This is a hugely significant decision to the ‘gig economy’ workers as to whether they can be classed as ‘workers’ for the purposes of the Employment Rights Act 1996 and gain significant employment rights. The distinction as to the employment status is crucial as it means drivers would be entitled to the minimum wage, paid leave and other legal protection.
The court’s decision marks the end of a four-year legal battle between Uber and two of its former drivers, James Farrar and Yaseen Aslam. They brought a claim before the Employment Tribunal as they believed they should be considered workers rather than self-employed and therefore entitled to the minimum wage, paid leave and other legal protections. The Employment Appeal Tribunal, the High Court and the Court of Appeal all upheld the decision.
Uber argued that the drivers are independent, third party contractors and not workers. Lord Leggatt said that the court unanimously dismissed Uber’s appeal that it was merely an intermediary party and stated that drivers should considered to be working not only when driving a passenger, but whenever logged into the app. The drivers were working whenever they:
- Had the Uber app switched on
- Were within the territory in which they were authorised to work
- Were able to and willing to accept assignments.
In defending the case, Uber argued that it was simply a technology platform which put drivers in touch with passengers. However, the Tribunal looked at the practical implications of the operational agreement and determined that the definitions used in the contract did not reflect the actual reality of the arrangement in place, and accordingly determined that the drivers were in fact workers.
The Supreme Court described the relationship between Uber and their drivers as one of “subordination and dependency” and relied on five main reasons when making its decision:
- Uber sets the fares for each ride the drivers carry out and the drivers are not permitted to set their own prices as they would if they were self-employed
- Uber sets the terms and conditions of using its service and the drivers have no say in them
- Drivers face penalties for cancelling or not accepting rides – this constrains the driver’s ‘choice’ as to whether to accept work and sometimes prevents them from working
- Uber has significant control over the way that drivers work, as they face a rating system. If a drivers’ Uber rating falls below a certain level this could ultimately lead to warnings or even termination of their contract
- Uber takes active steps to prevent drivers and passengers from directly making any agreement by restricting communications outside of the Uber app.
This judgment reinforces the position that a tribunal or court will not be bound by contractual terms if they do not reflect the true nature of the relationship between the parties in practice. This principle could also apply to workers who may in reality be employees.
Does this Affect you?
If you engage self-employed individuals or workers then it is essential to review your contracts and consider updating them. This judgment signifies the importance of a contract accurately reflecting the working relationship in practice to avoid any future claims for compensation. For further information on this article or our fixed price HR packages, please contact Lisa Aitken on 07960 469988.