neither own the aircraft they fly or invest in flight planning software or manuals. Self-employed pilots don’t ‘advertise’ their services to attract clients, neither can they work for more than one airline. Moreover, airlines are obliged by EASA regulations to monitor and supervise them continuously. All this points to the fact that the job of commercial line pilots is simply incompatible with the status of self-employed, no matter what the formal arrangement is.

The job of commercial line pilots is simply incompatible with the status of self-employed

National labour and aviation authorities typically struggle to identify bogus self-employment – some more than others. Sometimes it is difficult when facing complex social engineering, where several jurisdictions are often involved. Other times countries take a principal position that bogus self-employment does not exist, that people have the right to decide their work status, and stand out with being vocal opponent to any EU-wide initiatives to fight abuses. This gave a free pass to bogus self-employment and allowed the phenomenon to flourish in the past decade.

Pre-COVID, around 9% of pilots are self-employed, according to a study by the EU Commission, carried out by the consultancy Ricardo. This figure varies among countries, type of air carrier and business model. The majority (88%) are contracted through an intermediary and 75% of all self-employed actually work for a low-cost carrier. The self-employment “champions” are Ryanair with almost 60% of its pilots being ‘self-employed’, followed by Wizzair Post-COVID, where the fear is that pilots will only be ‘rehired’ if they set up as self-employed. 

But the researchers are doubting if even a small number of those pilots are genuinely ‘self-employed’. The vast majority of self-employed pilots – 90% – are not free to work for more than one airline in parallel, and 93% have no flexibility to decide when or how many hours to fly. Both are major criteria when defining if someone is indeed genuinely self-employed. This effectively means that self-employment is used by airlines as a smoke-screen for what should be regular employment. Just like Uber’s ‘self-employed’ drivers.

And just like with Uber, various Courts and authorities across Europe have challenged the status of self-employed pilots (see box). However, all these are individual cases, which may solve the problem of one or a couple of pilots, but would not stop the systemic abuse of self-employment in aviation. 

No fewer than 17 parliamentary questions have been tabled in the European Parliament on this topic in the past couple of years

To tackle an EU-wide issue, there is a need for an EU-wide approach. No fewer than 17 parliamentary questions have been tabled in the European Parliament on this topic in the past couple of years. Still, to this day, the EU Commission insists that even if 93% of all self-employed pilots are bogus self-employed, it should still be handled on a “case-by-case” basis in Courts or by competent national authorities across Europe. It is now clear, that the lack of EU action over far too many years has given airlines using bogus self-employment a feeling of impunity and damaged irreparably fair competition in the aviation sector. To remedy this, the “case by case” rationale needs to be reversed into a presumption of employment, with the burden to prove otherwise being born by the employers – instead of the employees having to go to Court.

Against this background, the Uber ruling gives us hope that no company is above the law and the European decision-makers would finally be shamed into taking action. For now, the Courts are doing what political leaders have failed to do:  see behind the smokescreen. 

Germany’s Koblenz Local Court (Amtsgericht), dated 22 January 2013: It is suspected, quite contrary to [Airline’s] statements that these pilots were independent subcontractors that the pilots are employed by [the claimant] and are leased to [Airline] by that company.

Norwegian foreign tax department deputy director statement from 26/04/2012: “We generally believe that pilots flying for the major commercial airlines are employees and not self-employed”

Ruling of the Scope Section of the Irish Department of Social Protection of 25/08/2015: “Based on the information on file, I am satisfied thatMr.
XXX was employed by XX under a contract of services and a normal employee/employer relationship existed in this case”.

UK HM Revenue & Customs ("HMRC") letter dated 24 March 2015: Requires an agency providing self-employed pilots to an airline to operate PAYE and NICs on the payments received by the pilots claiming that "I do not consider the pilots had any genuine right of substitution whereby they could supply and pay a substitute pilot." The letter then set out HMRC's protective assessments in respect of PAYE and NICs due from the claimant in respect of
the 2010/11, 2011/12 and 2012/13 years, some £47 million in total.

Deutsche Rentenversicherung Bund and
GKV-Spitzenverband Deutsche Verbindungsstelle Krankenversicherung: Letters were sent to individual pilots in 2015 informing them that after an analysis of their activities as airlines pilots, the characteristics of dependent employment activity prevail.