The Uber Judgement: An Employer’s Guide
Last week saw one of the most significant and eagerly awaited judgements in the history of employment law.
Former Uber drivers James Farrar and Yaseen Aslam took Uber to an employment tribunal in 2016 claiming that they were not self-employed and were in fact ‘workers’. They won their case at every stage from Employment Tribunal to the Court of Appeal but last week the Supreme Court called time on any further stage of appeal for Uber with its ruling.
What was Uber trying to argue?
Uber are seen as the kingpins of what has become known as the ‘gig economy’. They are an American company and are also involved in food delivery and courier services.
Uber has consistently argued that their drivers were self-employed contractors. This means that they did not have any of the rights afforded to employees or workers, such as the right to paid annual leave or minimum wage entitlements.
What is the ruling?
By declaring their drivers as self-employed contractors, Uber had been able to deem their drivers to be ‘working’ only when they had a customer in their cab. By ruling them as workers, this means that their drivers are classed as being at work from the moment they log on to the Uber app i.e., the start of their working day to the time they log off i.e., the end of their working day.
They are entitled to the minimum wage, paid annual leave, a workplace pension, the right to protection from discrimination and protection for ‘whistleblowing’.
How did the courts arrive at this decision?
The main issue here centres around control. Uber drivers were not able to set their own fares, they were penalised for rejecting fares, drivers faced having their contracts terminated if their low customer awarded star ratings did not improve and crucially Uber controlled the contractual terms their drivers had to sign.
In practical terms this meant that Uber controlled and dictated the working day, they also controlled their drivers earning potential and performance managed their drivers. This level of control essentially meant that the drivers were the subordinates in the relationship and hence the terms of the contract Uber tried to enforce were unlawful.
What happens next?
Uber say they have implemented some changes to working practices since the original tribunal ruling back in 2016 but what we will now see over the coming months and years are further legal challenges in the Employment Tribunals or County Courts for back payment of wages and annual leave.
It is estimated that the drivers will be able to claim as much as up to 2 years back pay (possibly more) for back pay at the Employment Tribunal or as much as 6 years back pay through the County Courts.
In short, it is going to cost Uber a lot of money, not to mention the impact this case has had on their reputation.
What is the difference between a worker and an employee?
This case has also highlighted a difference in status that not many people are aware of, namely that of a worker and an employee.
In the UK there are three types of employment status:
GOV.UK defines someone as a ‘worker’ if:
- they have a contractor other arrangement to do work or services personally for a reward (the contract doesn’t have to be written)
- their reward is for money or a benefit in kind, for example the promise of a contract or future work
- they only have a limited right to send someone else to do the work (subcontract)
- they have to turn up for work even if they don’t want to
- their employer has to have work for them to do as long as the contract or arrangement lasts
- they aren’t doing the work as part of their own limited company in an arrangement where the ‘employer’ is actually a customer or client
Workers are entitled to the following employment rights:
- the National Minimum Wage
- protection against unlawful deductions from wages
- the statutory minimum level of paid holiday
- the statutory minimum length of rest breaks
- to not work more than 48 hours on average per week or to opt out of this right if they choose
- protection against unlawful discrimination
- protection for ‘whistleblowing’– reporting wrongdoing in the workplace
- to not be treated less favourably if they work part-time
GOV.UK defines employees as someone who has extra employment rights and responsibilities that do not apply to workers who aren’t employees.
These rights include all the rights workers have and:
- Statutory Sick Pay
- statutory maternity, paternity, adoption and shared parental leave and pay (workers only get pay, not leave)
- minimum notice periods if their employment will be ending, for example if an employer is dismissing them
- protection against unfair dismissal
- the right to request flexible working
- time off for emergencies
- Statutory Redundancy Pay
Save only for protection against discrimination and health and safety protections, someone who is self-employed does not have any of the rights or entitlements afforded to workers or employees. For more information on employment status please see our previous article here.
What are the implications for smaller businesses?
It’s true to say that this ruling is a landmark one and will be sending shivers down the spines of many big business gig economy players but there are lessons which can be learned by smaller businesses too.
The main one is to ensure that the correct status is afforded to your workforce. If you are in doubt as to someone’s status or are in the process of appointing someone on a self-employed basis, the first thing to do is to seek our advice, but you should also ask yourself what you need from the arrangement.
For example, if you want to have control over the activities of the person carrying out the work such as setting their hours of work, place of work, the nature of the work and so on, this person is not going to be self-employed and to apply this status to them will likely result in costly claims.
Don’t get bound by the black and white terms of the contract, sometimes employment status can change. For example, we often find that zero hours workers start out being offered work on an ad-hoc basis but over time they start to establish a regular pattern of work. Even though the contract states you are not obligated to offer work, if you have offered 40 hours of work every week for the past 12 months, this person’s status has likely changed from worker to employee. If you suddenly stop offering work, don’t be surprised if this is challenged.
And finally…. employee status can be a tricky area fraught with claim traps. Its vital that you seek our advice to ensure that your business is protected.
Please quote your Client Account Number on all correspondence and telephone calls. 24-hour client advice line: 0800 151 2935.