Uber's Supreme Court Decision: the start of a domino effect for the gig economy?

Uber's Supreme Court Decision: the start of a domino effect for the gig economy?

Landmark ruling for gig economy: Uber drivers entitled to valuable employment rights

In February, the Supreme Court’s decision that Uber drivers are workers sent shock waves through the gig economy, both in the UK and overseas. Many expect the decision to have significant ramifications on how this employment structure can operate going forwards, wondering if it marks the end of many flexible business models that have sprung up in recent years. But what does this important legal milestone actually mean for Uber, its employees, and the wider gig economy world?

A historic moment

In a landmark decision, the Supreme Court considered the claims brought by a group of Uber drivers for failure to pay national minimum wage and to provide paid holiday. Uber contended that its drivers were self-employed contractors and so not entitled to those valuable “worker” rights. The Supreme Court disagreed, deciding that this group of drivers were entitled to the rights and protection of workers.  

In its decision, the Supreme Court also said that these drivers were to be considered working during any period when the driver was logged onto the Uber app, within the territory in which they were licenced to operate, and ready and willing to accept passengers. In contrast, Uber’s position throughout the four years of litigation has been that its drivers should only be paid for time spent actually transporting passengers to their destinations.  

Who really is a ‘worker’?

Workers are an intermediate group in UK employment law, falling between employees and self-employed people. Those who are genuinely self-employed are in business on their own account and undertake work for their clients or customers. Being identified as a “worker” affords an individual valuable employment rights, including entitlement to paid holiday, the right to receive the national minimum wage and whistleblowing protection. 

The general purpose of UK employment legislation is to protect vulnerable individuals from being paid too little for the work they do, being required to work excessive hours, or being subjected to other forms of unfair treatment. Employees are thought to need the most protection, given their subordinate and dependent position relative to their employer. Conversely, those who are genuinely self-employed are considered least in need of statutory protection, given their relative independence from the clients and customers who hire them.

Workers are also considered to be sufficiently vulnerable to merit statutory protection, given the extent to which workers are dependent on, and under the control of, the person or business for whom they perform their services. The greater the level of control, dependence and subordination, the more likely an individual will be identified by the Courts as a worker. 

Control, dependence and subordination were critical areas considered by the Supreme Court in this case. In its view, the working arrangements that existed when the claims were brought indicated a strong degree of control exerted by Uber over the service performed by its drivers. By way of illustration, Uber imposed contractual terms on its drivers and dictated the fare charged by a driver, which determined the driver’s pay. Uber also exerted control by constraining a driver’s 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.  

In reaching its decision, the Supreme Court was also influenced by the standardised service that Uber offered to its passengers, in which its drivers were “perceived as substantially interchangeable and from which Uber, rather than individual drivers, obtains the benefit of customer loyalty and goodwill.” For example, Uber restricted communication between drivers and passengers to prevent a driver establishing an independent relationship with a passenger beyond a single journey.

Once the Supreme Court had decided that the claimant drivers were workers, it then had to decide whether the drivers were working from the moment they logged onto the Uber app (in their licenced territory) or only when they were transporting passengers. Uber contended that its drivers should only be considered working when transporting passengers. Central to Uber’s argument was that, while logged onto the Uber app, its drivers were not prohibited from making themselves available to accept trip requests from another operator (provided they maintained an acceptance rate that was acceptable to Uber). No evidence was put forward to support this argument and the Supreme Court was not persuaded, viewing the option to accept work from another operator as largely theoretical.

The Supreme Court determined that the drivers’ “working time” for the purposes of calculating national minimum wage and holiday entitlement comprised any time the drivers were logged onto the Uber app within their licenced territories. 

What next for Uber?

In a statement released shortly after the judgment, Uber suggested that the Supreme Court’s decision on worker status was limited to “a small group of drivers using the Uber app in 2016”, which is when the claims were originally brought. Uber contended that, since 2016, it has made significant changes to its business model and that many aspects of the working arrangements identified in the Supreme Court’s judgment are no longer relevant. For example, Uber asserts that drivers now have full transparency over the price and destination of their trip and since 2017 there has been no repercussion for rejecting multiple consecutive trips. Nevertheless, many have questioned whether Uber has made sufficient changes to its business model to render the Supreme Court’s findings as irrelevant to Uber’s drivers in the present day.

In an apparent change of tack, Uber has reportedly now agreed to pay all its drivers, irrespective of age, the national living wage. Its drivers will now receive rolled-up holiday pay every fortnight, based on 12.07% of their earnings, and be automatically enrolled into a pension plan with contributions from Uber alongside driver contributions. Giving its drivers these additional rights will have significant financial implications for the business, but Uber insists that these additional costs will not be passed onto its passengers through an increase in fares.

And what about the rest of the business community?

The Supreme Court’s findings in relation to worker status and working time are expected to have significant ramifications throughout the gig economy, especially for businesses with similar operating models to Uber. For many of them, it will not be financially viable to assume the additional costs of national minimum wage, holiday entitlement and longer working time. If such obligations are imposed, businesses may need to restructure their model in order to survive.

The Supreme Court’s decision is the latest in a series of cases in which the Courts have identified a closer, personal relationship between the individual and the business, rejecting the notion that the individuals were self-employed. There is certainly a trend towards giving gig economy workers greater rights and legal protection, not just in the UK but also overseas.

Many commentators have heralded the Supreme Court’s decision in relation to Uber as a welcome step forward for gig economy workers. However, many of these workers will be justifiably concerned about the wider ramifications of the decision, not least in terms of the threat to jobs. It should not be overlooked that many workers are attracted to the flexibility, risk and entrepreneurialism of the gig economy, and would not want this sacrificed for the greater security of worker status.

There clearly needs to be a balance, and the Courts should rightly intervene when businesses are seeking to take advantage of the most vulnerable workers. However, it would be simplistic to draw parallels between David and Goliath in every case. At a time when many sectors are struggling to recover in the wake of the global pandemic, it would be a mistake to stifle the adaptable and dynamic gig economy to the detriment of its own workforce.

This article was first published in The World Financial Review, see here

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