Posted by Mike Thomson, Litigation Executive
Uber – working out who’s a worker
The Supreme Court (“SC”) has found that Uber’s drivers are to be classed as workers and not, as Uber has tried to argue, self-employed contractors. There is a lot of commentary in the employment law world that hails this as a really big decision; one piece said the decision creates “waves and not just ripples” in employment law. But putting aside the technicalities, is the hype justified? Is this really a big decision that employers and HR professionals need to take seriously?
Background – what is a worker and why is it important?
Workers are a mix between an employee and someone that is genuinely self-employed. They will usually have greater control over, for example, their working hours when compared to an employee, but the company might require them to wear a uniform or work in a particular way, which may be similar to an employee. Workers are often paid less than the genuinely self-employed as they have less bargaining power over their terms and conditions (e.g. they may have less niche expertise than a contractor). In order to combat this imbalance, workers have some employment rights, such as the right to the National Minimum Wage, paid holiday and protection from discrimination. Overall, they have less rights than employees but more than the genuinely self-employed, who have basically no statutory employment rights at all.
Uber essentially said that it operates as a platform that allows a driver and a passenger to form a contract between them, and it does not enter into a contract with either the driver or the passenger in relation to the particular journey. Uber then takes a cut of the fare for being the one that introduces them to each other.
Uber’s argument seems pretty logical at first glance, as it seems to match up with how a passenger interacts with the app when booking a ride. There was also a lot of contractual documentation between the drivers and Uber that stated that the drivers were self-employed.
However, despite this the Employment Tribunal (“ET”) decision in 2016 was that the drivers were workers and therefore have some employment rights. The Employment Appeals Tribunal (“EAT”), the Court of Appeal and the SC all agreed with the ET.
It was determined that Uber exercised substantial control over the drivers’ conduct and equipment (they are required to have either black or silver cars for example), sanctioned them for refusing jobs and for having poor ratings, dictated all of the terms of the working relationship and prevented the drivers from increasing their earnings in an entrepreneurial fashion (e.g. they are not allowed to approach passengers directly for repeat work which would cut Uber out of the picture).
The courts also found that drivers are “working” for the purpose of the National Minimum Wage (“NMW”) when they are logged into the app and available to work. Uber had tried to argue that drivers should only receive the minimum wage for the time spent driving to a job and completing the job itself. But Uber’s argument failed.
Impact on Uber
This decision will have a massive financial impact on Uber as it foots the bill for all the unpaid NMW, tax and NI liabilities it will now owe. It will also fundamentally reduce the profit it makes as it will need to pay NMW when a driver is not on a job, and will also need to pay holiday pay for each of its tens of thousands of drivers.
As a result, and perhaps understandably, Uber has said that the Supreme Court decision applies only to those drivers that brought the original claims. Uber have stated that their terms with drivers have changed since then, and they would be “consulting” with drivers going forward. In reality it’s difficult to see how Uber will be able to continue on its current operating model.
Impact for employers/HR professionals
Some employment lawyers are saying that this decision fundamentally changes the way that employers assess whether someone is an employee, a worker or self-employed, but it remains to be seen whether it is as seismic as that. What has certainly changed however, is how contracts can and should be drafted to reflect the working relationship.
The SC said that the reason employment legislation is in place is to protect those that are vulnerable and not in a powerful bargaining position, and the parties should not agree to forgo that protection for any reason. Therefore, a clause in a contract that ignores these rights, such as the individual agreeing that they are not a worker and will indemnify the employer in the event of an unsuccessful claim, may now be void.
In reality, employers are at risk if they continue to draft clever and complex contracts in an effort to have their cake and eat it. If an employer wants to enter into a working arrangement that is more flexible than one of employer and employee, then they need to consider the actual reality of what they want the arrangement to look like. If they want the individual to wear a uniform, behave in a certain way, take breaks at certain times and will not allow them to have the opportunity to increase their earnings on their own account, it is likely that individual will be a worker and will need to be treated as such. If the individual does not need the protections provided to workers as they have the bargaining power to negotiate favourable terms, then they may well be a self-employed contractor.
Employers should review their contracts, especially if they engage zero hours or casual staff, or if they engage ‘contractors’ where there are similarities between the contractor and its employees. If there are any clauses that indicate the individual has contracted out of statutory rights, they should be amended or removed where possible to minimise the risk of claims. As above, using Uber’s tactics of overly complicated company structures and contractual jargon (the ET quoted the famous phrase in Hamlet, “the lady doth protest too much methinks” when highlighting Uber’s overly complicated arguments) is likely to come back to bite employers. This is likely to also apply to employees that may have waived their rights and are currently treated as workers.
This decision will have little to no impact on a lot of employers, but may significantly impact those that operate in a slightly “grey area” of employment status in order to be profitable (such as Uber). This decision has, in effect, removed some of the uncertainty and should not be ignored.
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