Background to the case
The UK Supreme Court's decision brings an end to nearly five years of the legal battle between Uber and a small group of former drivers (Yaseen Aslam, James Farrer, Robert Dawson and others). These Uber drivers agreed to drive passengers who were located using the Uber application (app) as part of a partnership agreement with Uber. The drivers were defined as self-employed independent contractors in the partner agreements.
The drivers claimed that they were employees and deserved rights and privileges under the law. In 2016, a labour tribunal ruled in favour of the drivers and supported this view. Upon appeal, an employment appeal tribunal and the Court of Appeal, by a majority decision, concluded that the drivers were Uber's employees, not self-employed contractors. In each case, the tribunal or court determined that the partner agreements did not accurately represent the parties' actual relationship. The agreements were disregarded as a result.
This time, Uber again appealed to the Supreme Court, arguing that its drivers are independent contractors and that Uber functions as an 'agency' by linking drivers and passengers through the app.
Supreme Court Decision
Uber's appeal was rejected by the Supreme Court, which disagreed with the argument that Uber was an intermediary party between drivers and passengers. The court instead concluded that Uber drivers were employees.
More importantly, the Supreme Court (chaired by Lord Reed, Lord Hodge, Lady Arden, Lord Kitchin, Lord Sales, Lord Hamblen and Lord Leggatt) dismissed Uber's contention that the terms of the partnership agreement are determinative in assessing worker status, concluding that the contractual terms should not be the starting basis for evaluating whether people should be classified as employees. The Court argued that such terms could bar employees from receiving statutory worker's rights and protections because employers could arbitrarily dictate contractual terms for vulnerable workers, robbing them of their employment rights.
However, rather than examining the contractual terms, the Court examined the factual background whilst considering the statutory language and legislative purpose. The Court determined that the legislation's objective is to protect employees, especially vulnerable workers, from being underpaid for their work, working long hours and being subjected to other types of discrimination and poor treatment, e.g. being victimised for whistleblowing.
The Court considered several factors in making its decision:
The amount of money drivers could receive was determined by Uber, who set the fares.
Uber drivers could not negotiate the terms of their contract, which Uber set unilaterally.
Uber limits ride requests, and their drivers could be penalised if they refuse too many rides through the app.
Uber uses a star rating system to track a driver's service and can terminate the driver's affiliation with Uber if their performance does not improve after several alerts.
Thus, the Court determined that the drivers were employees. Drivers had a subordinate role to Uber, and the only way to raise their earnings was to work longer hours. Uber had considerable influence over the work of its drivers. Thus, the Court disagreed with Uber's argument that it merely facilitated transactions between drivers and passengers. Furthermore, the Court noted that drivers should also be regarded as employed not only when transporting a passenger but also when logging into the app. The Court decided that a driver's working hours are not limited to the time in the car with a passenger. The lawsuit will now be heard before the employment tribunal, which may force Uber to compensate the original claimants.
Repercussions of the case
The repercussions of this case lie in three main areas. First is an issue of price: will consumers have to pay more for Uber rides? Whilst this can only be determined with time, it could happen. Uber's filing with the US Securities and Exchange Commission (SEC) (when listing its shares in the US in 2019) included a section on business risks. In this section, Uber claimed that if it were to identify drivers as employers, it would incur substantial extra costs in compensating them with minimum wage and overtime. This could eventually impact the prices consumers have to pay.
The second issue to arise is that of VAT. In the filing (above), Uber also claimed that HM Revenue & Customs (HMRC) would recognise the company as a transportation service if the claimants succeeded. Uber would be required to pay VAT on fares. With the claimant's success, it is nearly impossible for Uber to avoid paying VAT and interest. However, Uber's VAT responsibility is also a point of contention between HMRC and the company. Only with time will this issue be resolved.
The third, and most contentious issue, is that this could signify an opening of litigation floodgates. Some, such as Tom Vickers, think the Supreme Court's ruling has broader implications for other gig economy workers, e.g. private hire drivers, couriers and delivery drivers. Vickers has stated that this ruling's central element focuses on the control that companies exercise over people's labour.
However, this point has been contested. Since this lawsuit was brought forward in 2016, and only a limited group of Uber drivers were involved, it is uncertain if this decision will have far-reaching consequences. Equally, because the UK does not have a labour inspectorate, these rules are not enforced, and it will fall to workers to bring subsequent tribunals. This is especially relevant since Uber claims it has made substantial improvements to its business approach since 2016. Uber has announced that it is providing additional protections to its drivers, including free insurance in the event of injury or illness. Uber has also claimed that drivers now have greater flexibility and control in making money.
It is unclear if this Supreme Court ruling will create a precedent for all other gig economy employees and employers across the UK and European Union (EU), particularly as the underlying legal argument and rationale are extremely fact-sensitive, and, in reality, it is all too easy for Uber to ignore the problem until more tribunals from the remaining 40 000 drivers begin to make their way to court.