The Supreme Court has the final say on the employment status of Uber drivers

19 February, 2021

The Supreme Court has handed down its decision in Uber v Aslam and has concluded that the employment status of Uber drivers is rightly that of “worker” rather than “self- employed”.  This is a judgment that will affect, not only the working rights of tens of thousands of Uber drivers, but will also have huge implications for how all “gig economy” workers are treated.

In this particular case, a number of Uber drivers brought claims against Uber asserting that they should be afforded “worker” status. The model that Uber has developed means that its drivers are characterised as self-employed and the contractual documentation in place supports the drivers’ status as self-employed individuals. However the courts found that this did not accord with the reality of the working arrangements.

The courts ruled in favour of the drivers in 2016 and Uber lost a subsequent appeal in 2018. The  unanimous decision of the Supreme Court to dismiss Uber’s appeal will now be binding.

This decision means that Uber drivers are entitled to claim the national minimum wage (including back pay for minimum wage), with their minimum wage claims being based upon their entire working day, not just when they have a rider in their cabs.
 
They can also claim 5.6 weeks’ paid annual leave each year, and will have other rights afforded to workers such as protection for whistle blowers. 

 

Why is employment status an issue in the “Gig Economy”?

The essence of a gig economy business model is to provide services to consumers at a competitive price. This is partly achieved by shifting the risk/cost of the service provision from the owner of the “platform” to those who actually provide the service i.e. the driver or tradesman, by using contractual arrangements that try to ensure that the service provider who uses the platform is classified as self-employed. However, this classification doesn’t sit well with the current law on employment status.

As a result, over the past five years we have seen a plethora of high-profile legal decisions concerning employment status, particularly in the “modern gig economy” areas such as delivery drivers and couriers involving names such as Uber, Addison Lee, Deliveroo and Pimlico Plumbers. 

 

What are the different types of employment status and why are they important?

There are three different types of employment status. Originally UK employment law only recognised two categories of individual – employees and the self-employed. However since the 1970’s the new “in-between” category of worker has emerged.

  1. Employee – someone who has entered into or is working under a contract of employment;
  2. Worker – someone who is engaged under a contract for services to perform work personally for another party whose status is not that of a client or customer;
  3. Genuinely Self-Employed – someone in business on their own account where the organisation for whom they work is their client or customer.

The distinction in status is important as it will:

  1. Confirm what employment protection rights apply to the individual concerned and the obligations of the “employer”; and
  2. Impact on the appropriate tax treatment of any payments made to the individual.

An employee has a higher level of protection and more rights than a worker and somebody who is self-employed has the fewest rights.

The most significant differences in the rights of employees and workers are those that relate to the termination of employment i.e. only employees have the right not to be unfairly dismissed, the right to receive a statutory redundancy payment and the protection of the ACAS Code on disciplinary and grievance procedures.

Workers have the protection provided by the Equality Act i.e. protection from discrimination, rights under the Working Time Regulations i.e. to paid holiday, and limits on working hours and the right to receive the National Minimum Wage.

Self-employed individuals only benefit from the protection provided by the Equality Act.

 

Tests of Employment Status

The tests of employment status are well established.

Mutuality of Obligation:  The test considers whether there is an obligation on the employer to provide work and a corresponding obligation on the individual to perform work. If this minimum requirement does not exist, there is unlikely to be an employment relationship.

Control:  Looks at the degree of control an employer exercises over what the individual does, how an individual works and the times at which the individual works.  The more control an employer exercises over an individual’s work, the more likely the individual is to be an employee.

Provision of Personal Services: Considers the right of the individual to provide a substitute to do work if they are unable to work on a particular day (for example because they are ill or on holiday). If the individual has this right and exercises it on a regular basis, they are more likely to be a worker or self-employed. 

A worker, shares the obligation of personal service with an employee but frequently the requirement of mutuality of obligation is absent. For example, in the case of a casual worker, the organisation would not be under an obligation to provide on-going regular work (just “as and when”) and, in turn, the worker would not be obliged to accept the work when it is offered.

In the case of a self-employed contractor, by contrast the features of mutuality of obligation, personal service and control are all absent.

 

What facts did the court take into account in the Uber case?

In reaching its decision that Uber drivers were, in fact, workers rather than self-employed, the Supreme Court considered that the following parts of Uber’s business model were particularly relevant:

  • Uber set the fare which meant that they dictated how much drivers could earn;
  • Uber set the contract terms and drivers had no say in them;
  • Uber constrains drivers’ freedom to choose when to work once logged into the app;
  • Uber controls the way in which the service is delivered;
  • Uber restricts drivers’ ability to communicate with passengers;

Looking at these and other factors, the court determined that drivers were clearly in a position of subordination to Uber and Uber exercised significant control over their work.

 

Takeaway messages

Commenting on the Supreme Court’s judgment, James Farrar, ADCU’s general secretary said, “This is a win-win-win for drivers, passengers and cities. It means Uber now has the correct economic incentives not to oversupply the market with too many vehicles and too many drivers.”

So what are the takeaway points from this case for businesses operating outside of the so called “gig economy”?

In short, getting employment status right is more important than ever. All businesses should look closely at all of their arrangements with staff both on and off payroll.

Ensure that any documentation that governs these relationships actually reflects the day to day working practices that exist as courts and tribunals will look beyond the terms of any “sham” contracts.

Where any grey areas are identified, it would be advisable to re-assess the way these individuals are categorised and of course seek legal advice where appropriate.  

For more information please contact Camilla Beamish.