What’s your status? Implications of the Uber judgment

By Matthew Cranton

Matthew Cranton recently joined Fletcher Day as a Partner in both the Employment and Business Immigration teams. In this article, he considers the issues and implications of the Supreme Court's unanimous decision in Uber and others v Aslam and others [2021] UKSC 5, which considered the question of worker status for Uber drivers.

Introduction

The employment status of 'worker' was introduced as a legally defined term by the Employment Rights Act 1996, yet the meaning has shifted in practical terms over the years. The definition has been particularly tested by the emergence of the 'gig economy', which the BEIS define as involving "the exchange of labour for money between individuals or companies via digital platforms that actively facilitate matching between providers and customers, on a short-term and payment by task basis". The popularity of mobile and online platforms providing a connection between independent contractors and end users has boomed in recent years. It has therefore come as little surprise to employment lawyers that gig economy companies, particularly those involved in food delivery, courier or taxi services such as Uber, Deliveroo, Yodel and Addison Lee, have already been the subject of cases testing the position on employment status of individuals providing services under their names.

The latest and most anticipated of these cases was Uber and others v Aslam and others, in which the Supreme Court upheld an employment tribunal decision that Uber drivers are workers within the meaning of the Employment Rights Act 1996, primarily due to the amount of control Uber held in respect of their services. The decision has far reaching implications for Uber and many other companies working in the gig economy.

What was the case about

Mr Farrar and Mr Aslam were drivers providing their services through Uber, a smartphone app through which customers order and pay for a private hire vehicle. Drivers would sign into the app when they were ready to provide their services, and Uber would match them to passengers in their vicinity.

This claim was selected as a test case, whilst several similar cases against Uber were stayed pending the outcome. Both claimants claimed to be workers under the statutory definition, whereas Uber maintained that all their drivers were self-employed. Uber claimed to be acting as an agent for the drivers, introducing them to passengers in order for a contract to be entered into between the driver and the passenger; Uber claimed they did not provide the services to passengers themselves.

The question of employment status was particularly relevant in this case; if the drivers were workers, they were entitled to protection from unlawful deduction of wages, the right to receive national minimum wage, and the right to paid annual leave. If they were self-employed, no such entitlements had accrued. Given Uber had approximately 60,000 drivers in the UK, the difference in status represented a hugely expensive liability to Uber, who would need to provide backdated holiday pay and compensation in respect of pay below national minimum wage. The decision could also have implications for its worldwide operations.

The case also considered, for the purposes of calculating both national minimum wage and holiday pay, what amounted to 'working time' for these drivers.

Decision

The question of the correct employment status of the drivers had been determined in the drivers' favour at the Employment Tribunal ('ET') in the first instance. The ET determined that the drivers were workers for statutory purposes for as long as they were signed into the app, were ready and willing to accept bookings, and were in their authorised geographical location (e.g. London). Any such time was to be considered working time, including time that they were 'on call' (i.e. awaiting a booking). Working time was not limited to the time between the point of a booking having been accepted and the point of dropping off of the passenger.

The tribunal reached its decision on worker status on the basis that the significant amount of contractual documentation that Uber (both the Netherlands based parent company and its UK subsidiary) had in place was not genuinely reflective of the relationship between them and the drivers in reality. The tribunal therefore could disregard the terms, and focus instead on considering the true relationship on the ground.

Uber appealed against the judgment, but were unsuccessful at both the Employment Appeals Tribunal and the Court of Appeal in getting the decision overturned. They therefore brought an appeal to the Supreme Court, the final arbiter in such matters.

The Supreme Court unanimously rejected the appeal, finding that the drivers were workers. In doing so, the Supreme Court confirmed that worker status is determined by a purposive approach, considering all of the relevant facts and not simply the contractual paperwork between the parties. This approach was necessary "to protect those who are vulnerable as a result of their subordination to, and dependence upon, another person in relation to their work". As Uber exercised a significant amount of control over the drivers and their services to passengers, the Supreme Court was satisfied that the drivers were correctly working for Uber rather than having an introductory agency relationship.

Implications

The immediate cost for Uber is not yet apparent, as they claim their terms with drivers changed in 2016 and therefore this decision only applies to a small proportion of their current drivers. However, given the ruling emphasises that the contractual terms are not exclusively definitive, and the true relationship must be considered, any minor changes to the terms which are not then reflected in a material change to Uber's working model, and in particular a change to the subordination to which drivers are subject, are unlikely to be sufficient to avoid liability. Ultimately there is likely to be a substantial sum payable by Uber in respect of backpay to affected drivers. Some estimates put the immediate compensation amount as high as £100m.

The implications for the wider gig economy are also significant, with this judgment likely to open the floodgates to claims against platforms with similar models. They too may end up with colossal bills in respect of backpay or settlement of claims. This will of course be in addition to the expense and administrative HR headache regarding calculation of working time, pay and holiday going forward.

There is also the potential for HMRC to consider whether there are issues arising from the treatment of drivers as self-employed, which may result in penalties against these companies for failure to pay PAYE, National Insurance contributions and, where relevant, national minimum wage.

Comment

It is now more important than ever for businesses to consider the true status of individuals contracted to provide services under a contract other than a contract of employment. This case has highlighted the potential costs of getting it wrong from an employment law perspective, whilst the changes to the IR35 rules coming into force next month will also bring into focus HMRC's views on the correct taxation of payments to such individuals.

It has long been the case that, in determining the correct status of such individuals for both employment rights and taxation, a holistic approach should be taken. Tribunals will not determine status simply by looking at the contract, but will first consider whether the statutory definition applies in the particular case, bearing in mind the facts and the purpose of the legislation (i.e. protection of workers in the face of uneven bargaining positions). However, if the contract paints the accurate picture of the relationship between the parties then it may act as a map to determining the correct status.

Businesses should therefore aim to ensure that contractual documentation is correctly reflective of the intentions of the parties, but should be aware that such documentation cannot be relied upon alone as a rebuttal to any claims, nor is it possible for parties to contract out of the protections available to workers. They should also avoid efforts to utilise contractual documentation to bypass the statutory provisions; this may only give rise to greater problems further down the line.

Cases will always turn on their own merits, and the Uber decision is not an indication that everyone in the gig economy will be a worker. The immediate impact will be felt by Uber and similar businesses, particularly given the judgment regarding drivers' waiting time amounting to working time, for which they are required to be paid national minimum wage. How the business models of these companies will be varied to account for these additional liabilities remains to be seen - will it be recovered by increased fares? Will drivers be subjected to minimum performance requirements?

We may also see legislative changes arising from this judgment. The rights of those in both the gig economy and the zero-hours contract jobs markets will likely come into greater focus, particularly given that this was a hot topic before the pandemic, during which delivery drivers have been essential both to the general public and to the economy. With the impact of Brexit and the eventual reduction and removal of furlough pay to be considered, the protection and enhancement of workers' rights should be quite high on the UK government's agenda, but the economic impact of the pandemic may well slow down the progress initially sought.


At Fletcher Day, we can advise you further in relation to these complex issues, so please do not hesitate to contact us for further information.

 

18 March, 2021
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