A unanimous decision by the Supreme Court has concluded that Uber drivers must now be treated as workers rather than as self-employed.

In a move welcomed by campaign groups Uber confirmed on 17 March 2021 that following the judgment it would be introducing paid holiday time, will be ensuring drivers over 25 are paid at least the National Living Wage and will be enrolling drivers into a pension plan.

This blog summarises what this means for employment law and the effect it will have on the gig economy going forward. After Uber’s ongoing legal battle within the gig economy, the Supreme Court have now provided a degree of certainty.

You can’t call someone self-employed unless they genuinely are!

In the case of Uber BV and ors v Aslam and ors the Supreme Court have upheld the Employment Tribunal’s decision that Uber drivers should be considered as workers. The Supreme Court dismissed Uber’s appeal and held that it is incorrect to treat the written agreement as a starting point and that one should instead concentrate on statutory interpretation.

The headline news is that taxi drivers working for Uber were confirmed, once again, to be workers of Uber not the self employed individuals running mini businesses as those acting for the company were keen to describe them as. Uber has now confirmed it will be treating these individuals as workers moving forward.

The Employment Tribunal previously found in favour of the workers, with Uber unsuccessfully appealing to the Employment Appeals Tribunal, the Court of Appeal and now the Supreme Court.

The details of the Uber case

To summarise the case itself, two drivers brought a test case, supported by their union the Independent Workers Union of Great Britain, to argue that they were ‘workers’ of the company Uber rather than true self employed contractors. They were seeking access to the rights, benefits and protection that come with that status. They were also looking to demonstrate that companies are not following the law when it comes to this way of working.

Uber drivers typically work flexibly. They use an app system, which they can turn on and off at will, and are paid per job that they complete. They are not traditional employees and as a result the label given to their way of working has been rather unclear. The law rather unhelpfully recognises two alternatives to traditional employment which aren’t always easy to identify in practice.

Firstly there are the genuine “self employed” where someone runs their own small business and is in business for themselves. This is normally quite easy to spot; a window cleaner who advertises his services by dropping leaflets through doors, an IT consultant who you can hire to review your IT equipment and supply replacements, a cleaner who you can pay by the hour to clean your home. They control when they work, where they work and how they work. They take the financial risk if something goes wrong, provide their own equipment and can send someone else in their place to do the job. They run their own business.

Secondly there is a “worker”. A person who carries out their work as part of someone else’s business with slightly more flexibility in their working arrangements but who does not have the choices and control that come with being truly self employed. Workers are harder to spot and the category was essentially created to cover the grey area between true employment and self employed status and to bridge the gap to avoid leaving a vast army of the working public without a defined role or employment rights.

Workers don’t have the full array of employment rights given to employees but they do receive some key benefits; for example the national minimum wage, paid holiday, protection against unlawful deductions from wages, discrimination and whistleblowing and the rights to limits on their working day and week. It isn’t a status to be sniffed at.

Uber have been trying to argue through this case that each Uber driver runs their own mini business offering taxi services to members of the public. They are self employed, in control of their own time, money and resources and that Uber merely assist them in doing this by connecting them, through the Uber app, with potential clients.

The drivers have been arguing that they are in fact working within Uber’s business and that whilst they have flexibility over when they do work, when they are actually working they are heavily controlled by Uber.

Decision of the Supreme Court

As stated above, the Supreme Court have held that the drivers are legally workers. The contracts did not reflect the true reality of the relationship between Uber and the drivers and the Supreme Court followed a statutory interpretation, rather than a contractual one. The Supreme Court found that the purpose of the legislation (namely, the Employment Rights Act 1996, the Working Time Regulations 1998 and the National Minimum Wage Act 1998) was to give protection to vulnerable people who are dependent on an organisation exercising control over their work. The Supreme Court found that the interpretation should give effect to that purpose.

The Supreme Court emphasised five relevant factors:

  1. Uber determines the fixed rate of pay;
  2. Uber dictates the terms of the contract;
  3. Uber constrains the drivers’ freedom to choose whether to accept work once the driver has logged into the app;
  4. Uber exercises a significant degree of control over the way in which the drivers deliver their services; and
  5. Uber restricts the communication between passengers and drivers.

The Supreme Court agreed with the Employment Tribunal’s view that the terms of the written contract should be disregarded due to the contradiction with what was happening in reality. The rights asserted by the claimants were created by legislation and were not contractual rights.

