Uber loses in the Supreme Court: Why? And what does it mean for your business?
Last week Uber lost the final round of a five-year legal battle brought by some of its drivers. To understand what it means for the future of business in the UK, Business Leader spoke to some industry leaders. Below, Waterfront Solicitors Employment Partner Anthony Purvis shares his thoughts.
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 the gig economy and UK law
Uber UK Supreme Court ruling regarding its employees now being classed as workers rather than self-employed has led to a change in legal perspective on the gig economy. Below is a legal perspective on the case from Richard Thomas, employment lawyer and partner at Cardiff and London based firm Capital Law.
It’s a good day for gig economy workers. By rejecting Uber’s final appeal, the Supreme Court decision confirmed the previous judgments of the lower courts and clarified three key points.
First, that the status of the working relationship must reflect the reality of the work. Just because a company describes its workers as “self-employed” in their contract, doesn’t mean that it’s necessarily the case. Sometimes, convoluted terms of employment can be used by companies to their advantage – courts should not assume that this accurately describes the real nature of the working relationship and are expected to look beyond the contract terms.
The Supreme Court found that Uber exercises enough control on its drivers – who are subordinate and dependent on the company for work – for them to have worker status, as opposed to being independent contractors as their contracts suggested. Uber’s argument, that they are merely a tech intermediary putting independent drivers in touch with passengers, was not accepted . That’s the second point.
And thirdly, the Supreme Court confirmed that working time should be measured in terms of actual hours worked, not just in terms of activity. This means that Uber workers are entitled to National Living Wage for the entire time they have the app on, and are on work duty, regardless of whether there’s a passenger in the car or not. Uber drivers who can demonstrate the hours they’ve spent on duty are now likely to be able to claim backdated National Living Wage payments and holiday entitlements (5.6 weeks per year).
This is a blow for Uber and similar gig economy companies – but it won’t destroy their business model. It’ll just require them to adapt and add some costs. And those costs will likely be passed onto consumers. That’s just the price to pay to ensure that workers receive appropriate pay for their activities – we should all be willing to accept it.
Alan Price, employment law expert and CEO of BrightHR expands on this.
The Supreme Court has held that two taxi drivers who challenged Uber over their employment status are ‘workers’, and not ‘self-employed contractors’. This ruling could have significant consequences for both Uber and other employers in the gig economy who work on a similar ‘on demand’ basis.
Workers have more employment rights than self-employed contractors, including rights to earn the national minimum wage and receive paid annual leave. Importantly, they still do not have unfair dismissal protection, nor many other rights that are exclusive to ‘employees’.
The Supreme Court agreed with previous appeal decisions in this case, which has now been running for several years. Uber had continued to maintain that their drivers were self-employed. The Court decided that the working arrangements that exist between Uber and the drivers do not contain the autonomy – during the period when the driver is logged on to the app – that must be present for someone to be classed as self-employed.
Uber are now unable to appeal any further; the Supreme Court represents the final legal say on this case.