Since this article was published, Uber announced that it will pay 70,000 of its UK drivers the national minimum wage, holiday pay and pensions contributions. It would appear that the deal only covers drivers after they accept a trip request (so not waiting time), which trade unions have criticised as not going far enough.

Uber has lost its appeal over worker status, a result which is not unexpected. Today the Supreme Court handed down its judgment, agreeing with the lower courts that Uber's drivers are workers, not self-employed contractors.

The court reached the conclusion that Uber was clearly in control. Despite what the contractual documentation suggested, the relationship was one of subordination or dependency and this was key to the court's reasoning. The policy consideration behind the Employment Rights Act 1996 (ERA 1996) is to protect the vulnerabilities of workers; the definition of a worker under the statute cannot be contracted out of by the parties. 

Implications

Worker status is a gateway right, so the cost implications are huge. Uber now faces the prospect of paying its drivers the national minimum wage and holiday pay, as well as having to consider eligibility for pensions auto-enrolment. Apart from the immediate financial implications, there are significant compliance costs. Many other rights flow from being a worker too, such as whistleblowing protection and the right to receive a written statement of terms. The ruling also paves the way for Uber drivers to apply for statutory recognition for collective bargaining purposes.

The decision entrenches what we already knew: that the question of employment status is a major disruptor to the gig economy. It does not look like the UK government is going to legislate any time soon either, on reforming how the definitions of employment status work.

Businesses will want to review arrangements which purport to be arms-length and factor in what, if any, adjustments should be made, as well as setting aside a contingency fund. Digital platforms may find themselves asking in any tripartite situation (involving them, a customer and supplier) whether there is a lurking status risk. Interestingly, the judgment distinguished Uber's model, where the product is standardised, from the situation where a digital service provider offers customers access and bookings to a range of service providers.

Factors pointing to control

The factors in Uber's model which pointed to control, and which mitigated against drivers being in business on their own account, were:

• Uber set the driver's pay and the fare for the ride.
• Contract terms were set by Uber.
• Once the drivers were logged onto the app, Uber effectively monitored their activity and could subject them to a penalty if too many trips were declined.
• Uber used customer ratings of drivers to manage the performance of drivers. 
• Drivers were not free to develop individual relationships with customers, effectively the interaction with customers was controlled by Uber.

Subordination and dependency

At the heart of the judgment is a recognition that employment legislation is designed to protect those in a position of subordination or dependency. Unlike most other commercial relationships, there is clear unequal bargaining power between the parties. The definition of a worker, as contained in the ERA 1996, cannot be contracted out of. This means that the written documentation between the parties cannot be the starting point when determining employment status, it is only a factor. The reality of the situation must be scrutinised, meaning the way the arrangement works in practice.

It was significant that drivers had no real ability to develop their own client base. Neither was there any evidence to suggest that in practice they were free, while logged on to the Uber app, to accept bookings via other private hire vehicles. Effectively drivers were constrained to accept jobs, once they were logged on to the app, or else they faced consequences. The way in which Uber dealt with them had the hallmarks of "classic subordination".

Drivers were working when logged onto the app

Although possibly not of wider interest to most businesses, it is worth noting that the Supreme Court decided that drivers were working (for the purposes of the Working Time Regulations 1998) when logged on to the app in their territory and willing and able to accept trips. Uber's narrower view, that drivers were only working when they were carrying passengers, was rejected. This has knock-on effects for determining what they are entitled to under the national minimum wage legislation.

Find out more

To read more about the case and reactions in the market, you can access further insights from Senior Associate Joe Aiston on Bloomberg.com or in the Financial Times, Evening Standard, CityAM and on BBC News where Joe's expertise also featured. We will also be hosting an webinar next week unpacking the Supreme Court's decision and its implications for the wider gig economy; please register to attend below.

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