Uber Loses Landmark Tribunal Case

November 18, 2016

The highly anticipated employment tribunal ruling in Aslam and Farrar v Uber has stated that Uber drivers are not self-employed and should be paid minimum wage and holiday pay. This decision will have huge implications for companies using the increasingly popular “gig economy” business model. This has become increasingly prevalent as businesses can use apps to match customers with workers; the firms do not employ the workers but take commission from their earnings.

Uber is a global company which uses an app to connect customers with taxi drivers. The company has grown quickly from its humble beginnings in 2009 and is now valued at more than £50bn. As a result of this ruling it could now face claims from all of its 40,000 drivers in the UK, who are currently not entitled to holiday pay, pensions or other workers’ rights. Uber has already said that it will appeal against the ruling.

The case was taken by two drivers, James Farrar and Yaseen Aslam on behalf of a group of 19 Uber workers who argued that they were workers for Uber, rather than self employed. Mr Farrar told the tribunal how he was put under “tremendous pressure” to work long hours and accept jobs, adding that there were “repercussions” from the company if he cancelled a pickup. He said some months he earned as little as £5 an hour – far below the £7.20 that employers are obliged to pay workers aged over 25.

Uber contested this and argued that it is a technology firm, not a transport business and that its drivers are independent, self-employed contractors who can choose where and when they work.

What is meant by “self employed”, “employed” and “worker”?

Self employed- When you are self employed, which is what Uber argued its drivers were, you do not have a contract of employment but rather a contract for services. You pay your own tax and national insurance. You determine when and where you will work, and how much you will work for. For example if you pay to have your windows cleaned you have not given the window cleaner a contract of employment but rather a contract for services. The window cleaner has no right to claim holiday or minimum wage from you. He or she simply has to perform the contract which was made on its stipulated terms.
Employed- When you are employed you have an express or implied contract of employment. This is the situation which most people in the UK are currently in. Employees have a number of rights including minimum wage, redundancy rights, unfair dismissal protection, holiday entitlement, working time protections, parental leave, sick pay and others which are enshrined in legislation.
Worker- This is a third category which is somewhere in between an employee and a self employed worker. This is what the Uber drivers successfully argued they were. Workers do not have all of the same rights as employees. However, they are entitled to certain rights such as minimum wage, rest breaks and parental leave which self employed workers are not entitled to.
It is not always easy to tell which of the three categories one falls under and there is a wide range of case law on this topic. There are a number of factors which have to be considered including:

Control- the less control the individual has over when, where and how they work the more likely it is that they are an employee or worker rather than self employed;
Integration- the more benefits (for example pension, company car etc.) and burdens (liability to be subjected to disciplinary procedures) a person has the more integrated they are into the business and therefore the more likely it is that they are employees or workers;
Mutuality of Obligations- If there is an express or implied obligation on the employer to give the work and the individual to do the work then it is likely that the individual is an employee or a worker. If the individual is free to choose whether or not he or she does the work then it is more likely that they are self employed; and
Economic reality- If the individual is simply paid a salary and (subject to disciplinary procedures) free from the consequences of the work then it is likely that the individual is an employee or a worker. Conversely if the individual is responsible for losses and liable to correct unsatisfactory work at his or her own expense it is more likely that they are self employed.
The tribunal in this case had to consider all of these points to decide what employment status the Uber drivers had. This case is of key importance because in the 21st century “gig economy” there are more and more people working in conditions similar to the claimants in this case.

Decision and Comment

The tribunal was scathing in its assessment of Uber’s arguments, saying: “It is, in our opinion, unreal to deny that Uber is in business as a supplier of transportation services”. The judges accused the firm of “resorting in its documentation to fictions, twisted language and even brand new terminology”, quoting Shakespeare to suggest that the group’s UK boss was protesting too much about the firm’s position. It was said 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… Drivers do not and cannot negotiate with passengers … They are offered and accept trips strictly on Uber’s terms”.

Lawyer Nigel Mackay, representing the drivers said, “This is a ground-breaking decision. It will impact not just on the thousands of Uber drivers working in this country, but on all workers in the so-called gig economy whose employers wrongly classify them as self-employed and deny them the rights to which they are entitled”.

The GMB union, which took up the case for the drivers said: “Uber drivers and thousands of others caught in the bogus self-employment trap will now enjoy the same rights as employees. This outcome will be good for passengers, too. Properly rewarded drivers are the same side of the coin as drivers who are properly licensed and driving well-maintained and insured vehicles”.

However, the regional general manager of Uber in the UK has claimed that many of the firm’s drivers did not want to be classified as workers: “Tens of thousands of people in London drive with Uber precisely because they want to be self-employed and their own boss… The overwhelming majority of drivers who use the Uber app want to keep the freedom and flexibility of being able to drive when and where they want”.

This decision comes amid mounting concern within government about the growing trend towards self-employed workforce. Other firms with large self-employed workforces could now face scrutiny of their working practices and the UK’s biggest union, Unite, announced it was setting up a new unit to pursue cases of bogus self-employment. Research by Citizens Advice has suggested that as many as 460,000 people could be falsely classified as self-employed, costing up to £314m a year in lost tax and employer national insurance contributions. The government has recently announced a six-month review of modern working practices and HMRC is setting up a new unit, the Employment Status and Intermediaries Team, to investigate firms.

The ruling is not the end of the process for Uber. The firm will take the case to the Employment Appeal Tribunal, and following its decision there could be further hearings in the Court of Appeal and then the Supreme Court. Any payments due to drivers will not be calculated until that process is over. This is one of the most important employment law cases in recent years and the appeal will be followed with great interest by legal commentators, politicians and businesses alike.

 

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