• Maria Polycarpou

Uber Drivers are now Uber Workers: The Effects on the Gig Economy

On 19 February, the UK Supreme Court handed down a landmark judgment in the case of Uber BV v Aslam. The Court held that drivers were not independent contractors, but that they worked for Uber and were therefore entitled to certain employment rights like minimum wage. Uber extraordinarily took the stance that only these 25 claimants were workers due to the case's factual circumstances, refusing to honour the judgement which could give rise to contingency claims from thousands of drivers in retaliation. This article will discuss the Supreme Court’s reasoning, the implications of its decision for the gig economy, and the knock-on effects on digital ride-hailing apps in the future.

Workers or Self Employed?

Employment law uses the definition of employment status set out in section 230 of the Employment Rights Act 1996. This creates three categories of people:

1) ‘Employees’ who work under a contract of service;
2) ‘Workers’ who are self-employed but provide their services as part of a business carried out by someone else; and
3) ‘Self-employed’ who carry out business in their own account and contract with clients;

Uber drivers in this case were classified as workers by the Supreme Court – the claimant drivers never sought out employee status. Workers have the advantage of having the flexibility of self-employment, and are classified as such for tax purposes, but are entitled to workers’ rights such as the national minimum wage, holiday pay, rest breaks and pension schemes. Uber tried to contest this, claiming that under the employment contract, drivers were to be considered as ‘self-employed’ for the purposes of the act and, thus, were not entitled to the benefits of a worker. The judges unanimously dismissed Uber's argument that it was merely an intermediary party.

Interestingly, within the Uber case, the employment tribunal looked beyond the scope of the contract between Uber and its drivers to establish the true nature of their agreement. It took into consideration the substantial degree to which the company exercised control over its workers and determined that this was enough to establish that drivers were not, in fact, independent contractors.

The considerations were: that Uber set the fare, dictating how much drivers would earn in each trip; Uber had set the contractual terms and drivers had no say in them; drivers could be penalised if they rejected too many trips; and Uber had the power to terminate the relationship, if drivers’ star ratings did not improve after a given number of warnings. By considering the unequal power between Uber and its workers, going beyond the wording of the contract set by Uber, the ruling reaffirmed[1] that employers cannot contract out of their obligations. This is a significant step in protecting vulnerable workers from being required to work excessive hours, or being subjected to unfair treatment.

When are they working?

In the second limb of the case, the Supreme Court considered when drivers would be considered to be working under their new classification. Lord Justice Nelson confirmed that their working time included the time spent driving to collect passengers, time spent logged in waiting to get passengers in the area covered by their license, and time spent driving passengers. This is because while the app is on, drivers must accept a certain percentage of trips. The Supreme Court upheld the broadest of the working times presented to it, but some unanswered questions remain. For instance, ‘multi-apping’, referring to a situation where an Uber driver has the Uber app open as well as another ride-hailing app at the same time, was not considered in this case. However, that may be an important feature of future cases which would dispute this case's findings on working times.

The issue of Tax

We mentioned three employment categories under the Employment Act. However, for tax purposes, there are only two categories: employees and the self-employed. So, for example, someone who is a worker for employment rights purposes, could be either an employee or self-employed for tax purposes. This could have been a monumental issue for Uber in terms of national insurance contributions (13.8% to HMRC). However, the HMRC agreed that Uber drivers are not employees for tax purposes. This is in order to protect the legitimate expectations of the ride-hailing app. Hence, even if the court, in the future, found them to be employees for tax purposes, Uber would not be responsible to pay any tax for its past contractual relationships. This is in line with similar gig economy cases.

Future of the Gig Economy

Uber still retains the argument that the workers' ruling is only limited to the claimants of this case, but it has vouched that it will start a nationwide consultation, which will take several weeks. “This process will seek the views of all active drivers to help us shape the future of flexible work”, the company stated. The ruling fundamentally challenges the ride-hailing app’s business model, which may signal a change for Uber’s competitors as well. It is likely that uber-like apps will overhaul the contractual relationships between them and their drivers in order to ensure that power imbalances are managed, and that drivers either fit squarely within the ambit of self-employed or workers within the legislative instrument.

The Uber case marks an interesting shift in the employment status of gig workers, as flexibility and the mere capacity to choose when to work is not in itself inconsistent with the existence of an employment contract. In fact, in March 2020 the French Supreme Court (Cour de Cassation) found that an Uber driver was operating under a relationship of ‘subordination’, and that his contractual relationship with the company could be reclassified as an employment contract. The shift also exists in business models of ‘gig economy' companies. For instance, Hermes Group struck a deal with trade unions and provided a “self-employed plus” scheme, that provides delivery couriers with minimum wage and some working rights in exchange for them to still be classified as self-employed.

The UK Government is currently working on a ‘Good Work’ Plan, that will work to clarify and align employment and tax regimes, as well as improve the clarity of the employment status tests. The Government will also consider reversing the burden of proof so that the employer will have to prove that the individual is not entitled to employee or worker rights rather than the other way round. Another significant proposal is the increase of penalties from £5,000 to £20,000 for non-compliance with employer obligations. The plan is highly ambitious, but it provides hope for how the world of employment could become more flexible and fair for workers, while leaving room for development and innovation.

[1] Autoclenz Ltd v Belcher [2011] UKSC 41 set the legal precedent for this.