An Employment Tribunal was recently tasked with determining whether drivers for the mobile taxi-hailing service Uber were “workers” (within the meaning of the Employment Rights Act 1996 (ERA 1996)) or were self-employed contractors. Ultimately, the Tribunal determined that, for employment law purposes, Uber drivers were workers and as such were entitled to certain rights. The case attracted a high level of media interest, not least due to the huge cost implications to Uber in providing all drivers with annual leave and minimum wage. It also has potential implications for other businesses in the “gig economy” (where companies regularly contract with independent freelancers for short-term engagements).
Whilst Uber immediately announced their intention to appeal against the decision to the Employment Appeals Tribunal, and in all probability the matter will ultimately continue to the Supreme Court, it is quite likely that there will be an influx of claims against other companies with similar business models. So what is the difference between a worker and a self-employed contractor, and why does it matter?
A “worker” is defined by the ERA 1996. In short, a worker is an individual who has entered into or works under either (1) a contract of employment or (2) any other contract whereby the individual undertakes to do or perform personally any work or services for another party who is not (by virtue of the contract) a client or customer of the individual. The contract could be express or implied, and could be oral or in writing. This means that all employees are workers, but not all workers are employees. Someone who does not meet either of the two tests is usually considered to be genuinely self-employed for employment law purposes.
Neither party considered that there was a contract of employment; Uber were under no obligation to provide the drivers with work and they were under no obligation to accept any work offered to them (mutuality of obligation). The Tribunal therefore needed to consider: (a) whether there was a contract between the parties; (b) whether the drivers offered a personal service (i.e. they were unable to arrange for a substitute to do the work); and (c) the true nature of the business relationship between the drivers and Uber.
In respect of (a) and (b), the answers were clear: there certainly was a contract – indeed, the documentation was somewhat complex – and only the driver registered on the app could provide the services. The question ultimately came down to (c), the nature of the relationship. Cases relating to worker status have usually considered issues of mutuality of obligation (though a less stringent version than would apply in employment status cases) and control, and indeed the Tribunal focused significantly on the steps Uber had taken to control drivers in order to protect its brand image. Additionally, Uber could not be considered the client or customer of their drivers, and the suggestion that they acted purely as a platform working on behalf of drivers to connect them to their potential customers, rather than themselves supplying transportation services, was given short shrift.
The Tribunal also considered whether the contractual documentation reflected the true relationship between the parties. To this end the Tribunal noted that although Uber’s terms stated that they simply facilitated a contract between the driver and the customer, neither of those parties could bargain with the other regarding the terms. In the case of the driver, they did not even know the identity of the party with whom they were supposedly contracting. The Tribunal held that the terms of the contract could therefore be disregarded as they did not correspond with the reality of the arrangement, and that ultimately Uber drivers were workers when they were physically in the territory in which they were authorised to drive, had their app turned on and were ready and willing to accept fares.
Worker status gives certain employment rights to workers, although far less than those enjoyed by employees. However, it does ensure a right to the National Minimum Wage (or National Living Wage, as may apply), paid annual leave, minimum rest breaks and a right to pension contributions under the auto-enrolment scheme. With Uber estimated to have between 30,000 and 40,000 drivers in the UK, the cost implications are therefore tremendous.
The decision is likely to have a significant impact on the gig economy, which has seen significant growth with the development of mobile apps. Whilst many of these companies consider those working for them to be self-employed, this decision may highlight the fact that many are wrongly classified as self-employed and are being denied their rights. Bogus self-employment is also believed to cost the UK over £300m a year in lost tax and national insurance contributions. This decision is therefore unlikely to be the last word on the rules governing these businesses.
Matthew Cranton - Employment & Immigration
This article was first published on 11 November 2016 as part of our Employment Law Update series. Register above to receive our updates as soon as they are published, directly to your inbox!
This article is offered for general informational purposes only, and does not constitute legal advice. The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the views or opinions of Solomon Taylor & Shaw.