Uber loses landmark Employment Tribunal case on worker status

The London Employment Tribunal recently decided that drivers working for the taxi hailing app Uber fell fully within the definition of a ‘worker’ for purposes of the Employment Rights Act 1996.  They dismissed as ‘faintly ridiculous’ Uber’s assertion that the drivers were self-employed contractors.

UK employment law provides for different levels of protection, depending on whether an individual is classed as an employee, a worker, or self-employed.  The Uber drivers did not attempt to claim that they were employees, only that they should be classed as workers because they were providing services to Uber for a reward.  The consequence of being classed as a worker rather than self-employed means that Uber drivers will be entitled to certain rights such as the national minimum/living wage, paid holidays, rest breaks and a maximum 48 hours working week.

Uber argued that it was merely a technology company and not a transport business, and that rather than contracting with the drivers, the contractual relationship was actually between the passenger and the driver. Uber claimed it was merely a platform to connect customers with self-employed drivers who were operating their own businesses. The Employment Tribunal rejected this argument completely and, in coming to this decision, looked at the following factors:

  • Uber interviews and recruits the drivers;
  • Uber requires the drivers to accept trips;
  • Uber controls key passenger information and does not share this with the driver;
  • Uber sets the fare and the driver can only decrease it: the driver is not free to increase it;
  • Uber sets the default route to be taken, from which the drivers depart at their own risk; and
  • Uber imposes conditions on drivers regarding the type of vehicle that they can use, controls the performance of drivers, and subjects them to disciplinary sanctions.

The Tribunal felt that these factors indicated that Uber had a level of control over its drivers that was consistent with being a worker.  In other words, the Uber drivers personally undertook to do or perform work for Uber.  The drivers were not acting completely independently or autonomously – as a genuinely self-employed contractor would – nor was Uber their client.

The Employment Tribunal did however concede that Uber could have devised an alternative business model in which the drivers could be considered as being genuinely self-employed, and so would not attract the rights associated with being a worker.

Interestingly, the Employment Tribunal also found that a driver is ‘working’ when he has switched on the App, is in the territory in which he is licensed to use the App, and is ready and willing to accept trips. Uber’s argument that drivers are only working when they are driving passengers was rejected.  The Tribunal found that it is an essential part of Uber’s business that there is always a pool of drivers ready to be called upon when demand for driving services arises, so that being available is an essential part of the service rendered by the driver.

This decision will have implications for calculating whether Uber drivers’ earnings satisfy the requirements of the national minimum wage.  At present, drivers receive fares from customers but no remuneration for time spent ‘waiting’. The outcome of this case may not only affect its business model, but could also change the relationship between many firms and their self-employed workers.  The decision means that Uber now faces having to fund costly benefits for its drivers such as holiday pay, sick pay and pension contributions. This could result in Uber increasing the percentage of each fare that it keeps as commission or increasing prices for customers.

There are approximately 40,000 Uber drivers in the UK. However, it must be borne in mind that the decision of this Employment Tribunal decision only applies to the two Uber drivers who brought the case.  The Employment Tribunal decision is not a universal ruling that all Uber drivers in the UK (or indeed individuals working in the wider ‘gig economy’) are workers.  The existence of worker status will depend on the specific circumstances of each driver.

This judgment serves as a reminder that an individual’s employment status depends on the practical reality of what they do.  Just because an individual is labelled as ‘self-employed’, does not mean that they are.  Wrongly classifying an individual as self-employed when they are a worker or employee could lead not only to Employment Tribunal claims but also potential liability for tax and national insurance, with added interest and penalties.  There may also be consequences with the Pensions Regulator as Uber may now be required to enrol all drivers into a pension scheme.

Uber is one of the most well-known companies operating in the ‘gig economy’, in which individuals are paid for separate pieces of work instead of working for one employer.  The consequences of this ruling will be felt far more widely throughout the ‘gig economy’.  The sector’s advocates say it provides convenience for users and flexibility for workers.  However, its detractors argue that the model erodes workers’ rights. The decision therefore does not just affect Uber, but may also affect other business models such as Hermes, Deliveroo and Amazon Prime.

But watch this space. Probably due to the huge financial consequences of this ruling, Uber says it will appeal. This means that the decision reached by the London Employment Tribunal will not cemented into UK law until the outcome of any appeal – which, in all probability could take years to be heard.

Paul Kelly

Paul Kelly

Paul Kelly
Partner
Employment Team
0113 227 9249
PKelly@LawBlacks.com
@PaulLawBlacks

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