Posted on Nov 04, 2016 in Employment by Amy Jones
On 28 October, the London Central Employment Tribunal ruled that Uber drivers are “workers” for the purposes of the Employment Rights Act 1996 and, therefore, entitled to the specific employment protections attached to being a “worker”. This decision presents a potentially significant blow to Uber’s multi-billion dollar business model as well as similar businesses which operate “flexible labour” methods in the so-called “gig economy”, such as Deliveroo, TaskRabbit and City Sprint.
Why did Uber classify its drivers as self-employed?
The company’s position was:
1. It was not a taxi company, but rather a technology company which simply connected individuals who wanted to be taken somewhere with other individuals willing to drive them.
2. Drivers simply made use of Uber’s technology service to carry out their own transport businesses.
3. Drivers could undertake other paid work.
Why did the Employment Tribunal reject this view?
The employment tribunal held that, for the following reasons, the drivers could not be categorised as self-employed due to the significant level of control Uber maintained over them. Specifically, Uber:
1. Recruited its drivers and subjected them to competitive interviews, etc.
2. Retained control over the fares which customers requested. For example, Uber could prevent their drivers collecting fares in areas where the company does not operate.
3. Deliberately withheld details as to customers’ intended destinations from drivers until they accept the fare to prevent drivers from choosing to reject short journeys.
4. Required drivers to follow defined routes (which are usually the shortest distance) and cannot suggest an alternative route (i.e. one which is longer, but quicker) on their own initiative.
5. Decided the fare pricing structure for their drivers.
6. Laid down guidelines as to how drivers should conduct themselves and how their vehicle must be maintained and presented.
7. Operated a driver rating system which was held to be a de facto performance management tool monitored by Uber as, following a sufficient number of negative reviews, Uber could deduct sums from a driver’s share and remove them from the Uber system.
8. Dealt with all complaints and had full discretion as to paying out refunds to aggrieved customers.
9. Included a unilateral variation clause in all its contracts with drivers.
10. Follows local taxi licensing laws which apply within the jurisdictions it operates.
Such was Uber’s level of control over its drivers; it could not argue that Uber drivers were realistically running and expanding their own “businesses”. Further, they were prohibited from doing things which someone who is truly self-employed has the ability to do, such as: accepting tips; negotiating higher fares; altering routes; changing their terms of carriage; or dealing with complaints internally.
Implications of this decision
This decision serves as a reminder to employers that tribunals can look beyond how a contract or agreement is labelled and consider how it operates in practice. Throughout Uber’s dealings with its drivers, it was careful to identify the relationship as self-employment; however, this was not enough to avoid the drivers being held to be workers due to the reality of their relationship with the company.
More specifically for Uber drivers, the effect of being held to be workers is not insignificant, meaning they will be entitled to:
1. The National Minimum Wage (or for drivers over 25 years of age, the National Living Wage).
2. Paid annual leave of 5.6 weeks per year (pro-rata).
3. Rest breaks as provided for under the Working Time Regulations 1998.
4. The right not to be compelled to work beyond the maximum 48 hour average week.
5. The protections and safeguards provided to whistleblowers.
Further, as workers, Uber is required to set up a workplace pension scheme for its drivers in order to comply with their obligations under the Pensions Act 2008. From an immigration perspective, Uber will likely also need to tighten the checks it makes on their drivers’ right to work in the UK to avoid being penalised for employing individuals without the “right to work”.
So Uber drivers are now employees?
Crucially, the employment tribunal did not hold Uber drivers to be “employees”.
While the terms “worker” and “employee” are often used interchangeably in casual conversation, they have, in fact, two very separate definitions in law. Employees receive additional enhanced rights which are not available to workers, including the right to bring a claim of unfair dismissal, to statutory redundancy payments, minimum notice periods and “family friendly” rights (maternity, paternity, adoption, parental leave, etc.)
This remains to be seen. As a major multinational company, Uber has a strong interest in protecting its commercial strategy and appealing this decision. In other jurisdictions, Uber has faced similar legal challenges but had rulings issued in its favour. For example, while the California Labour Commission held Uber drivers to be employees in that state, the Florida Department of Economic Opportunity ruled Uber drivers to be “independent contractors”. The possibility of Uber successfully appealing this decision in the UK can, therefore, not be discounted and this is likely to be a case that will progress to the most senior courts given its importance to the flourishing “gig economy”.
It is likely to be some time before we have a definitive decision on this matter and in the meantime, Uber (for now at least) is likely to operate exactly as it is has been with the Uber drivers themselves potentially being deprived of the basic employment rights due to them.
We will keep you posted as and when there are further developments but, if you have any questions about employment status, please do not hesitate to get in touch.
Amy Jones is a Solicitor in our specialist Employment Law team. If you need Employment advice please contact Amy on 01382 229111 or email firstname.lastname@example.org or alternatively contact a member of the Employment Law team.