Not All’s Fare in Taxis and Employment Law – Part 1
The Uber Case Part 1 of 3 – The Platform Economy and the Facts of the Case
Globally, we’re in the midst of an economic revolution that is disrupting economies, businesses, labour markets and our daily lives in a way not seen since the Industrial Revolution. Driven by tech innovation, increased online connectivity and accelerated by the COVID-19 pandemic, the star of digital labour market matching is rising. And at its centre, the rise of the platform economy featuring rapidly evolving tech as a key enabler.
The advancement of the gig economy through digital platforms is blazing a trail for the platform economy. Uber is arguably one of the biggest successes in the platform economy in the UK – a shining example of disruptive technologies shaking up outdated markets. Whilst this has provided new business and worker engagement opportunities, some might say it’s become a victim of its own success. As a result, there have been calls for a re-evaluation of laws and regulations to ensure that the platform economy fits into legal and tax frameworks as well as employment rights law, fair competition laws etc. Whilst Uber’s recent groundbreaking defeat in the Supreme Court (whereby Uber drivers have been designated “workers”) has sent shockwaves through the platform economy, it comes as no real surprise that legislation now looks to play catch up.
The ramifications of the ruling are manifold and will impact the decisions of any business operating in the UK that uses temporary workers. It may even affect investment decisions. The Office for Tax Simplification highlighted in its Gig economy Focus paper in November 2016 that “any reclassification of someone in the platform economy for employment rights purposes does not provide an automatic determination for tax purposes” and this uncertainty will undoubtedly cause problems for business investment.
The original 2016 Employment Tribunal heard a claim brought by 25 Uber drivers (sponsored by the GMB) for failure to provide paid leave, minimum wage and other workers’ rights under the National Minimum Wage Act 1998, Employment Rights Act 1996 and the Working Time Regulations 1998. Uber defended this by arguing that their drivers were self-employed and were not ‘workers’ and so wouldn’t be protected by the Acts and Regulations.
The outcome of the Employment Tribunal was that the claimants were found to be “workers” (broadly an individual with a contract who isn’t an employee but does have rights). One of the key considerations for this decision was the difference between when drivers had the Uber app switched on or off. It found that while the app was off, there was no question of a contractual obligation and that there was no over-arching contract. However, while the app was on, a driver was working and would fit under the definition of operating under a ‘worker’ contract.
Supreme Court ruling
Following the Employment Tribunal hearing, Uber appealed to the Employment Appeal Tribunal and then the Court of Appeal. When these were both dismissed, Uber appealed to the Supreme Court which then upheld the ruling that their drivers are classed as “workers” and therefore not considered self-employed on 19th February 2021.
The difference between legal status and tax status
Employment law distinguishes between three types of people but taxation only recognises the first two.
- Those employed under a contract
- Those self-employed who undertake work for their own clients and customers and are in business on their own account
- Those classified as “workers” or more specifically defined as:
Limb (a) worker – an individual with a contract of employment but who is not an employee (a bizarre concept but see the facts of the case in Autoclenz vs Belcher) and
Limb (b) worker – an individual with a contract other than a contract of employment who is entitled to basic employment rights including national minimum wage but not unfair dismissal
Some statutory rights are only applicable to employees working under a contract of employment. However other rights, such as those claimed in these proceedings, are applied to all ‘workers’.
Figure 1 The Distinction between legal status and tax status
The details of the Uber decision
This case was concerned with whether there was an employment contract between Uber drivers and Uber London or if drivers were providing services for, and under contracts made with, passengers (with Uber London acting as an agency).
The view of the Supreme Court was that there was no factual basis for Uber’s assertion that Uber London acted as an agent for drivers when accepting bookings and that the issue in this case was a statutory, not contractual, issue. The case, therefore, centred purely on whether the claimants fell within the legal definition of “worker” so as to qualify for those rights, irrespective of what was in the contracts.
In this case it was found that, although drivers were free to choose when and where they worked, when they were actually working they were doing so under contracts with Uber. There are five key points in the tribunal’s findings which are worth highlighting:
- The compensation the drivers received for their work was set and fixed by Uber and the drivers had no influence on it
- They performed their service based on contractual terms that were set and fixed by Uber
- When a driver had the app switched on, their ability to accept and / or reject trips was restricted by Uber
- The way in which drivers performed their services was controlled significantly by Uber
- Communication between drivers and passengers was restricted to the minimum necessary to perform the service
The Tribunal found that the heavy control exerted by Uber meant that the customer loyalty, goodwill and experience benefitted Uber, not the individual drivers.
Finally, these findings also pointed to the limited influence drivers had over their ability to improve their economic position through working with Uber. They had little, to no, ability to exercise entrepreneurial or professional skill. The only way they had to increase earnings was to work more hours whilst constantly, and consistently, meeting Uber’s performance measures.
Uber’s decision on 16th March 2021 to accept that their drivers are in fact Workers, and therefore entitled to Holiday Pay confirms that Platform Workers ARE all Workers in the eyes of the law. Ubers decision to also automatically enroll workers into a pension and make contributions as well seems to go beyond what the law requires.
Figure 2 Email sent to Uber customers on 17/03/2021
It remains to be seen whether this landmark decision will lead to Deliveroo postponing their recently announced IPO – at the very least, they can expect the float value to be significantly lower!