UK Confirms Uber Drivers have Employee Rights

Tuesday, February 23, 2021

The UK Supreme Court ruled that Uber drivers are “workers” for the purposes of UK labor law.

With this ruling, the Supreme Court unanimously upheld the ruling of the original labor court and approved the decisions of the labor appeals court and the appeals court.

This ruling confirms that Uber drivers in the UK are entitled to core benefits such as paid vacation and the national minimum wage.

What is the problem?

There are three categories of employment status in the UK: employed, employed and self-employed. Each category has a different level of protection under labor law. Employees have the greatest protection, contractors the least, and workers sit in the middle. Workers are entitled to basic rights such as paid holidays, breaks and the national minimum wage. Contractors are not entitled to any of these core rights.

A “worker” is a person who works under the following conditions:

1. an employment contract (ie a traditional worker); or

2. any other form of contract (implicit or express, oral or written) in which:

a) they undertake to work personally for another party; and
b) The other party is not a customer or customer of a profession or business carried out by the person.

Uber’s appeal to the Supreme Court focused on one specific point related to the second part of this test: whether each driver worked under a contract to provide services to Uber. Uber said it didn’t, as did self-employed entrepreneurs. The drivers argued that they were and were workers.

Uber’s main argument before the Supreme Court was that the lower courts failed to pay sufficient attention to how the relationship between Uber and the drivers was described in the relevant written agreements in their decisions.

In summary, Uber said that the written agreements state that Uber BV’s role is to provide technology services and act as a means of payment for the driver and that Uber London’s only role is to act as a booking agent for the drivers.

The Supreme Court decision

The Supreme Court did not agree with Uber on any of its points. The results summarized the following:

• Contrary to Uber’s argument, the contract documentation is not the “starting point” for determining whether a person is an employee.

  Given the relative bargaining power, the employer has the greatest influence on the drafting of the contract. It would be wrong for the employer to be able to dictate the status through drafting, thus depriving the worker of protection. It has long been recognized that a labor court should look beyond the written agreement if it is alleged that the agreement does not reflect the true nature of the relationship. However, the principle goes beyond agreements that turn out to be “fraud” and that may intentionally misrepresent the nature of the relationship. There can be many reasons why a written agreement may not accurately reflect the individual’s status, including because circumstances have changed over time.

  To ensure that labor law fulfills its purpose of protecting vulnerable workers, an analysis of a labor court needs to take into account what actually happens in practice and under all other circumstances. The written contract (if any) is only part of this analysis.

• When the Supreme Court applied this to the Uber drivers here, it found that the Labor Court had rightly ruled that they were workers. While drivers were free to choose when and where to work, five particular aspects of the relationship between drivers and Uber mattered:

  a) The compensation was effectively set by Uber, not the drivers.
  b) The terms of the contract were dictated by Uber.
  c) After logging into the Uber app, the driver’s decision to accept requests has been restricted by Uber.
  d) Uber exercised significant control over the manner in which drivers performed the service.
  e) Uber limited communication between passenger and driver to the minimum necessary to complete the trip.

The Supreme Court also upheld the Labor Court’s ruling on what constitutes working hours for drivers. This was the time the driver was logged into the Uber app in the area where the driver had a license to operate and was ready and willing to take trips, contrary to Uber’s argument that only the time he spent Driving passengers to their destination represented working hours.

What does this mean for employers?

It is important to note that this decision does not materially change the existing law.

The case is certainly high-profile, but largely confirms a direction of travel that has developed in recent years: people who work in the gig economy can certainly be workers. However, they are not automatically taken into account. It all depends on the actual reality of the relationship.

As noted above, in the Uber case, five separate factors formed the basis of the decision, in other cases none or some of which may be present.

However, there are lessons to be learned for employers:

• This decision is a further reminder that the classification of employees as self-employed does not determine their status when these “contractors” are in practice treated as employees or employees.

  An employer’s contracts can state that the employees are self-employed. However, if the reality is that employees are properly employees or employees, then the contracts do not prevent employees from being classified as employees or employees. In addition, the Supreme Court ruling questions the validity of provisions which, directly or indirectly, purport to exclude or limit UK statutory employment protection.

• The more control a company has over how a service is provided by what it calls a contractor, the less likely that someone is in practice a contractor.

If they have not already done so, employers with significant banks of independent contractors should take the opportunity to review the regulations in practice. Does the existing contract documentation correspond to daily practice? How much control do you have in terms of service delivery? What do you do when someone is offered work who chooses not to take it? If some of the five factors identified in the Uber case are known, action may be required to either discover the correct status or to reset the way the relationship is working in real life.

Firms engaging individuals through personal service companies will already be focused on conducting a similar status investigation to comply with the changes to the private sector off-site labor rules (IR35) due to come into effect in early April 2021.

There is no doubt that treating a person as an employee rather than a self-employed person costs more. Workers are entitled to national minimum wages, annual paid leave, rest breaks and, depending on the precise circumstances, may also be entitled to sickness benefits.

Such potential obligations can be included in future operating costs. However, the bigger headaches for employers who might be affected by these issues are likely the retrospective ramifications. Finding that a person is more of an employee than a self-employed entrepreneur will almost certainly establish that that person has worked as an employee for some time prior to the application, possibly since their first employment.

This means they receive compensation to get them into the position they should have been as employees. This remuneration can in particular include retroactive remuneration to meet the corresponding minimum wage during this period (plus possible penalties) and retroactive vacation pay. For a full-time contractor who has been determined to be an employee, vacation can be 28 days for each year of service. While there is a legal two-year period to backdate (i.e. a claim cannot go back over a period of more than two years), it is possible that the legality of this limit will soon be challenged in court. The financial consequences could therefore be far-reaching.