The Supreme Court concluded that failing to view the drivers as workers would be inconsistent with the purpose of the legislation in protecting individuals who have no say over their pay and working conditions because they are subordinate and dependent on Uber as an organisation who exercises control.

The Supreme Court also upheld the Tribunal’s conclusion that any time spent which would be considered as working for Uber would not only include the time when they were driving passengers, but also included any period they were logged into the app and were willing to accept trips. The Court found that this time constituted ‘working time’ for the purpose of the Working Time Regulations and ‘unmeasured work’ for the purpose of the National Minimum Wage.

What are the consequences for the gig economy?

The key question now for employers is what this means for the “gig economy” and those working in a similar field to Uber, Deliveroo, Citysprint and the other service industries which are multiplying quickly as technology advances. What it has made very clear is that people are much more aware of their rights and are prepared to challenge them in the tribunal system. This is only likely to increase with the removal of tribunal fees and the publicity from these large cases.

The government attempted to create a degree of certainty for the gig economy in 2017 by commissioning the Taylor Review, which then led onto the Good Work Plan. The Good Work Plan made recommendations on how to restructure the UK labour market and suggested the need for a better balance between employment rights and flexibility. The Good Work Plan focused on the need for more security for gig economy workers. However, since the Good Work Plan, there does not seem to be have been a substantive change for those working for gig economy organisations.

The decision of the Supreme Court in the Uber case will now have changed that and may cast a shadow of doubt over organisations operating in the gig economy who have individuals carrying out work for them in a similar subordinate and dependent position. Those who were once considered to be self-employed may actually be legally entitled to a worker status under the relevant legislation, in particular where the organisation is tightly controlling and defining what work the individuals carry out.

An indication that someone is a worker, as stated by the Supreme Court in the Uber case, may be where the individual has little or no ability to improve their economic position through professional or entrepreneurial skill. The only way the Uber drivers could improve their position was by working longer hours while meeting Uber’s measures of performance.

Organisations and employers need to be aware that the consequences of this case is that the workers will be entitled to an array of rights which they were not entitled to before. This includes the right to receive minimum wage, holiday pay and the right to be auto-enrolled into a pension scheme. Failure to do so may lead to these rights being compensated retrospectively.

Uber’s announcement that it will offer employment benefits from 17 March 2021 to its Uber drivers represents a significant milestone in the gig economy.

Campaign groups have hailed it as a further victory that rather than seeking to alter their driver arrangements moving forward, or to continue to argue the impact of the recent Supreme Court judgment was limited to the workers that brought the case, Uber have instead chosen to accept the judgment and treat all Uber drivers as workers moving forward.

This case may open the floodgates to further claims by other individuals who are carrying out similar services in the gig economy to be able claim and enforce further rights. Gig economy organisations will now need to start considering whether they can accept the extra costs and responsibilities associated with engaging workers, or whether they need to carry out a restructure in order to maintain a self-employed status. The costs of no longer having self-employed individuals may reflect into their prices to be passed onto the consumers to pay.

The Supreme Court’s decision makes it clear that gig economy employers will have to pay national minimum wage if the legislation dictates so and that entering into a contract to say otherwise will not prevent that. The case will now go back to the Employment Tribunal for them to consider how much compensation will be payable to the individuals who made the claim. Although Uber has announced that it will now treat drivers as workers, there are still areas that will need further clarification as Uber has said nothing as to whether it will offer back payments to drivers to cover these entitlements historically, and has said it will only provide benefits based on time driving, rather than time logged into the app, which remains a point of dispute.

The Uber case is a very strong indicator that employers need to be very clear from the outset how they are engaging with their staff. It is vital to make it as clear as possible whether people are genuinely employees, workers or self employed. Employers will need to compare how the person works in practice against the legal tests and criteria and take the time to make sure that contracts and written documents reflect what is actually happening on the ground from the start and put in place any changes that are needed if they don’t match. Fixed term contracts or zero hours contracts might actually be more appropriate in some situations as well.

As the “gig economy” increases and more and more flexible ways of working develop in the market place, this is unlikely to be the last case on these types of workers. Watch this space to see how the future of working in more agile ways evolves.

If you have any further questions relating to the gig economy and the consequences of the Supreme Court’s ruling, please contact a member of the Employment team.