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14 November, 2016

Tribunal rules that Uber drivers are workers

In the highly publicised landmark test case brought by two Uber drivers the Central London Employment Tribunal concluded that they were not self-employed but were "workers" and therefore entitled to rights such as paid annual leave, whistleblower protection, and the national minimum wage.

This is the first major decision on the employment status of those working in the so-called gig economy and will have been waited for with interest by companies with similar business models and those working for them. There are about 40,000 Uber drivers in the UK and the government estimates that a record 4.79 million people are self-employed. There are similar claims being brought against courier companies such as City Sprint and Hermes and "on demand" companies such as Deliveroo.

Uber's case before the tribunal was that it did not provide a taxi service but is a technology platform which provides the means to connect the driver with the passenger through the Uber App. It argued that the drivers were self-employed as there was no obligation to switch on the App, the drivers supplied their own vehicles and were responsible for all running costs and the cost of private hire licences. However, the Tribunal found that once the App was switched on and the driver was within the territory where he was authorised to work and he was able and willing to accept assignments, then he was working for Uber under a "worker" contract. This time also counted as working time and the number of hours for national minimum wage purposes.

In reaching this conclusion the Tribunal looked behind the complex contractual documentation to the reality of the situation and also took into account things done and said in "unguarded moments" by Uber including its submission to the GLA Transport Scrutiny Committee where it boasted of potentially generating "tens of thousands of jobs in the UK".

In looking at the test for worker status the tribunal considered the level of control exerted by Uber over the drivers and whether they were in business on their own account. It found Uber controlled key information about the passenger, it determined the route, set the fare, logged off drivers who breached their response requirements and subjected them to a rating system akin to a performance management system. In looking at who took the financial risk in the business the Tribunal found that this lay with Uber who handled complaints, bore the cost of any passenger fraud and paid drivers an amount towards the cost of cleaning vehicles soiled by passengers. There was no means for the drivers to market themselves, substitution of another driver was not permitted, they could not negotiate with passengers, and the only way to increase their business was to spend more time behind the wheel all of which supported the view that the drivers were not in business on their own account and were workers.

Practical considerations

  • This is only a first instance decision and therefore non-binding on other tribunals. Uber has said it will appeal given the huge impact this decision will have on its business and it is likely to be some time before this is resolved.
  • The decision is very fact specific to Uber's business model and the tribunal itself noted that Uber could have devised a business model which did not involve them employing drivers but that the model they chose failed to achieve that aim.
  • It is important that documentation should reflect the reality of the working arrangement and that any message or information about the business model is consistent.
  • Employers with similar business models should take the opportunity to review their working arrangements and seek advice if in doubt. If individuals are found to be workers then in addition to any liability for unpaid holiday and underpayment of the national minimum wage the employer also faces potential tax and national insurance liabilities and other fines.
  • In response to a more general concern that as opposed to offering flexibility, those working in the gig economy are being exploited, the Government has launched an inquiry into the rights and working conditions of non-traditional employee roles. In addition HMRC is creating a new "Employment status and intermediaries team" which will focus on looking at false self-employment. Watch this space.

For further information, please contact Sarah Jane Brostoff on +44 (0)1242 246328 or [email protected].

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