The Uber case: what next for the gig economy?

The victory of two Uber drivers in the employment tribunal has been hailed as the employment case of the year, if not the decade. But how radical is this decision and what impact will it really have on the UK labour market?

What is this all about?

19 Uber drivers had brought claims against Uber, seeking to establish that they were workers and therefore entitled to various statutory rights afforded to workers, principally the right to the national minimum wage and to paid holiday.

This case has been followed with interest, given the rise of the gig economy (see below) and uncertainty about the employment status of those working in it. With case law about employment status derived from more traditional forms of employment, it was unclear how the flexibility and benefits said to be available to those working in the gig economy would impact on future cases.

Those involved in running businesses in the gig economy and whose cost base relies on engaging self-employed individuals (not more expensive workers) were just as keen to know how safe this business model was.

What has been decided?

In late October 2016 the employment tribunal made a preliminary ruling that two Uber drivers selected as “test” claimants were engaged by Uber as workers. They were not, as Uber claimed, self-employed.

As things stand, that means that all 19 drivers involved in the proceedings will be able to claim the national minimum wage and paid holidays. The tribunal will need to have another hearing to decide how to assess the value of backdated claims for pay and holiday pay. However the tribunal has already ruled that the drivers were working when they had their apps switched on.

In practice the ruling will also apply to all Uber drivers engaged on the same terms, though this is disputed by Uber. This decision is subject to appeal, and as a first level decision will not be binding on employment tribunals hearing cases against other employers, even if the facts are similar.

Could things have been different?

The tribunal’s judgment includes a very detailed analysis of the contractual relationship between Uber (or to be more precise two separate Uber companies), the drivers and the passengers. This involved a review of some very complicated terms and conditions and an examination of the way the Uber recruits drivers and controls the service they offer.

In essence the tribunal decided that the arrangements fell on the wrong side of the (often thin) dividing line between workers and the “genuinely self-employed”. The test looks at a range of factors including personal service, mutuality of obligations and control. Control is often the determining factor, as it proved to be in this case.

Applying existing law to the new business model, the tribunal concluded that the drivers had no real control over setting fares or deciding on routes. Although they were free to work when they wished, they went through a selection process (known as “onboarding”) and could be penalised if they did not accept passengers once their app was switched on. In addition it could not realistically be said that Uber drivers had any kind of contractual relationship with their passengers.

The tribunal was, however, at pains to point out that Uber could have arranged things so that its drivers were self-employed. It follows that its ruling is simply about the precise arrangements under consideration in this case. It is not a ruling that workers in the gig economy can never be self-employed.

What is the Government planning to do?

The latest ONS figures reveal that the nearly 4.8 people in the UK labour market are now classified as self-employed – more than 15 per cent of all people in work. Official statistics also show that their pay has been declining, with median weekly earnings still lower in real terms than they were 20 years ago.

There is a growing perception that some self-employed individuals may be open to exploitation. Two separate initiatives to address these and other concerns have been announced in recent weeks:

• Matthew Taylor, a former advisor to Tony Blair, has been appointed by the Government to lead a review of “employment practices in the modern economy”. Among the issues it has been asked to consider is whether current definitions of employment status “need to be updated to reflect new forms of working created by emerging business models, such as on-demand platforms”.
• In what appears to be a separate initiative, the House of Commons Business, Energy and Industrial Strategy Committee has launched an inquiry into the future world of work, focussing 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 has to be said that previous reviews of this nature have not been productive, mainly due to the intractability of the problem. Part of the difficulty is down to the fact that there is a considerable overlap between employment and tax status, and these issues are considered by different Government departments and also different parts of the legal system, at least at first instance. However they really need to be tackled in tandem to achieve an effective solution.

In view of the popularity of this form of working and to avoid detrimentally affecting businesses working in this sector, it is possible the Government may look more at the lack of a safety net provided to the self-employed rather than impose employment status on those who may not want it. Alternatively it may need to look at the way the tax and national insurance system makes employing someone far more expensive than engaging that same person on a self-employed basis.

However, if the furore over zero hours worker is anything to go by, effective legal solutions may be harder to achieve than stirring up public indignation.

What are the wider implications?

There has been a range of reactions to the Uber case. Some have seen it as a major step forward for workers seeking to secure better terms and conditions. Others have suggested this battle is a rear-guard action by a small minority of drivers battling in vain against a major shift in the way labour is organised.

Whatever the end result of this case, even if confirmed on appeal, it cannot necessarily be read across to other aspects of the gig economy. Even services that are superficially similar – for example Deliveroo – maybe set up sufficiently differently to enable claims by would-be workers to be resisted.

This issue is not going away. Deliveroo has already received a request from a trade union to be recognised for collective bargaining purposes. This request can only be made if Deliveroo is engaging workers, rather than the self-employed. Not only is this seemingly a test of a new form of employment, but an area the unions may identify as a way to address declining union membership in the UK.

What is certain is that cases like this will increase the pressure on businesses to ensure that individuals working in this growing sector of the economy can earn a reasonable living and on the Government to ensure that responsible employers are not priced out of the market by ruthless competitors.

For those businesses involved in the gig economy in any way, now would be a good time to review their employment and cost models.