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UK Supreme Court decides Uber taxi-drivers are workers

  • United Kingdom
  • Employment law

19-02-2021

Nearly six years after claims were first issued, the Supreme Court has decided that a group of Uber taxi-drivers are workers, not self-employed contractors, for national minimum wage, holiday pay and whistleblowing protection purposes. This is despite Uber’s contractual documentation stating otherwise.

The judgment, from the UK’s highest appeal court, serves as a warning to businesses if their casual staffing models rely on written terms categorising workers as self-employed contractors, yet they exercise a degree of control over working arrangements. Even where there is no intention to create a sham arrangement, such contractual terms may be disregarded (should disputes arise as to employment status) if they do not reflect the true nature of the relationship and they defeat the purpose of statutory worker protections.

Background: determining employment status

In UK law, having ‘worker’ status is a passport to a range of employment rights such as the national minimum wage, holiday pay and access to a pension scheme, although the full array of employment rights, including statutory sick pay and protection against unfair dismissal, is reserved for the narrower category of workers commonly referred to as ‘employees’.

For a non-employee to qualify for worker status there will usually have to be a contract between the individual and the ‘employer’ under which the individual undertakes to do work personally, and the ‘employer’ must not be a client or customer of a business operated by the individual.

Determining whether an individual is genuinely self-employed and operating their own business, or a worker with a closer, more dependent relationship with their employer, is a question of fact and will depend on the individual circumstances. Over the years, a number of tests have emerged in case law which courts apply to help them decide which side of the line - self-employment or worker status – an individual falls.

These include whether the worker is under the control of the employer and whether they can send a substitute to perform the work. In interpreting the relationship between the individual and employer, it may also be legitimate for a court to disregard express written contractual terms between the parties where they do not describe the true agreement. This is because the organisation offering the work may be in a position to dictate terms where the individual lacks bargaining power.

Facts

A group of Uber taxi-drivers entered into Partner agreements with Uber to drive customers obtained through the Uber app. The Partner agreements portrayed the drivers as self-employed independent contractors.

The Employment Tribunal, Employment Appeal Tribunal and Court of Appeal (by a majority) agreed with the drivers that they were workers, not self-employed contractors. In all three decisions, the Partner agreements were judged to bear little relation to the real dealings between the parties and, accordingly, they were disregarded.

Supreme Court judgment

The Court unanimously rejected Uber’s appeal, determining that the drivers were workers. In so doing, it dismissed the significance of the contractual terms between Uber and the drivers when deciding worker status.

In particular, the Court decided that the contractual terms between the party should not be the starting point in determining whether an individual falls within the definition of a worker. It highlighted the risk that such terms might defeat the purpose of providing statutory workers’ rights (holiday pay, minimum wage etc), because the employer may dictate contractual terms for a vulnerable worker in such a way as to deprive them of these rights.

Furthermore, any terms which purport to classify the parties’ legal relationship or to prevent the contract from being interpreted as a worker’s contract are “of no effect and must be disregarded”.

Instead, the correct approach where workers are claiming statutory rights is to ask whether they qualify under the statutory provisions, irrespective of the contract.

This approach involves applying the statutory language, assessing the facts of the particular case and keeping in mind the purpose of the legislation. That purpose, according to the Court, is to protect “vulnerable workers from being paid too little for the work they do, required to work excessive hours or subjected to other forms of unfair treatment (such as being victimised for whistleblowing)”.

The degree of worker subordination and dependence upon the employer and the degree of control exercised over their work will be key tests and, per the Court: “the greater the extent of such control, the stronger the case for classifying the individual as a “worker” who is employed under a “worker’s contract”.”

In applying this approach to the drivers’ circumstances, the Court highlighted the following factors which show that the drivers worked for Uber:

  • Uber fixes remuneration and drivers have no say
  • contractual terms are dictated by Uber
  • once logged into the app, a driver’s choice about whether to accept requests for rides is constrained by Uber
  • Uber exercises significant control over the way in which drivers deliver their services
  • communication between driver and passenger are restricted to the minimum necessary

Finally, the Court also agreed with the lower courts in deciding that the drivers are “working” when the app is switched on and they are within their territory. This aspect of the decision is particularly fact-sensitive.

Practical implications for employers

This is a significant decision in favour of workers in the on-demand and gig economy, coming on the heels of a number of similar courier and driver tribunal decisions. Those businesses exercising close control of such casual labour, regardless of their written terms, should take note and conduct a review to assess the potential risks of misclassifying the status of their workforce, including the affordability and practicability of paying statutory minimum wage, pension auto-enrolment and holiday pay entitlements, as applicable.

The decision in this case does not however necessarily mean that cases brought by other workers will meet the same success: the fact-specific nature of status cases and the multifaceted test applied means that there will always be some uncertainty on the outcome. As such, this case is unlikely to be the end of the ongoing wave of cases in this area, with a number of others still waiting in the wings to be heard.

Further developments in this area look set to continue, including in Europe with the EU Commission’s upcoming consultation on gig economy regulation. In the meantime, action in respect of the UK government’s commitment to reform the gig economy to provide protection to workers continues to be delayed.