A Curse in Disguise

Feature Article

A court ruling against Uber in the UK may not be as helpful to its drivers as it may appear

In November, a decision from the Employment Appeal Tribunal in the UK invoked a significant refashioning to Uber and potentially the gig economy as a whole. On November 10th the court held that Uber drivers were “workers” under UK law as opposed to self-employed, and thus were entitled to the rights and benefits conferred to them by law. This includes minimum wage as well as holiday pay.

The global transportation company, head-quartered in California, has quickly accomplished a great amount of success in a relatively short space of time. Since it launched in 2010, it has managed to deploy its ride-hailing platform in 400 cities globally. According to Bloomberg, it doubled its gross bookings in 2016 to $20 billion, adding to its $7 billion cash on hand.

In the UK, its success has been particularly impressive; in the last year revenues rose by 59% to £36.9m. Yet such success has also been disruptive, as turnover for the largest taxi and minicab firms in the UK fell for the first time in five years between 2014/15 and 2015/16.

Much of Uber’s domination has been helped by increase in the number of drivers offering its services. There are around 40,000 Uber drivers in London alone, up from 30,000 last year. It seemed inevitable then that these thousands of workers would eventually challenge Uber’s employment practices, since an increasingly large amount rely on it as a source of income.

This is exactly what happened in late 2016, when a group of Uber drivers brought a legal action against the company claiming that it was legally obliged to provide various employment rights to its drivers. The Employment Tribunal in London held that this was correct. The tribunal declared that Uber drivers were “workers” under the definition provided by section 230(3)(b) of the Employment Rights Act 1996. Thus, as workers, they were entitled to the rights provided for them under UK law. Accordingly the drivers’ working time should be calculated in accordance with section 2(1) of the Working Time Regulations 1998 (WTR) and they should be deemed to be engaged in “unmeasured work” for the purposes of the National Minimum Wage Regulation 2015 (NMWR).

In essence, the court ruled that the drivers were “workers” when all three of the following conditions were met when they were driving. First, the Uber app had to be switched on. Second, it had to be switched on within the territory in which they were authorised to work. Third, they had to be able and willing to accept assignments. The court found that when these conditions are satisfied, the drivers are accordingly entitled to the minimum wage and holiday pay.

The Employment Tribunal looked at how Uber worked in order to come to its decision last year. It described Uber as “an international transportation network which operates through a smartphone app.” It further identified that the fare for the journey, conducted by an Uber driver, to the designated destination of the passenger is “calculated by Uber’s servers, based on GPS data from the driver’s phone.” This fare is paid by the driver electronically and directly to Uber. The court also observed that “drivers were paid weekly by Uber in respect of the fares they had earned, minus a ‘service fee’ of 20% for the use of the app.”

Uber challenged all three of the tribunal’s findings in its appeal to the Employment Tribunal Appeal Court (EAT), which was heard earlier this year. Uber argued that it was a technology company merely acting as a platform linking self-employed drivers and passengers. This argument addressed the idea that the drivers were “employed” as “workers” which would be the case with a typical taxi company.

Uber substantiated this by citing the agreement it has with its drivers. Under this agreement, Uber labels its drivers as “independent contractors.” Under the heading “Relationship of the parties”, it is stipulated that “the Agreement is not an employment agreement [and] nor does it create an employment relationship…between Uber…and a Customer or any Driver.” Additionally, the agreement also says that “no joint venture, partnership, or agency relationship exists between Uber and Customer and any Driver.” Uber thus argues that its agreement conveys that the only contract which exists when a driver undertakes their work is between themselves and passengers, with Uber simply acting as a medium between the two.

Uber further argued that drivers were under no obligation to switch on the app or accept assignments offered to them. Such freedoms thus indicate that the drivers were independent and were not employed by Uber in the way described under the 1996 Act. Therefore, the company was under no obligation to provide the employment rights conferred to workers under the law.

