Uber Supreme Court decision has wider implications for the ‘gig economy’

As many of you will be familiar with, Uber operates by means of a smartphone app, which enables passengers to book rides from drivers. Drivers are free to choose when they make themselves available to accept bookings using the app.

Drivers own their own cars and, under the terms of the contract between Uber and the driver: driver and passenger are put into direct contact with one another through the app; there are limits on time for acceptance for jobs; drivers don’t have the ability to set higher fares and drivers are prevented from directly engaging with passengers (which stops developing business independent from the app); and Uber operates various warning and penalty systems that can lead to a driver being automatically logged off the app or removed altogether.

A number of Uber drivers brought successful employment tribunal claims against Uber for, amongst other things: failure to pay the national minimum wage, failure to provide paid annual leave and whistleblowing detriment. The case progressed all the way up to the Supreme Court who delivered their judgment last month.

The Supreme Court’s decision

The judgment considered whether Uber drivers were independent contractors, as argued by Uber, which would mean they had no statutory employment rights; or whether they were ‘workers’, as argued by the drivers. If they were the latter, then although not ‘employees’, (which would give them rights to a redundancy payment, not to be unfairly dismissed etc.) they would be entitled to some employment rights i.e. holiday pay, national minimum wage, among other things.

To be classed as ‘workers’ the drivers needed to persuade the Supreme Court that: (1) they were in a contract where they performed work or services for another party, (2) they performed that work personally; (3) the other party to the contract was not a client or customer of the individual.

The Supreme Court held that, when deciding whether drivers were ‘workers’, employment tribunals should make a statutory rather than contractual interpretation. Therefore the focus should be on what actually happened in practice between the drivers and Uber, rather than what was said in the contract between them. It went on to find:

the lack of any say in the remuneration paid to drivers;
the lack of any say in the contractual provisions (between the drivers and Uber);
the fact that once a driver logged onto the app, a driver’s choice about whether to accept requests for rides was constrained by Uber e.g. Uber retains an absolute discretion to accept or decline any request for a ride, further Uber controls the information provided to the driver;
Uber exerted a significant degree of control over the way in which drivers deliver their services e.g. vetting the types of car that a driver can use to perform the service; and
the restriction, by Uber, of communication between driver and passengers to a bare minimum.

This all meant, according to the Supreme Court, that there was a ‘worker’ relationship between the drivers and Uber, and therefore these drivers were entitled to receive holiday pay etc.

What does this decision mean for the ‘gig economy’?

This decision is not a surprising one. It follows the Pimlico Plumbers case (2018) which also went to the Supreme Court. In this case it was held that plumbers were ‘workers’ and not independent contractors.

I would suggest that service providers in the ‘gig economy’ will need to revisit their business models, where they use independent contractors to provide their services to end users.

Despite the Supreme Court’s latest judgment, it has been reported that Uber take the view that the decision only concerns a few drivers in 2016, as since then they have changed the way they operate so ‘their’ current drivers are not workers. Unless there has a significant shift in the relationship between Uber and its drivers, I consider this will be a difficult position.

One of the recommendations of the 2017 Taylor Review into Modern Working Practices was for the government to introduce legislation to provide greater clarity on the boundary between self-employment and worker status. This has yet to be done.

The fact that we have had two cases on this issue which have had to go all the way to the Supreme Court, with all the time and expense that has been involved, in my view, demonstrates the need for government to urgently address this issue.

The author is Paul McFarlane, partner at Capsticks.