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What does the Supreme Court decision in the Uber case mean for employers?

On 19 February 2021, the Supreme Court handed down a landmark judgment which confirmed that Uber drivers are workers and not independent contractors. We look at the basis for the decision and what it means for other employers.

Background

This case began back in 2016, when Uber drivers Mr Aslam, Mr Farrar and others submitted a claim to the Employment Tribunal (ET) regarding their employment status. Uber argued that the drivers were independent contractors, but the Employment Tribunal disagreed and held that the drivers were “workers” under employment legislation.

This decision meant that Uber were obliged to pay their drivers at least national minimum wage and allow them to take paid annual leave, as well as offering other protections (such as from unauthorised deductions from pay, discrimination or being subjected to a detriment for being a whistle-blower) albeit not granting them the wider employment protections afforded to “employees”.

In 2018, Uber appealed against this decision. The Employment Appeal Tribunal (EAT) upheld the finding that Uber drivers were “workers”. The EAT also raised the issue of working time and how the drivers’ working time was to be determined for the purposes of calculating minimum wage. This point was addressed by the Court of Appeal when Uber pursued a further appeal. The Court of Appeal agreed with the ET’s finding regarding the status of the drivers as workers and concluded the drivers are not only working when driving passengers to their destination, but also when they have the app switched on and are waiting to accept passenger journey requests. In 2020, the Supreme Court heard the most recent (and final) appeal of this case following further appeal from Uber.

What factors did the Supreme Court take into account?

Uber’s main argument for the drivers being independent contractors and not workers was that there was a written contract between Uber and the drivers, and then another separate contract between the drivers and the passengers. Uber argued that the drivers did not in practice work for them (Uber), but for the passengers. Uber relied on the wording of the written contract between themselves and the drivers which said that Uber was an “independent company” and that the drivers were the “customer” (of Uber) who received access to the app in return for a service fee. Uber argued that they were not themselves providing transportation services for passengers, but only the use of the app to drivers and that the drivers independently contracted with the passengers.

The Supreme Court disagreed with Uber’s argument and asserted that Uber did contract with the passengers and engaged the drivers to carry out the bookings. It also held that when determining worker status, the starting point should not be the written agreement, because it is more important to focus on the purpose of the legislation which protects workers. The Supreme Court explained that the true picture of a working relationship may not be fully represented by a written agreement, even where it has been read, understood and signed by both parties. Therefore, the real situation and conduct of the parties must also be considered. It is not uncommon for there to be unequal bargaining power between the parties in these situations and for employers to attempt to use written contracts to contract out of certain statutory protections. The Court held that provisions in written agreements in circumstances such as these could be disregarded.

The Supreme Court judgment sets out five key factors which underpinned the rationale for the decision that the drivers were workers:

  1. Uber has control over how much the drivers are paid for the work they do. Uber sets the fixed fare for each trip and decides the service fee which is deducted from the fares. Uber also has the right to control whether fares are refunded fully or partially following a complaint by a passenger.

  2. Uber required its drivers to sign and accept a standard written agreement, which sets out the contractual terms that govern the services performed by the drivers, and the drivers do not have the right to amend this.

  3. Uber controls the drivers’ choice about whether to accept or decline passenger journey requests once they have logged on to the app. Uber does not inform the driver of the destination of the journey before the driver accepts, so drivers cannot decline requests based on destination. Uber also can penalise drivers for declining or cancelling too many requests by sending warning messages to improve performance. Uber may then take matters further and log drivers out of the app for ten minutes if performance (from Uber’s perspective) does not improve.

  4. Uber has a significant amount of control over how the drivers deliver their services. For example, Uber guides the driver to the pickup location and sets out a route for the journey. The drivers do not have to follow the specific route but are likely to receive negative customer feedback via the rating if they don’t. Uber uses the customer rating to monitor driver performance and where ratings do not meet Uber’s standards, drivers’ access to the app can be terminated.

  5. Uber restricts the communication between the drivers and the passengers to ensure that no relationship develops between passenger and driver beyond the one individual journey. Uber handles all complaints and further interactions.

The Supreme Court considered these five factors together and therefore dismissed Uber’s appeal and upheld the original finding that Uber drivers are workers. The Court also confirmed that the drivers were not only working when driving passengers to their destination, but also when they have the app switched on and are waiting to accept passenger journey requests.

What does this mean for other employers?

This case sets a precedent for how tribunals will decide future cases regarding employment status. Whilst the test of worker status depends on weighing up a number of different factors, it is clear that a high degree of control exercised by the business that engages individuals will favour an argument that those individuals may be regarded as workers.

It will be interesting to see the impact on businesses that use gig economy workers and how they will shape their business models moving forward. A likely implication is that such businesses may be forced to increase their prices to cover the additional costs required to engage workers in the knowledge that they are likely to have the legal rights attached to workers. However, low prices are fundamental to many businesses in the gig economy.

Therefore, we may see businesses amending their platforms to make their workers self-employed by giving them more control over how they carry out their services. The downside to this for those businesses is the potential impact that reduced control has on a consistent customer experience and their brand and reputation.

Disclaimer

This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.

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