David and Goliath

The EAT dismissed Uber’s appeal, rejected its arguments put forward and upheld the findings of the Employment Tribunal. The court agreed that Uber drivers are “workers” under the 1996 Act, and that the provisions of the WTR and NMWR applied to them. As such, the court maintained that it was right for the Employment Tribunal to apply the rule from Autoclenz v Belcher and Ors (2011) to base its decision when answering the question as to whether Uber drivers were “workers” or not. In that case, the UK Supreme Court held that, in the context of employment law, “where there is an inequality of bargaining power between…workers and…their employers [and] the written contracts drafted by the…employers do not reflect the reality of the relationship, the Court can disregard the written contracts and determine for itself what the true contractual arrangements between the parties are.”

Following this, the EAT agreed with the Employment Tribunal that, in this case, the agreement between Uber and its drivers, specifically the provisions relating to the relationship of the parties, did not in any way reflect the practical reality of their interactions and their relationship as a whole. The EAT upheld the perception that to suggest that Uber drivers were “independent contractors”, as stipulated in the contractual documents, was “absurd.”

The Employment Tribunal conveyed this absurdity by listing the number of ways in which the supposed freedom afforded to Uber drivers in order for them to be independent contractors did not exist. For example, the court said Uber imposed “numerous conditions on drivers (such as the limited choice of acceptable vehicles), instructs drivers as to how to do their work and, in numerous ways, controls them in performance of their duties.” Also, the court recognised that “Uber requires drivers to accept trips and…not to cancel trips, and enforces the requirement by logging off drivers who breach those requirements.”

The Employment Tribunal found that these realities, as well as others, were inconsistent with the idea that drivers were independent contractors. The tribunal believed that if drivers were in fact self-employed, they would have the discretion to accept and reject trips whenever they wanted, as well as use any vehicles they wanted. The EAT thus agreed with the Employment Tribunal’s ruling that Uber was more than merely a platform connecting drivers with customers.

The EAT concurred that the agreement was drafted by an “army of lawyers” engaged by Uber and did not reflect the reality of the situation. Instead, the reality in this case was that the drivers did fall within the definition provided by section 230(3)(b) of the 1996 Act. As such, an Uber driver, the EAT maintained, can be considered as “an individual who has entered into or works under…any contract, whether express or implied…whereby the individual undertakes to do or perform personally any work or services for another party to the contract.”

The ruling from the EAT is thus unequivocal; Uber drivers are employed by Uber and are therefore entitled to the rights and benefits provided by UK employment law. When Uber emphasis their use of technology “to give people what they want, when they want”, they may now have to do so for their drivers as well as their customers.

Going Driverless

Uber is not likely to give up; it may very well appeal to the Court of Appeal. The case could even end up in the Supreme Court. This is because the decision of the case will have an immensely significant impact not just on Uber, but the gig economy in the UK as whole. A legal challenge is also being brought against Deliveroo, a food delivery platform, on similar grounds found in this case. A ruling against tech companies like this will place heavy burdens which they perhaps did not contemplate before.

But a loss for Uber in particular could result in something else too. It is quite possible, that if Uber were to be legally obliged to treat its drivers as workers, it may push on further with its driverless cars program. Since first testing its own such vehicles in May 2016, and despite some crashes since, the project still appears to be going strong. Investment in automobile start-ups overall has soared in recent years. Even the UK government recently announced its commitment to get driverless cars on the roads by 2021.

So while a loss for Uber may be win for its drivers in the short-term, such a ruling cannot stop the rise of AI-driven technological innovations in the long-term. That technology may come with its own distinct legal implications, but they may do little to help the job-security of some in the UK economy. The protection provided by the EAT’s ruling may only thus go so far.

Sources:

Aslam v Uber BV [2017] IRLR 4

Uber v Aslam (2017)

Employment Rights Act 1996

Working Time Regulations 1998

National Minimum Wage Regulations 2015