Uber UK Judgment – when is a contractor really a worker/employee?

November 2016

In the recent case of Mr. Aslam, Mr Farrar & Ors v Uber, an Employment Tribunal in the UK rejected the contention that drivers for Uber are self-employed contractors and are in reality entitled to be deemed “workers” (but not full employees) of Uber. The potential implications of this decision are vast, not only for Uber but for other companies utilising a similar business model as Uber – i.e., linking supply and demand through a technology platform, utilising self-employed/independent contractors.  Uber has stated it will appeal the decision. As the Employment Tribunal is the court of first instance, the matter is likely to go through a number of appeals before being determined with finality.

Why were the drivers deemed workers when they signed up to a contract as a self-employed driver?

What the contract states is only the beginning; the law will look behind the contract to establish the fact of the relationship. UK law, similar to the law in Ireland, assesses whether a worker is really an employee based on a variety of factors, mainly relating to the level of control, mutuality of obligations and economic risk each party has in the relationship. In reality, a self-employed person has control over what work they take, they can delegate the work with no repercussions, they can negotiate their fees, pay their own taxes, decide when they take time off, and most importantly, they carry the economic risk and benefit of the business.

What were the relevant factors considered?

In this case, Uber maintains most of the control regarding the drivers’ work and allows limited flexibility. Uber is described as the “agent” in the contract, however, it reserves ‘sole and absolute’ discretion to decline bookings; Uber interviews and recruits its drivers; Uber controls key information regarding the job such as the client contact details and destination; Uber penalises drivers if they do not accept a certain number of trips by logging them off the system for a period; Uber set out the route for the driver to take and fixes the fare (although the driver may deviate from the route, s/he does so at risk of penalty).

In terms of the performance of the job, Uber imposes conditions on its drivers – Uber instructs drivers how to do their job; Uber controls a drivers performance as it imposes a rating system which is effectively a disciplinary procedure; Uber determines rebate issues sometimes without reference to its driver; Uber had (but no longer has) a guaranteed earnings scheme; Uber accepts risk of loss;  Uber deals with complaints directly and finally, Uber reserves the power to amend its terms unilaterally.

What does this mean for Uber?

As the drivers are now classed as limb b “workers” (under UK law there are two types of workers – limb a) an employee with full employment rights and limb b) workers with more limited employment rights due to nature of their position), the drivers are entitled to a substantial amount of employment rights derived under both EU law and UK local laws such as minimum wage, annual leave, protection from discrimination. Further, Uber will be obliged to pay taxes on behalf of its drivers as an employer and this is no small matter – Uber works with approximately 40,000 drivers in the UK (although Uber maintain that this judgment only relates to the drivers who took the case).

Are there knock on implications?

All companies using this business model, a technology platform of linking supply and demand, which use independent contractors rather than employees to carry out its work, may find themselves under scrutiny as to the reality of the situation.

Start-up companies struggling for cash flow who use a similar model may unwittingly find themselves as employers and find it harder to compete to survive. Companies who are thriving on the same model, may unexpectedly be an employer of hundreds of employees, owing money to Revenue and suddenly open to a myriad of claims for various breaches of employment rights that may affect their ability to continue in business.

What if a similar judgment is made in Ireland?

Ireland does not have a distinction between types of workers as the UK does – a person is either an employee or an independent contractor. If the judgment is followed here (which may be likely given the persuasive authority UK courts have in this jurisdiction), the “self-employed” workers (in any given business sphere) would be deemed employees and would be entitled to the full suite of employment rights. Unlike the UK, this would extend to all employment laws and would include protection from unfair dismissals, redundancy as well as the basic employment equality rights and protection of part time/fixed term workers and maternity/paternity leave amongst others.

My company uses a similar model – how do I know if I am an employer?

It is important to remember that there is no prohibition on using independent contractors but the law will not allow companies to avoid their obligations if they are in fact employers.

The true nature of the agreement in place is what is taken into account when examining the relationship. Steps to take are to immediately review the contracts of service you have with your contractors with the following questions in mind – what level of control do I hold over this arrangement? Who pays the taxes? Who holds the risk? Who has responsibility for maintaining the equipment? Do I instruct the contractor how to carry out their job? Are there any penalties imposed on the contractor on a gradual basis for non-performance that is akin to a disciplinary procedure? If you find that you are in fact in control of most matters, it may be the time to make changes to your contracts in order to allow flexibility for both parties to maintain their relationship status within the parameters of the law.

For more information, contact your usual Whitney Moore contact or Marie Claire Scullion in our Employment Group.