Gearing up for change?

Gearing up for change?

A Supreme Court ruling brought a four-year battle with Uber to an end by determining that drivers are not self-employed, but workers. Lloyd Davey and Emily Hocken examine the wider implications of the judgment.

Uber and its drivers were not the only ones eagerly awaiting the Supreme Court’s judgment in Uber BV and Others v Aslam and others, handed down last month. The finding that Uber drivers are workers, as opposed to independent contractors, and as such are entitled to a range of valuable protections including national minimum wage and holiday pay, is likely to have national and potentially global impact, forcing businesses operating within the gig economy to reconsider their business models.

Uber considers the ruling to be limited to “a small group of drivers using the Uber app in 2016” and does not take into account the significant changes made to its business model since then. While this may be true to some extent, many question whether Uber has changed its business model enough, and it is likely that the company will need to take further action to avoid its drivers being afforded worker status going forward. Plus, the need to pay its drivers the national minimum wage as well as holiday pay could result in significant fare increases for the customer.

Businesses operating a similar model to Uber should consider themselves on notice that the Courts appear keen to support individuals seeking greater rights and workplace protection, and are willing to afford greater protections to individuals, especially in the gig economy, irrespective of the nature of their contractual arrangements. In particular, the Supreme Court warned against attempts by businesses to contract out of statutory protections that exist to protect the vulnerable.

The Supreme Court identified five key control factors indicating that Uber’s drivers were considered workers and not self-employed:

  1. Uber dictated the fare charged by a driver, which determined the driver’s pay. Drivers had no control over how much income they generated other than by choosing when and for how long they worked.
  2. Uber imposed the contractual terms on which the drivers provided their services.
  3. Uber constrained the drivers’ choice to accept or decline passenger journeys, by limiting the information provided to the driver (including the passenger’s destination) and penalising the driver for a low acceptance rate.
  4. Uber exercised significant control over the way in which drivers provided their services, including vetting the driver’s car and using passenger ratings to manage a driver’s performance.
  5. Uber restricted communication between drivers and passengers to prevent a driver establishing an independent relationship with a passenger beyond a single journey.

While these cases are always fact-sensitive, businesses that operate similarly to Uber should review their own working arrangements in light of these factors.

The gig economy

This landmark ruling is a devastating blow to gig economy businesses, although not unexpected. It is the latest in a series of cases in which the courts have identified a closer, personal relationship between the individual and the business, and rejected the notion that gig economy workers are carrying on a business in their own right.

Importantly, there will be significant cost implications for businesses forced to recognise workers’ rights, which could make them reconsider their business models or pass on additional costs to the customer. Businesses are now under pressure to provide much better terms and conditions to those working for them, and an increasing number of new start-ups are opting to directly employ their staff rather than navigate the uncertainty of less defined working relationships.

Despite these developments, the gig economy is unlikely to be phased out completely. Many of the estimated five million individuals currently working under these conditions are attracted to it precisely because of the flexibility and entrepreneurial opportunities it offers. While these core values remain, the gig economy appears here to stay.

First published in Community, Insurance and Risk Magazine - March-April 2021 edition, see here.

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