Uber to classify its drivers as workers rather than self-employed following Supreme Court ruling

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Uber
Uber

Following a ruling this morning at the Supreme Court, Uber has to classify its drivers as workers rather than self-employed.

The Supreme Court has upheld the decision of the Court of Appeal by holding that drivers for Uber are workers and therefore entitled to paid holiday, minimum wage and rest breaks.

In practice, this means that these are individuals performing work are now under a contract with Uber and are not in business on their own account.

The Supreme Court have also upheld the Tribunal’s original decision that a driver’s working time is not limited to periods when they are actually driving a passenger but includes any period when they are logged into the app.

The ruling could leave Uber facing a large compensation bill, and have wider consequences for other gig economy companies in the UK. Uber now faces many claims for holiday pay and minimum wage from their estimated 40,000 drivers (30,000 in London) at the relevant time.

The Supreme Court has emphasised that the legislation is there to protect vulnerable individuals from those who seek to exercise control over their workers and it is for this reason that no employer can contract out of these rules.

They said that there were five main reasons that it supported the Employment Tribunal’s decision:

  1. Uber sets the fare and the driver cannot charge any more, therefore Uber controls the rate of pay
  2. The contractual terms that drivers sign up to are imposed and not negotiated
  3. Drivers are penalised if they do not reach a certain level of acceptance or there are too many cancellations and if this happens a driver is logged off for ten minutes
  4. Uber has control over the delivery by use of a rating system and persistently low ratings sees a series of warnings and eventually drivers are no longer engaged by Uber
  5. Uber restricts communications between the driver and the passenger to prevent them developing any kind of business relationship

Background

Beverley Sunderland, Managing Director of Crossland Employment Solicitors shares with Business Leader, the history that has led to today’s historic decision.

In the UK there are three categories of persons working: independent contractors with no employment rights, employees, with full employment rights, and a middle category known as ‘workers’ who have some employment rights such as a right to paid holiday, minimum wage and rest breaks. These are individuals performing work personally under a contract who are not in business on their own account.

All employees are workers but not all workers are employees. A useful example of the difference between the two is a person who works a few hours a week as an administrator, fitting it in around other things, letting the business know when she will be popping in and a person who has set up a limited company supplying her administration services to others. The former is going to be a worker and possibly an employee, the latter is going to be an independent contractor as they are in business on their own account.

Since 2016 there has been litigation over the status of a number of sections in the ‘gig’ economy – primarily delivery drivers. This has included City Sprint and Deliveroo – the former couriers being held to be workers but the delivery riders of Deliveroo were not. Deliveroo apparently even uses language to try and ensure there is no doubt about the status of their riders – ‘on-boarding’ instead of hiring and ‘supplier agreement review’ rather than performance management warning.

However, the highest profile of these cases has been the Uber case where drivers alleged that they were workers. The Tribunal upheld this claim, as did the Employment Appeal Tribunal and the Court of Appeal by a 2:1 majority – with the dissenting judgment coming from the most experienced employment law judge who raised a question as to why Uber drivers were different to any other self employment taxi driver. The majority view was that despite what was written in the contracts of drivers, the reality was that they were performing services under a contract and were not in business on their own account. They were therefore entitled to paid holiday, minimum wage and rest breaks.

The Supreme Court has upheld the decision of the Court of Appeal by holding that drivers for Uber are workers and therefore entitled to paid holiday, minimum wage and rest breaks. These are individuals performing work personally under a contract who are not in business on their own account.

Industry reaction

Alan Price, employment law expert and CEO of BrightHR

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.

Beverley Sunderland, Managing Director of Crossland Employment Solicitors

(Following today’s decision), Uber are providing a transport service which is tightly defined and controlled.  The drivers are subordinates and dependent on Uber to the extent that cannot improve or develop personally either professionally or entrepreneurially and the only thing available to them is working harder to earn more money.

