The Uber decision – Why is it so important?

HelenRowley_ESPLaw
Senior solicitor
ESP Law
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Just over a week ago Uber lost its appeal against the decision of the London Central Employment Tribunal that Uber drivers were workers rather than self-employed contractors.

The EAT upheld the Employment Tribunal’s decision that the Uber drivers were workers and therefore entitled to the benefits of workers including entitlement to the National Minimum Wage, Living Wage and rights under the Working Time Regulations.

This case has been much talked about but what is it about, what was actually decided and what does it mean for employers and the wider employment economy?

Why is this case important?

This is an important case in the current employment climate with the rise of the “gig” economy where organisations are increasingly contracting with individuals to provide services for them on a flexible/freelance basis. This case considered and gives guidance as to the status of these individuals and the rights they may be entitled to.

The key issues in this case were:

  • The consideration of employment status; were the Uber drivers workers or self-employed contractors? This was important because a worker is entitled to additional rights and protections under employment law.
  • The consideration of what would amount to “working time”? If the drivers were workers, what part of their time would amount to “working time”? This is important as this is used to calculate the benefits including annual leave and minimum pay.

What was this case about?

Uber was founded as a smartphone app through which the public book taxi services and has now grown into a “modern business phenomenon” with around 30,000 Uber drivers in London alone (40,000 across the UK as a whole).

The case was brought by named Uber drivers and supported by the GMB union as a test case. The drivers argued that they were workers and therefore should be entitled to the rights and entitlements of a worker. Uber argued that the drivers were self-employed contractors and that Uber acted as agent for the drivers in putting them in touch with customers. There were contracts between the drivers and the Uber parent company; Uber BV, but not between the drivers and any of the named respondent companies. The contracts were consistent with an agency relationship and Uber argued that this contractual position was reflected in the day-to-day relationship with the drivers.

What did the Employment Tribunal decide?

The Employment Tribunal concluded that the drivers were workers. The Tribunal had to consider what elements of their time they were workers for, as they were not workers for the whole time they were in their vehicles. The Tribunal concluded that they were workers on working time whilst they had the Uber app switched on, were within the territory in which they were authorised to work and were willing and able to accept assignments.

The Employment Tribunal rejected Uber’s argument stating that the “notion that Uber in London is a mosaic of 30,000 small businesses linked by a common ‘platform’ is to our minds faintly ridiculous”. They concluded that the position as stated in the contracts did not reflect the actual working relationship and therefore concluded that this should be disregarded. Although the express wording of a contract cannot be changed through implication where that express wording does not reflect the reality of the situation, it can be disregarded, particularly where the bargaining positions of the parties to the contract were not equal. The Tribunal found that the drivers were in a weaker bargaining position than Uber and therefore disregarded the contractual position.

What did the Employment Tribunal take into account?

As in any case on “employment status” the Employment Tribunal carried out an analysis of the day-to-day reality of the relationship. This included an analysis of the contractual documents available but also the reality of the day-to-day working of the drivers, particularly relying on the following factual conclusions:

  • Uber interviews and recruits drivers.
  • Uber controls key information (in particular the passenger’s surname, contact details and intended destination) and excludes the driver from it.
  • Uber requires drivers to accept trips and/not to cancel trips, and enforces the requirement by logging off drivers who breach the requirements.
  • The driver sets a default route at his peril.
  • Uber sets the fare and the driver cannot agree a higher sum.
  • Uber imposes numerous conditions upon the driver.
  • Uber subjects the drivers to a performance management system through the ratings system.
  • Uber decides issues in respect of rebates sometimes without involving the driver whose remuneration is liable to be affected.
  • The guaranteed earnings scheme.
  • Uber accepts risk for loss.
  • Uber handles passenger complaints.
  • Uber have the right to amend drivers’ terms unilaterally.

What was considered at the appeal to the EAT?

Unsurprisingly given the number of drivers involved and the potential impact upon Uber’s business, Uber appealed the Tribunal’s decision. Uber’s key grounds of appeal were:

  1. That the Employment Tribunal had erred in disregarding the written contracts.
  2. That the Employment Tribunal had erred in not finding that the written contracts reflected the reality of the situation.
  3. That the Employment Tribunal had disregarded basic principles of agency law.
  4. That the Employment Tribunal had erred in relying on elements of the relationship between the drivers and Uber that existed because of regulatory requirements.
  5. That the Employment Tribunal had made inconsistent and perverse finding of fact.

The EAT identified the key question was whether there was a contract between the drivers and the respondents and if so whether that was a contract whereby the drivers provided services to Uber or whether Uber provided a service to the drivers as agent.

More simply the EAT put this as the question; “When the drivers are working who are they working for?” Do they work on their own account or on behalf of Uber? 

What did the EAT decide?

The EAT dismissed Uber’s appeal.

The EAT concluded that the Employment Tribunal, having conducted an analysis of the factual circumstances of the true nature of the relationship was entitled to reject the label of agency as put in the contract and was entitled to conclude that the drivers were in fact workers.

The EAT concluded that the Employment Tribunal was entitled to take account of elements of the relationship that might be said to arise from compliance with particular regulation but in any event the Employment Tribunal’s findings were not limited to matters that might have resulted purely due to regulation. The EAT did not agree with Uber’s argument that the Tribunal’s findings were inconsistent or perverse and when the judgment was read as a whole this was not the case.

In respect of the issue of what amount of the time is “working time” the EAT said that it had had some difficulty with this but upheld the conclusion made by the Employment Tribunal that drivers assume an obligation to work when they are in the territory in which they are authorised to work and they switch on the app and are available for work. The EAT stated that the assessment of a driver’s time between the acceptance of trips will be a matter of fact and degree to be assessed in each case.

What does this decision mean and why is it so important?

It is clearly of great importance to Uber, with approximately 40,000 drivers who may well now be able to claim additional rights and benefits including minimum wage, rest breaks and paid holidays. Uber have indicated that they wish to appeal and may request that they leap frog directly to the Supreme Court.

This case is also important for all organisations who contract out work on a freelance basis and the number of organisations that do this has grown in the currently booming “gig” economy.

Organisations who use individuals to personally deliver a service may well find that they are engaging workers if they exercise too much control over the way that service is delivered. This presents an issue in respect of increased costs, risk and tax. Workers will be entitled to additional rights and benefits and additional tax and NI will be due which could significantly affect profit margins.

About HelenRowley_ESPLaw

Helen Rowley, Senior Solicitor, ESP Law

Having qualified as an employment solicitor in 2001, I built up 9 years’ experience as an employment solicitor with DAC Beachcroft, where I was made Associate in 2007. Here, I provided advice on a wide range of complex employment law issues, to a varied public and private sector customer base. I also managed a number of high value and complex litigation cases through the Employment Tribunal.

Combining this time at DAC Beachcroft, with 3 years running my own HR consultancy business, I have conducted a wide range of employment-related investigations and delivered training on a variety of employment law and HR issues. These include equality and diversity, whistleblowing, contractual disputes, disciplinary and grievance, severance agreements and redundancy situations, to name just a few.

I am now a straight-talking senior solicitor at ESP Law, part of ESP Group - a very different employment law firm and HR consultancy business, with our own in-house legal and HR experts. The vision for our business was to deliver an exceptionally personal, yet cost-effective service that truly meets the evolving needs of modern and forward thinking HR teams and their organisations. I’m lucky to be among a team of very talented employment lawyers who work hard day in, day out, to make this vision a reality.

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