The Uber case has shown up the difficulties employment law has with many working arrangements in today’s “gig economy”. What are the implications for advisers and for the law?

“Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.” (Tom Goodwin, Havas Media)

Few businesses nowadays would not describe themselves as “tech” companies, given the importance of information technology in our lives. But for businesses in the so-called “gig economy”, tech is at the heart of everything they do. In the UK alone, the gig economy was estimated to be worth £0.5 billion in 2014; by 2025 the Office of National Statistics forecasts the sector’s worth to hit £9 billion. This hot topic cuts across the vexed issue of employment law status – that is, whether individuals who take on work on a piecemeal basis are workers, employees or truly self-employed independent contractors (as the companies who engage their services would prefer).

Employment status

The European Commission put out a short paper in June 2016 acknowledging the importance of the gig economy and its potential legal implications throughout the EU. It warned member states that placing bans and restrictions on businesses in the “collaborative economy” should be a “measure of last resort”, in a report that was mainly supportive of this growing sector.

However, the report really just scratches the surface, as it confirms that it is for member states to address the question of employment status at local level. The EU at least acknowledges the challenges businesses will face in accurately categorising the status of their workers in the gig economy, but it gives us very little help.

UK employment lawyers have been advising on employment status for many years. Whether car valeters, freelancers, security guards, football referees, or even lap-dancers, the question of employment status has plagued courts and employment tribunals, not to mention HMRC when looking at the appropriate tax treatment. Its profile was heightened a few years ago with the legislation for pension auto-enrolment, which covers the broader category of “worker”.

Increasingly the boundaries between worker and employee are blurred; this is all the more so when we look at individuals working in the gig economy. If, say, a delivery driver is given an app to use to provide their services to the public, provided with a uniform, expected to take on a set number of jobs, and ultimately rated on the service they provide, are they not truly employees or at least workers? Of course, the flipside is that if they can refuse a job or send a substitute to do the work, how could they rightly be viewed as an employee if there is no personal service?

This dilemma sets the stage for an individual worker’s legal rights – whether to unfair dismissal protection, national minimum wage, holidays or sick pay.

I can perhaps answer it simply with a take on the old saying “If it looks like a duck, and it quacks like a duck, it’s a duck.” If the individual looks like a worker and acts like a worker, are they not a worker? Certainly the courts have been determined to look behind the language of even the most tightly drafted contracts for purported independent contractors to find that the individual is truly an employee, or at least a worker, looking at the reality of the working relationship in practice.

The Uber decision

Perhaps the highest profile operator in the gig economy, Uber has already been the subject of litigation relating to employment law status. The employment tribunal issued its judgment on 28 October 2016 (Aslam and Farrar v Uber, 2202551/2015) in a claim brought by the GMB union as a test case on behalf of a number of Uber drivers in London. Similar litigation in San Francisco had been settled by the global company for multi-million dollars. An entry-level tribunal decision is, of course, not binding on future tribunals, but we can glean a number of themes from the judgment for future litigation in this area.

In short, the employment tribunal resoundingly found in favour of the drivers, holding that they were “workers” at law, and not self-employed independent contractors as their contracts said and Uber had tried to persuade the tribunal.

The tribunal rejected Uber’s submissions that it is simply a technology platform as opposed to a transport provider, and that its drivers are self-employed contractors offering their services to passengers via the app. In the tribunal’s view, any driver who has the app switched on, is within the territory in which he or she is authorised to work, and is able and willing to accept assignments is – for as long as those conditions are satisfied – working for Uber under a worker contract.

The tribunal also drew guidance from the findings of the North California District Court in a similar case, that “Uber does not simply sell software; it sells rides”.

The tribunal highlighted that Uber runs a business whose central function is the carrying of people in cars from one point to another and that it operates through a company regulated as a private hire vehicle operator. The “remarkable lengths” to which Uber had gone to compel agreement with its legal analysis merited “a degree of scepticism”. The tribunal noted that in correspondence with other bodies, Uber had boasted of providing job opportunities and potentially generating tens of thousands of jobs in the UK, and of paying its drivers on a commission basis. In the tribunal’s view, Uber's case did not correspond with the practical reality of the situation.

In emotive language, the tribunal decided that the notion that Uber in London was a mosaic of 30,000 small businesses linked by a common platform was “faintly ridiculous”. Apart from a few individuals who operated more than one vehicle on their Uber account, each such business consisted of an individual with a car, seeking to make a living by driving it.

On the key issue of the nature of the relationship between Uber and its drivers, the tribunal noted in particular that:

  • Uber interviews and recruits drivers;
  • Uber controls key information as to the passenger’s identity and intended destination and does not share this with drivers;
  • Uber requires drivers to accept and/or not to cancel trips and enforces this by logging off drivers who breach it;
  • Uber sets the default route for each trip and the driver may face deductions from their fare if they depart from it;
  • Uber fixes the fare and the driver cannot agree a higher sum with the passenger;
  • Uber imposes conditions on drivers, instructing them on how to do their work and controlling them in the performance of their duties;
  • Uber subjects drivers through its rating system to what is effectively a performance management/disciplinary procedure;
  • Uber accepts the risk of loss, for example where a passenger soils a vehicle; and
  • Uber handles passenger complaints.

