More than 90,000 Uber drivers will welcome the news that the UK’s Supreme Court has ruled that they are to be treated as workers, rather than self-employed for employment purposes.
The decision means that they will be entitled to receive the national minimum living wage, paid annual leave and other worker’s rights which they would not have received had they been deemed to be self-employed. The judgment also goes as far as clarifying that the drivers are workers from the moment they logged into the app within the territory in which they were licensed to operate and ready and willing to accept trips, despite Uber’s assertion that this would only apply whilst driving passengers to their destination.
Uber’s business model operates by prospective customers downloading the Uber app to their smartphone and creating an account by using their personal information and a method of payment. The prospective customer requests a ride and Uber, using the smartphone’s GPS, identify the nearest available driver who is logged into the app and offers them the job. The Uber driver has ten seconds to accept the job or it will be offered to the next closest driver. The Uber driver is not told of the destination until they have collected the passenger. Once the trip is complete, the fare is automatically calculated and both the driver and passenger have the opportunity to score one another anonymously between 1 and 5.
To be classed as a worker the Uber drivers had to satisfy the 3 part test within the statutory definition: (1) a contract whereby an individual undertakes to perform work or services for the other party; (2) an undertaking to do the work or perform the services personally; and (3) 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. The only element in dispute was part (1), whether the drivers were performing work or services for Uber, or as Uber were contending, for the passengers.
The case presented by Uber’s Counsel relied on the terms of the written agreements which stated that a contract is created between the passenger and driver when the request to book a trip through the Uber app is accepted. Dismissing Uber’s argument, the Judgment explains that it would be inconsistent with the purpose of the legislation in the Working Time Regulations 1998 (which implement the Working Time Directive), the National Minimum Wage Act 1998 and the Employment Rights Act 1996 to treat the terms of a written contract as the starting point for determining employment status.
Often in employment circumstances there exists unequivocal unequal bargaining power between the parties. This case was no exception as the drivers accepted terms without any practical possibility of negotiating the terms, that is to say, even if they understood their legal significance. Following the outcome of this case, Tribunals are invited to consider the reality of the relationship between the two parties and look beyond what is purported within the documentation.
As a result Uber drivers are entitled to claim minimum wage (including backdated pay for minimum wage). The backdated pay is limited to two years’ backdated pay, or £25,000 (whichever is the larger) in an employment tribunal, or up to six years’ backdated pay in the county court.
In addition, they can claim 5.6 weeks’ paid annual leave each year, and will have whistleblowing and similar rights to employees. Unlike employees however, the case remains that they do not have rights to unfair dismissal or redundancy.
It remains to be seen if this outcome will inevitably result in increased fees for the Uber rides themselves, who have traditionally been well recognised for their affordable prices. However, given the fact Uber would now incur significant additional expenses and liability to tax, it would not come as a surprise if it had this effect.
A question arising as a consequence of this decision is what impact this has on the rest of the gig economy? Ultimately, it’s unclear how this will affect the rest of the gig economy at this stage. However, it has been argued that as the rules aren’t enforced, it will be reliant on workers bringing subsequent tribunals. It is estimated in the UK that 5 million people are employed in this capacity and so the effect could be monumental. It has also been suggested that in reality, it is very easy for Uber to ignore this ruling until more tribunals come for the rest of their workforce.
Another side point to this case was that the ruling on the driver’s employment status would impact Uber’s liability to tax. Currently, Uber do not pay 20% VAT on fares due to not being classified as a transport provider. The significance of this means that Uber will be liable to HMRC for the unpaid VAT and it is anticipated to be in excess of £1bn.
If you have any questions about updating your training, or any other employment law matters, get in touch with our expert team of employment lawyers on 01582 514000.