Uber facing an expensive fare: Court finds that Uber drivers are workers

This is it. A decision has been made in the highest court in the land in a legal case spanning six years, and the ramifications of this are potentially huge. Before getting into why this is huge, let’s look at the background to the case and why it was so hotly contested is relevant.

Uber is a tech company which created their self-named app with the purpose of allowing individuals to get cheap lifts, much in the same way as a taxi would (to the rancour of London’s black cab drivers). Uber has always treated their drivers as independent contractors. As independent contractors, the drivers were not entitled to the same rights or protections as workers or employees. This led to a claim being brought to establish whether or not the drivers were workers, bringing claims for, amongst others, holiday pay, failure to pay the national minimum wage and unlawful deductions from wages. In the original judgment from the employment tribunal in 2016, it was held that the claimants were ‘workers’ who worked for Uber London under ‘workers’ contracts’. This claim was upheld at the EAT, the Court of Appeal and has now been upheld by the Supreme Court.

To be a worker, an individual must have:

• a contract whereby an individual undertakes to perform work or services for the other party;
• an undertaking to do the work or perform the services personally; and
• a requirement that the other party to the contract is not a client or customer of any profession or business undertaking carried on by the individual.

At the time the claim was brought, the only point in dispute was the first one, namely, that a contract to perform work or services was not in place. There was no right to substitution, which gave Uber a certain amount of control over the drivers which is usually found in a worker relationship (and has been subject to previous caselaw).

In this case, the written agreement specified that this was not a working relationship. However, it was found that the written agreement was not the be-all and end-all of the determination. It was particularly important to understand the practical relationship. The tribunal’s findings showed that the service provided by drivers was “very tightly defined and controlled by Uber and that the drivers had little or no ability to improve their individual economic position through professional or entrepreneurial skill.” As such, the drivers were workers and they were ‘working’ when they had the app switched on, were in the right geographical area to provide lifts, and were ready and willing to provide lifts. If those three requirements were met, the driver then became entitled to be paid national minimum wage, rather than just for the lifts they do provide.

Now the Supreme Court has made its decision, the case will revert back to the employment tribunal to make a decision on the claims brought, which will likely become a remedy hearing rather to determine how much Uber owe.

Bizarrely, Uber have stated that the decision only affects the particular claimants, and not the thousands of other Uber employees who are on different contractual terms. This, it has been noted, is not in the spirit of the decision and it is likely that the other drivers will also be workers, however they may face a fight to claim back pay at the moment unless Uber changes its mind. It may take further litigation to do this. I doubt that this defence will stand up – and they probably don’t either. If they truly believed this point, they would not have spent so much appealing all the way to the highest court in the land, spending exorbitant amounts on legal fees to avoid paying relatively small amounts to a handful of claimants.

Nonetheless, this will affect the other players in the ‘gig economy’. The gig economy is so named on the basis that the individuals take on individual ‘gigs’ for each work – if they are not currently performing a particular gig, then they are not working. Uber drivers used to fit under this definition, and other examples include Deliveroo riders. Deliveroo riders have their own case which is still to be determined.  The last decision in that matter found that they were genuinely self-employed, and not workers, due to the right of substitution. Nevertheless, we may see this change in light of the Uber decision – watch this space.

So, what are the ramifications? If individuals become workers, they gain more employment rights and the companies will likely have to stump up more in staff costs, with increased liabilities for employment tribunal claims. Owing to the Uber decision, we are now more likely to see individuals fall under the definition of worker instead of self-employed or contractor. This will affect the margins and may see some companies within the gig economy finding that their business models are unsustainable if they don’t make changes. To survive, expect to see increased costs to the everyday consumer.

This case, however, has far reaching consequences and is not just limited to the gig economy. Essentially, what the courts have done in Uber is extend and develop protection for vulnerable workers in subordinate or dependant relationships with their companies, without the need for government legislation in line with the Taylor Report. This additional protection has long been mooted by government who wish to avoid companies taking advantage of vulnerable workers who try to circumnavigate individuals’ employment rights using certain contractual wording. The Uber case shows that irrespective of such wording, what actually happens on a day-to-day basis will be analysed in greater detail when individuals raise employment issues with their employer.

What does this mean for you or your business, and what should you be doing now?

If you are part of the gig economy, you may have a whole new host of workers, entitled to various protections which you should now consider. We suggest that you take advice from our employment team to determine whether the individuals will fall under the definition of workers and can then discuss how to deal with this situation with you. If they are workers, you will need to take steps to ensure that they receive proper compensation for their hours, for holiday, and for sickness absences.

For other businesses, you will likely see increasing costs for various services, such as postage (various postal services make up the gig economy) or for delivering food in for meetings when we can return to the office.

The full judgment from the Supreme Court case can be read here.

Our original article from the 2016 Employment tribunal decision can be found here.

These notes have been prepared for the purpose of articles only. They should not be regarded as a substitute for taking legal advice.