This is highly likely not going to be the final word in this test case, as Uber has since confirmed its intention to appeal.

What the judgment means for advisers

If you happen to be advising an Uber driver, there is much for you to learn from this judgment. Bloggers have been quick to offer practical tips to drivers on how they might draw from this case in their use of the Uber tech platform to bolster their prospects of being found to be a worker.

For those advising employers, the crux of the Uber case surrounds the blurring of the boundaries between employees or workers on the one hand and truly self-employed independent contractors on the other. The hype is that this is the first major case to address these issues in the gig economy. However, the traditional tests of subordination, control and mutuality of obligation remain.

Uber is just the latest in the line of authorities on this subject. What was most pronounced was the tribunal’s determination to look behind the language of the contract. Uber found itself on the receiving end of a scathing assessment that the drivers were, in practice, workers despite the contracts that were designed to say otherwise.

Other tech businesses that rely on flexible short-term labour in the gig economy will be monitoring this case carefully. For all employers that rely on independent contractors, supply staff, “casuals” or freelancers to supplement their headcount, this case is another cautionary reminder to audit and sense check the status and length of service of such individuals to consider whether their contractual status accurately reflects the status quo of the services they provide.

What now for the gig economy?

Tech companies are disrupters in the market, no more so than in the gig economy. Haven’t we all got used to using clever and convenient apps for the delivery of our goods and services and for riding taxis? These businesses may come into established markets and rock the boat, whether with existing traditional businesses or in the face of established legal regulation. But is that not their point? Can we now live without them?

I wonder whether we have now become so used to them in this 24/7 world, that we might see consumer demand being so great that the law will have to adapt to accommodate them. Full-blown employment status could cripple the low-cost business model and sustainability of some of these tech businesses. Therefore, to cut through the uncertainty (and delays) of the litigation approach to determining employment status, we could now see Government intervention to regulate the industry fairly whilst acknowledging the importance of these high growth start-ups to the consumers who have come to rely on them.

My provocation is that the traditional tests of subordination, control and mutuality of obligation (which we employment lawyers get so excited about), are no longer fit for purpose in assessing the status of these workers. After all, the flexibility of picking and choosing “gigs” is generally why workers are attracted to this sector in the first place. We are moving away from a traditional 9 to 5 working day, as businesses grow and flex to meet changing customer habits. Who is to say that independent contractor status does not suit the majority of these workers anyway?

For small businesses in particular, there are cost savings to be had by bringing in pool labour for projects as and when needed to meet demand. And for workers, they are given the choice of what jobs to do, when and how much for, which can fit around family life and studies.

As Uber put it in their post-tribunal statement: “A recent poll of 1,000 drivers who use our app found that the overwhelming majority prefer being self-employed and joined Uber precisely because they want to be their own boss. Drivers want the freedom to decide where, when and for how long to drive: being classified as workers could deprive them of the personal flexibility they value.”

Law reform

In a report by the Recruitment & Employment Confederation, Gig economy – The Uberisation of work, 23% of businesses said they would be encouraged to increase their use of digital work platforms if the Government clarified the legal status and responsibilities of such platforms in the UK.

The Commons Select Committee on Business, Energy & Industrial Strategy launched an inquiry late last year into the future world of work. It focuses on the rapidly changing nature of work, and the status and rights of agency workers, the self-employed, and those working in the gig economy. It was open for submission in consultation until 19 December 2016.

The terms of reference include the definition of the term “worker” at law and the status and rights of agency workers, casual workers, and the self-employed (including those in the gig economy), for the purposes of tax, benefits and employment law.

The challenge, of course, is how the Government would go about defining the relevant categories. If the courts have struggled, how easy would it be to commit this to a clear definition open to statutory interpretation? For me, the boundaries between “employee” and “worker” have already blurred. Virtually all new employment legislation now favours the broader definition of “worker” rather than employee. As is apparent from the Uber case, the tribunal was quick to uphold a finding of “worker” status, albeit that full-blown employee status did not appear to have been pled.

As the distinction between “employee” and “worker” has become less clear, and with “worker” status being the direction of travel in any event, I wonder whether we could see two categories going forward: either an individual is truly self-employed, or they are a worker. In the former case, there is now a trend for organisations to contract with independent contractors via a “loan-out” services company (since a company could, itself, never be an employee at law). There remain tax (IR35) risks for the company, but this model is at least more certain from an employment status perspective.

The current legal definition of “worker” is focused on those who have a “contract or other arrangement to do work or services personally for a reward”. With some finessing, perhaps codifying the jurisprudential concepts of mutuality of obligation and no-substitution, we could see a more sophisticated statutory definition of worker on the one hand and the truly self-employed on the other. Watching what we wish for, this could of course pave the way for an extension to the right to claim unfair dismissal for a broader category of worker. However, as this right is only triggered after two years’ service anyway, either genuinely “casual” piece workers would not be caught, or if they are, perhaps they ought to be, given their length of service?

After decades of case law grappling with a mixed question of fact and law, lawyers are still in the unacceptable position of having to advise clients in individual cases that employment status is still uncertain. Perhaps finally with legislative intervention, the answer will be as easy as a duck taking to water.

The Author
David Morgan is a partner in Burness Paull LLP and an accredited specialist in employment law  
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