There is now no further right of appeal against this decision and it will leave Uber in some difficulties with numerous outstanding claims by their drivers against the company, which will now need to be settled.

While all of these cases very much turn on their own facts – as can be seen by the differing decisions in Deliveroo and CitySprint, this decision by the most senior court in the country seems to set a different tone, really focussing on the need for protection of those who are tightly controlled by their masters and who do not have the ability to improve themselves and develop and their only way of increasing their earning power is to work harder. This change of emphasis is likely to catch most in the gig economy and there are many other cases in the process of appeal.

Nick Thorpe, partner and employment lawyer, Fieldfisher

This morning the Supreme Court unanimously dismissed Uber worker status appeal after a lengthy battle. The Court upheld the earlier court decisions which looked at the reality of the working relationship between Uber and the drivers and rejected Uber’s argument that it was simply a technology platform acting as a “booking agent” for the drivers by putting them in touch with passengers.

It took a purposive interpretation of the legislation regarding the protection of vulnerable workers, finding that the Uber drivers were in a relationship of subordination and dependency to Uber. In reaching this conclusion it discarded the contractual arrangements in place and focused heavily on the truth of the relationship.

The Court highlighted five factors, including that Uber dictates the fare, imposes the terms between the driver and passenger, restricts drivers’ choice over whether to accept or reject a job, exercises significant control over service delivery through the passenger rating system and restricts drivers from establishing an independent commercial relationship with passengers beyond the ride.

While the above factors may be specific to Uber’s operating model, the approach taken by the Supreme Court in this case is likely to embolden other courts to look beyond the contractual arrangements to protect to individuals perceived as economically vulnerable.

In a further body blow to Uber and its operating model, the Supreme Court concluded that drivers are ‘working’ when they log onto the app and are ready and willing to accept bookings (i.e. when they are “on stand-by”) and this should be treated as paid working time. Worker rights including the right to national minimum wage and paid leave accrual will therefore apply during these periods as well as when drivers are completing rides.

This case will have significant implications not only for Uber but other atypical working arrangements, including freelancer and consultancy arrangements.

Esther Smith, partner at UK law firm TLT

The Supreme Court’s ruling addresses the crucial question of worker status in the gig economy, coming after 5 years of heavy debate on the subject and a string of failed appeals by Uber.

The question of whether someone is an employee, worker or independent contractor is important because each category attracts different rights and obligations. The arrival of so-called ‘platform work’ in the gig economy complicated the process of defining employment status due to the flexible nature of the work. In this case, Uber contended that the drivers were self-employed contractors and insisted that the smartphone app was a platform to connect drivers with app users and process payment. The drivers that brought claims against Uber in 2016, seeking payment of the national minimum wage and holiday pay, were required to demonstrate they were workers or employees, rather than self-employed contractors in order to be eligible for these benefits.

The Supreme Court has ruled in the drivers’ favour, agreeing with the initial 2016 Employment Tribunal that the UK’s 65,000 registered Uber drivers are fully entitled to paid holiday and the National Minimum Wage. This decision will have a major impact, not just on Uber and its drivers, but also on all platform-based technology workers and other workers who are part of the growing gig economy.

It will be interesting to see how Uber responds in relation to their contractual arrangements and what impact it will have on its operations, and on that of similar organisations, across the UK.

Matt McDonald, a partner at law firm Shakespeare Martineau

The Supreme Court has spoken, and Uber’s landmark employment battle is now over. Having failed to overturn the employment tribunal’s original decision and subsequent appeals, Uber’s drivers are now classed as ‘workers’ and must be given the employment rights which come alongside that.

The decision will give gig workers some peace of mind and Uber now needs to carefully look at its employment model. The business must now give its drivers many of the rights that other ‘workers’ are entitled to, including holiday pay, minimum wage, and sick pay. With this decision, other companies which operate flexible employment models will need to carefully assess their own working practices and adapt them, if necessary.

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