In a landmark decision handed down last week, the Supreme Court has dismissed Uber’s appeal against the Employment Tribunal’s finding that Uber drivers were “workers” and not, as Uber had argued, independent contractors.
The Law
The key legal issues centred on:
1. Whether or not the drivers fell within Section 230(3) of the Employment Rights Act 1996, which defines a “worker” as:
“an individual who has entered into or works under (or, where the employment has ceased, worked under)-(a) a contract of employment; or (b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party and who is not a client or customer….of the business…. carried on by the individual”
and
2. Whether or not the Tribunal, in making its determination, was entitled to look behind the terms of the written contract between Uber and the drivers, to the practical reality of the relationship (as per the Supreme Court decision in Autoclenz v Belcher & Ors [2011]).
Background
The central issue in this case was whether the Uber drivers, whose work is arranged through Uber’s smartphone application (“the app”) work for Uber under workers’ contracts and so qualified for the National Minimum Wage, paid annual leave and other workers’ rights; or whether they were independent contractors.
Uber argued that the drivers were under no obligation to switch on the Uber app and were under no obligation to accept any driving assignment. They contended that, for the purposes of each assignment, the contract was between the driver and passenger and Uber was no more than a booking agent. The driver provided their own equipment, paid Uber a 25% service fee and were “on boarded” by Uber rather than interviewed for work.
The drivers’ case was that they were instructed, managed and controlled by Uber. They argued that the on boarding process itself contained substantial direction from Uber. Furthermore, if a driver declined three trips in a row then they were penalised by being logged off the app for 10 minutes. Uber also provided the drivers with mapping software that determined the routes they were to take and, effectively, performance-managed the drivers by way of a digital ratings system.
The Employment Tribunal held that there was a dependent work relationship between Uber and the drivers. The drivers were not independent contractors in the usual sense. They could not grow their business and did not accept all of the business risk. Uber, for example, reimbursed drivers for cancellations and soiled vehicles and dealt with passenger complaints. To all intents and purposes, the drivers worked for Uber and not the other way around.
Uber unsuccessfully appealed to both the EAT and Court of Appeal before lodging an appeal to the Supreme Court.
Supreme Court appeal
The Supreme Court regarded the critical issue as whether, for the purposes of the statutory definition, the drivers should be regarded as working under contracts with Uber, undertaking to perform services for Uber London; or whether they should be regarded as performing services solely for and under contracts made with passengers through Uber as a booking agency.
Uber argued that because its written contract with the drivers properly reflected what happened in practice, it was not open to the Tribunal to look behind the terms of the contract to determine the employment status of the drivers.
The Supreme Court disagreed. It argued that the rights being asserted by the drivers (e.g. for National Minimum Wage, holiday pay etc) were not contractual rights but were created by legislation. If the drivers were found to be “workers” by applying the usual tests or employment status and looking at the practical reality of the relationship, it was not open to the parties to contract out of these statutory rights.
In determining that the drivers were “workers”, the Tribunal identified five relevant factors:
- The drivers’ remuneration is fixed by Uber. They have no say in it.
- The contractual terms are dictated by Uber.
- Drivers are free to decide when to log onto the app but once they do, they are constrained by Uber over whether or not to accept rides (e.g. they don’t get told the destination before they have accepted and have no opportunity to decline). In addition, Uber in fact penalises drivers by automatically logging them off the app if their acceptance of rides falls below a certain limit.
- Uber exercises control over the way in which the drivers deliver the services (e.g. by the type of car they use and the booking/payment technology).
- There is no business relationship between the driver and the passenger - everything is controlled by Uber.
Having determined that the drivers are “workers” and entitled to protection under the National Minimum Wage and Working Time Regulations etc, the Supreme Court went on to hold that:
- the drivers were “working” and on duty as soon as they logged onto the app (and not simply when they were driving passengers around) and;
- the work they were doing was “unmeasured work” and not “time work”, thus entitling them to the National Minimum Wage for the whole of the time they were logged onto the app.
Comment
This claim is one of the most high profile and important employment status cases of recent times. It has far reaching implications for the new ways of working afforded by digital enterprise and technology companies, and for the “gig economy” in general.
The effect of Supreme Court’s Judgment is that the drivers will be entitled not only to key employment rights going forward, such as the right to National Minimum Wage, paid annual leave, sick pay, pension contributions and whistleblower protection but they will also be entitled to back pay for unpaid wages and holiday pay. The financial, commercial and reputational implications for Uber cannot be understated. Other companies, operating similar business models, will have been no doubt watching this case with bated breath. With any luck those companies will have planned for the worst whilst hoping for the best. However those businesses who rely on a large, independent contractor workforce (courier drivers, food delivery services etc) would be well advised to review their working practices with a view to assessing what, if any, existing financial liability they face and taking steps to manage and mitigate that liability going forward.
