The Uber Judgment: What is it and why does it matter?

1st December 2016 | Written by Amy White

taxiSince the Employment Tribunal delivered its ruling on 28 October 2016, we’ve heard from a number of clients asking what the judgment actually means and how it might affect them in practice.  Whilst the Tribunal’s findings were very fact-specific, it’s worth thinking about the principles the court relied on in coming to its decision and paying attention to the criticisms the court levelled at Uber when considering how, as a business, you engage staff or how, as an individual, you provide services.

What is Uber?

Founded in the USA in 2009, Uber is a business enterprise that allows customers to ‘hail’ taxis through a smartphone app.  Customers register for the app and then book trips via their mobile phones.  Once a customer has booked a journey, Uber locates the nearest driver from its pool and offers him or her the job.  At the end of the journey, the fare, which is calculated by Uber, is paid directly to Uber through the passenger’s credit card (which is connected to the app during registration).

Uber is a modern business phenomenon.  Having received billions in funding, the app is active in approximately 500 cities around the world, has millions of registered users and, in the UK alone, has roughly 40,000 drivers.  It’s part of the so-called ‘gig’ economy (a network of on-demand apps and websites which connects those seeking a particular service with providers via on-line platforms) and exploits the benefits of a flexible workforce operating in a digital age.

What was the claim?

In a case brought by the GMB Union, Uber drivers argued that the Company had disregarded their basic employment rights, including the right to be paid the National Minimum Wage and the right to receive paid annual leave.  The main thrust of the action, which started over a year ago, was that Uber drivers are not self-employed contractors (as Uber would have you believe) but rather ‘workers’ under S.230(3)(b) of the Employment Rights Act 1996.

A ‘worker’ is someone who is not quite an employee but is also not in business on their own account.  Whereas self-employed contractors are independent, promote their own business undertakings to the world at large and can look after themselves when it comes to bargaining and negotiation, ‘workers’ are generally recruited by a principal to work as part of their organisation and are subject to controls as part of a dependent work relationship.

In this case, the drivers argued that they worked ‘for’ Uber as workers, rather than ‘with’ Uber as self-employed contractors.  In support of this argument they pointed to the level of control exerted by Uber.  By way of example, whilst the drivers use their own vehicles, these have to correspond with a list of acceptable models specified by Uber.  Drivers are interviewed and have to attend an induction.  Uber controls key information (such as passenger name and destination), sets the default route for each trip and fixes fares.  Driver ratings are monitored and Uber penalises its drivers for cancelling journeys.  There is even a ‘Driver Offence Process’ for managing driver misconduct.

Uber denied that the drivers satisfy the legal definition of ‘workers’, characterising them instead as self-employed.  Uber asserted that its business model allows people to ‘be their own boss’ by deciding when they work and for how long.  It suggested that each driver enters into a separate contract with each passenger and, in support of this argument, pointed to the invoices Uber generates for those passengers on behalf of the drivers.  Uber also submitted that the ‘control’ arguments put forward by the drivers were unremarkable, stating that the procedures and policies Uber imposes just reflect the parties’ common interest in maintaining good standards of service.

What was the decision & what does it mean?

The Tribunal agreed with the drivers.  It ruled that all the while an Uber driver has their app switched on, is within their territory and is willing and able to accept assignments, they are working for Uber under a ‘worker’ contract and are entitled to basic worker rights including paid annual leave and the right to receive the National Minimum Wage.

The essential problem for Uber was that it had tried to impose a label on the drivers that plainly didn’t reflect the reality of their relationship.  This was something the Tribunal strongly criticised.  It   found the notion that Uber in London was a mosaic of 30,000 small businesses linked by a common platform ‘faintly ridiculous’ and suggested that the argument that each driver enters into a separate contract with each of its passengers was  ‘absurd’, particularly given that the parties never even learn one another’s names.  It referred to the ‘fake invoices’ generated by Uber as one of a number of ‘fictions’ and labelled the Driver contracts issued by Uber, documents that ‘simply misrepresent the true rights and obligations on both sides’.

The implications of the decision are potentially huge, not only for the 30,000 London-based Uber drivers, but also for others working in the context of the ‘gig economy’, where sham self-employment is prevalent.  The Tribunal was keen to make it clear however, that there is, ultimately,  nothing stopping businesses like Uber from working with drivers or others on a self-employed basis, but that the model selected by Uber ‘fails to achieve this aim’.

It’s worth noting that the judgment is only a Tribunal decision and Uber has already made clear that it will be appealing the ruling. Despite this, the court’s initial findings are still a useful reminder of the pitfalls associated with the question of ‘employment status’ and how important it is to look at the substance of the relationship rather than attempting to impose a fallacy of your own creation.

If you would like further information or advice on employment status and the engagement of consultants, please contact our Employment team – Amy White on 01825 744489, email amywhite@rixandkay.co.uk or Miranda Martin on 01273 225603, email mirandamartin@rixandkay.co.uk