Implications of the landmark Uber judgment

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A landmark judgment in the Supreme Court in February over Uber drivers’ employment status has far reaching consequences for employers.

The Supreme Court found that Uber drivers were classed as ‘workers’, entitled to the National Minimum Wage, holiday pay and pensions. In addition, as workers they will have other rights such as whistleblowing and potentially might also have auto-enrolment pension rights.  

Throughout the long-running legal process, Uber argued that its drivers were independent self-employed ‘partners’ and therefore not entitled to these basic rights.

This week Uber has changed its position, finally accepting its drivers are workers. It has announced that it will give its 70,000 UK drivers a guaranteed minimum wage, along with holiday pay and pensions.

However, Uber has diverged from the Supreme Court decision. The Supreme Court had ruled that drivers were classed as workers from the moment they switched on their app to when they switched it off and therefore entitled to the National Minimum Wage throughout that period. Despite this, Uber has said it will only pay its drivers while driving, rather than while logged onto the app.

Implications for employers

Both Uber and similar gig economy operators relying on nominally independent couriers and food delivery drivers may need to brace for follow up actions by their workers.

A key area of argument was the extent to which it was permissible for the Supreme Court to look outside of the terms of the contract to what happened in practice. Uber’s argument, relying on a previous Supreme Court decision, was that the contractual terms were consistent with what happened in practice. This argument was dismissed by the Supreme Court on the basis that the rights asserted were not contractual rights but statutory rights and therefore it was a matter of statutory interpretation and what happened in practice was paramount.

As a result, tribunals will be able to look to the reality of the situation so that meticulously constructed contractual terms will not prevent courts and tribunals undertaking the statutory exercise of interpreting whether someone is an employee or worker.

For those seeking to avoid creating worker status it will be important to pay very careful attention to the reality of the situation when setting up a new operational model. For a business wishing to operate reliably at scale the notion of a true 'gig' economy is at odds with the level of control that is required to make a model sustainable. The Uber decision therefore has very serious implications for the costs associated with running that type of business.

While the gig economy presents substantial opportunities for novel contractual arrangements it is clear that tribunals will be able to interpret the arrangements, applying the tried and tested concepts used to identify employment relationships for many years. New ways of working do not mean new tests, simply that the tests have to be applied to new situations.

We can expect to hear more about gig economy cases as there are still some outstanding issues to be determined but the Supreme Court’s decision indicates a clear line of travel.

 

Barry Stanton is partner and head of employment at law firm Boyes Turner