The ruling against Uber casts a dark shadow over the gig economy. Government inquiry and legal challenges, whether businesses will be able to use the model ethically and lawfully is fuelling argument, for and against, and it’s likely to continue. Article by Clare Waller, Partner – Hewitsons,
In October last year, the London Central Employment Tribunal ruled against the firm and in favour of two of its drivers. The ruling is likely to be binding for all Uber drivers operating in the same way as these test complainants did. Uber had claimed the drivers were self-employed contractors who merely used its app to identify potential customers. However, the tribunal judges held that they were, in fact, ‘engaged’ by the company. Therefore, the drivers were entitled to be paid the National Minimum Wage, and to paid annual leave. Uber had gone to remarkable lengths to establish a self-employment relationship with its drivers, who had signed elaborate contracts with a holding company in Holland. The judges, however, concluded that ‘the lady doth protest too much’. They ruled that the documentation did not match the reality of the relationship between Uber and its drivers. This entitled the tribunal to disregard the parties’ express written terms, and to find out for itself what the reality of the relationship was. The tribunal held that the contracts specified that the drivers had agreed to work personally, not on behalf of any business they operated. As a result, the drivers were workers engaged by Uber, entitling them to the various worker protections covered by statute.
The tribunal’s key finding was the extent to which Uber controlled its drivers’ actions – dictating their fare prices and routes, and being able to sanction them by barring access to the app, either temporarily or permanently. All this, the judges ruled, constituted sufficient control to find that the drivers were indeed workers. Uber has stated its intention to appeal against the finding. Considering the significant liabilities that will result if the judgement is upheld (from National Insurance contributions and VAT), this litigation looks likely to continue for some time, despite the legal principles of employment status being well-established and unaltered by the ruling in this case. Further challenges to the gig economy are likely to come before the courts later this year, brought by Deliveroo and Hermes drivers. Additionally, investigations and inquiries into various aspects of the gig economy, as well as into the future world of work generally, are being carried out by HM Treasury; the department for Business, Energy and Industrial Strategy (BEIS); and the BEIS Select Committee. These bodies are likely to report later this year. (Critics say the level of Government interest may be explained by the fact that each ‘gig’ worker pays an estimated £3,000 less in taxes than he or she would if employed.)
For all these reasons, together with the gig economy’s high profile within certain streams of the media, these issues will continue to be at the forefront of debate throughout the remainder of 2017. Doubtless there will be many lessons to be learned as time goes on. For now, though, the clear lesson from the Uber case is that any business wanting to contract workers on a ‘per gig’ basis must ensure that the documentation matches the reality. Both parties must adhere to any paperwork signed to demonstrate an independent contracting relationship. If the reality is that the employer wants, or needs, to retain significant control over contractors’ operations, then in the event of a challenge the individuals will likely be found to be either employees or workers. This will entitle them to additional protections that the organisation may not have factored into its business model. It should also be noted that challenges may be brought not only by individuals, but also by HMRC, which has set up a new Employment Status and Intermediaries team to tackle false self-employment. A ‘gig’ style of working will certainly suit some seeking a flexible work-life balance. However, as happened with zero-hours contracts, the expansion of this model into relatively low-paid, low-skilled areas, as seen with Uber, has increased perceptions that it is exploitative and unfair. Any business benefitting from the gig economy, or looking to enter into it, must ensure that the reality of the situation matches the documentation, as this will protect not only the business, but also the individuals.