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Uber in Midst of Legal Challenge Over Drivers’ Employment Status

Calendar August 5, 2016

The 20th July saw the start of what has been described as “the case of the year in UK employment law”. The Tribunal case concerns whether 19 drivers for the car-hailing app, Uber, are properly described as ‘self-employed’. Key to the issue here is the difference in employment protections afforded to the different categories of employment status, employees, workers and independent contractors. Under the Employment Rights Act 1996, an employee is defined as “an individual who has entered into or works under…a contract of employment.” Such employees have full statutory employment protection including redundancy pay and the right to not be unfairly dismissed. Crucially, those who are ‘self-employed’ or ‘independent contractors’ do not have a right to receive the National Minimum or Living Wage.

This case is of one an increasing amount of publicised cases in which atypical employment status is causing a stir with similar examples being seen with takeaway delivery company Deliveroo and the German online-delivery service MyHermes. Deliveroo, who use similar ‘self-employed’ contracts for their ‘riders’ who deliver food from restaurants via bicycle, have even gone as far as to include a clause in the contracts that attempt to prohibit ‘riders’ from disputing their employment status through a tribunal. Whilst this clause would seemingly be unenforceable, it at least does act as a deterrent. Moreover, what it also demonstrates is the tentative legitimacy the contracts have. Therefore, whilst these contracts are currently perfectly legal, it does beg the question as to whether Deliveroo believe they might not be upon any sort of legal challenge.

Such cases coincide with the rise of the so-called ‘gig-economy’ where instead of employers being bound by strict contractual relationships that exist between the traditional employer and employee, they are able to use flexible labour on an on-demand basis. Furthermore, this is not just an issue of the overuse of independent contractor relationships; liberalisation of employment status can be seen more widely through increasing use of zero-hours contracts, which similarly to self-employed contracts, provide employers with outright flexibility over hours their staff work with no obligation to provide their employees with any certain amount of hours each week. Clearly then, the traditional contract of employment appears ever more outdated as it is adapted and avoided in order for employers to be able to have a workforce that is flexible enough in a modern market. What is most surprising though is that the Uber case will essentially boil down to is a 19th Century test of control. Essentially, the question is, do Uber enact a sufficient amount of control over their drivers to warrant being considered to be working under a contract of rather than for service?
However, there are a number of benefits for the worker in this type of self-employed relationship. One could speak of the flexibility it provides, being able to choice when and equally, when not to work without the orders of a boss tying the employee down like a traditional employer-employee relationship. Therefore, what the growth of the so-called ‘gig-economy’ tells us is that in a modern economy, employer needs a flexible workforce and workers often prefer freelance work to fit around other work or commitments. Clearly, with around 30,000 drivers in London alone, there must be something appealing for drivers in how the relationship works. Furthermore, in one sense the self-employed contract does provide Uber with a degree of risk. In theory, because they cannot force any of their drivers to work, they could be drastically under-staffed at certain times.

In addition, it’s important to understand what kind of company Uber actually are. As far they are concerned, they are not a taxi company at all. To their minds, they are a technology company that does not provide transport but rather puts people in contact with drivers who can provide the transport. This is a subtle but rather important difference. When viewed in this way, the self-employed relationship seems perfectly correct; drivers pay Uber 20% commission for work found for them by Uber. This is not a new concept in itself, many businesses pay a company for sales leads or other services. Conversely though, this may be too basic of an analysis of the situation, after all, Uber drivers are subject to user ratings that could determine how much work they get in the future. This would indicate that there is a degree of control by Uber over the drivers that means they rely on the work that Uber provides.

The intermediate, ‘worker’ category of employment status may therefore be something which could be of more success to the Uber drivers in question. This category provides a basic floor of rights which being self-employed or an ‘independent contractor’ does not; such as a right to the National Living Wage and protection of the Working Time Regulations. However, another stumbling block to the Uber drivers could be the need for a lack of independent business taking. The Uber drivers would need to prove that they are not able to take work from any other source than Uber and cannot, for instance, stop taking Uber rides whilst they take a private job.

Consequently, this tribunal decision may cause a large change to the law surrounding employment status if it is determined that Uber drivers are not actually self-employed but rather employees or workers. If the judgment goes in favour of the drivers, then the floodgates may be opened to large numbers of independent contractors in the gig economy to change the nature of their employment relationship if they seek at least a basic floor of rights and stability in their work. Thus, whilst consumers desire cheaper and more flexible services, these may become two conflicting interests if employers cannot continue to use independent contractor agreements for services such as Uber.

For professional legal advice on these issues, or any other employment law matter, then contact our expert employment lawyers today.


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