Deliveroo strikes and Uber court ruling: Is this the end of the gig economy?
Following strikes from Deliveroo workers, and its difficult IPO launch, which came hot off the heels of the Supreme Court ruling on the rights of Uber drivers, the question of whether the gig economy has a future is looming over the UK. With this in mind, Business Leader spoke to some industry experts on the matter.
Peter Harte, group vice president, Enterprise, EMEA, UKG delved into the future of the gig economy.
Managing gig workers is a totally different ballgame than managing hourly or salaried workers, and as such there are additional complexities. If organisations don’t have a proper workforce management solution in place then as change happens and new legislation passes (as we saw with Uber) they will struggle to stay compliant with their wage and labour interpretations and expose the businesses to high administrative costs and increased risks of fines and penalties.
The UK Supreme Court ruling on the rights of Uber drivers seems to have sparked the minds of many gig workers to evaluate their worth. This latest development from Deliveroo riders striking to fight for a living wage and better working practices from their employer is one of what may be many gig worker advocacy events and cause consumers to consider who they buy from and a company perceived to be putting profits before people may face demand issues.
Casual work used to be a ‘side hustle’ or a means to make extra money. Employees around the globe approach the concept of work very differently now with many holding full time gig positions, and organisations must keep pace with this revolution by continuously assessing it’s HR practices, employee offerings, and workforce management as a whole. As change happens and new legislation passes as we saw with Uber, organisations must stay compliant with their wage and labour interpretations to avoid exposing the businesses to high administrative costs and increased risks of fines and penalties.
Uber loss in Supreme Court – why did they lose and what does it mean for gig economy businesses?
Waterfront Solicitors Employment Partner Anthony Purvis further explained the ramifications of Uber’s Supreme Court decision and its implications on the gig economy.
Uber lost the final round of a five-year legal battle brought by some of its drivers. The key question in dispute was: were the Uber drivers truly self-employed or were they ‘workers’ and entitled to certain employment rights as a consequence, including national minimum wage and paid holidays?
First of all, it’s important to note that in the UK there are three types of employment status. A person can be employed, as most of us are when working in traditional businesses and roles, and employees enjoy the greatest statutory rights and legal protections. A person can be self-employed and, again, most of us understand what this means in practice, but the self-employed have little or no statutory rights. The third category is that of worker and it is akin to self-employment but the law affords some of the rights enjoyed by employees to those who are workers. Uber treats its drivers as self-employed and the Supreme Court was asked to determine whether or not this was correct or if in fact the claimants in this case were workers.
In order for the drivers to be workers they had to show that they were contracted to perform work or services for Uber. Uber said that this was not the case because it only provided a technology platform and acted as an intermediary, whilst the drivers provided their services to the app’s users. The Supreme Court very much disagreed with this analysis for a number of reasons, in particular:
- The drivers could not determine the fares in any meaningful way, as a self-employed person would be able to.
- Uber dictated the contractual terms of the relationship, which were not open to negotiation by the drivers.
- Uber exercised a significant degree of control over the drivers by monitoring their acceptance and cancellations rates, as well as their customer ratings, before penalising underperformers. Uber also controlled how the drivers provided their services (by requiring a particular route to be taken) and limited communications between the drivers and the app’s users.
The decision was a resounding loss for Uber and they have no further right of appeal. It could well mean that Uber has to set aside money to make substantial payments to its drivers and we may see higher costs for users of the Uber app, but that remains to be seen. Uber points out that the claims in question were brought in 2016 and it say that since then it has changed the way it does business, so it may reject the need to treat all its drivers as workers. But what does it mean for others who engage a workforce on a self-employed basis? Here are three things to note:
- The Uber case is part of a trend. In many other recent cases, it has been found that those who are classed as self-employed, particularly in the so-called “gig” economy, are in fact workers. Therefore, those who operate with self-employed individuals should be aware that now is a good time to review matters and assess whether or not the freelance workforce could in fact be workers. Each case will be different and will depend on the relevant facts – and there will be many who are legitimately engaging self-employed contractors with little risk of a viable challenge – but it’s important to understand which side of the line a business might fall.
- What is the true nature of the relationship? Although there will be many factors to consider, this is one of the key questions. The Supreme Court held that the starting point must be to look at the reality of the situation and consider whether or not an individual should enjoy the rights of a worker, rather than the “self-employed” contractual framework which the parties have put in place.
- The Uber case did not deal with the question of personal service. The Uber case was litigated on only one of the three criteria which must be present for an individual to be a worker. The other two – that the individual must perform the services personally and that the other party is not the individual’s client or customer – were not disputed in this case. It was accepted that Uber was not a customer of the drivers and the drivers had to carry out the work personally. In other words, they could not have a substitute carry out the work because, as licensed mini-cab drivers, this was just not possible or lawful. In other cases, an individual’s right of substitution will mean that they are not workers. Most notably Deliveroo’s drivers were found not to be workers for this reason in a recent decision, and the Supreme Court’s decision still leaves room for legitimate self-employment in many circumstances.
Impact on investors
Following Deliveroo’s rollercoaster IPO and stock market debut, which has seen shares drop after major UK investors expressed concerns about its gig economy model, Business Leader received commentary from Ben Gallagher and Andrew Missingham, co-founders of B+A on the subject.
Ben Gallagher, co-founder of B+A a creative management consultancy that counts Nike, Kellogg’s and Clinique amongst its clients comments on the Deliveroo IPO listing: “Investors are rightly nervous about Deliveroo’s IPO and should also be nervous for the future of any business that has grown fast using a ‘gig economy’ business model. These models have been built around upon so called ‘freelance’ or independent workforces – large numbers of on-demand staff that are called upon to perform a task at a given moment. Proponents of the model such as Uber and Deliveroo claim it puts control and independence into the hands of the independent worker. But we are hearing all too many stories of workers having to commit to insufferably long hours to make enough money to survive. Furthermore, by classing these workers as non-Full Time they are unable to agitate for change, unable to negotiate benefits or mobilise to support each other. If you were to be very blunt you could claim that these workforces are simply a technology enabled version of the Victorian sweat house – entirely at the mercy of the employer. This feels in direct conflict to a world that is beginning to demand that all businesses are more human – in what they offer and how they treat their staff. The employer brand is today as important as the consumer facing brand. As this trend grows, so too does the strength and voice of the workers at Deliveroo. So the risk to all those investing in Deliveroo (or others like this) is of course that if the workforce are able to break free from the ‘low pay low commitment no rights’ model Deliveroo has grown with, will the business be able to survive, let alone scale and generate profit as fast as it has to date.”
Andrew Missingham, co-founder of B+A, added: “The recent UK Supreme Court ruling, stating that Uber drivers are “workers” (and thus valid claimants of all of the respect and benefit that this status accords), has not only called into question two foundational principles of gig economy businesses such as Deliveroo and Uber (that workers are a) “off balance sheet” and b) “software”) but it’s also it’s forced them to focus on the important bit that’s really powering them. It’s not the algorithm, it’s not the code, it’s not the logo, it’s the people. Either as workers or as customers, both need to be treated with care and respect. In the long term, any business’s brand is worthless without this buy-in. And as Deliveroo are finding out, any business that forgets or ignores this is on shaky ground, that seems to be getting shakier by the day.”