UK Supreme Court's Uber decision: Implications for gig economy companiesThe legal ruling hits the technology company’s business model, and similar companies are advised to consider the judgment.
The UK Supreme Court’s recent decision in the case brought by Uber, appealing an earlier Court of Appeal decision on the employment status of the company’s drivers, could have far-reaching implications for other businesses operating in the gig economy.
The 19 February judgment by the Supreme Court decided that under UK employment law, Uber drivers are classified as “workers”, who are therefore entitled to work benefits such as paid holiday. Uber had argued that the drivers were independent, third-party contractors.
The judgment is the conclusion of a legal dispute that started with an Employment Tribunal decision in 2016 and went subsequently to the UK Court of Appeal and then the Supreme Court.
Paul Jennings, a partner at UK law firm Bates Wells who represented two Uber drivers in the case, James Farrar and Yaseen Aslam, said in a press statement the decision provided “a powerful restatement” of the importance of basic employment protections that “will shape all future cases concerning the gig economy”.
He added “The ruling strikes at the heart of Uber’s business model. We anticipate there will be a significant class action against Uber. As a business, it will need to reflect very carefully on the implications of the judgment.”
Peter Steel, CIMA’s general counsel and vice-president–Professional Standards and Conduct, told FM that businesses operating in the same way as Uber in the UK are “likely to face a similar raft of claims from their contractors”. He said they could face “the potentially enormous cost of settling those claims and compensating their new employees for the benefits they should have received”.
He explained: “This does not mean, however, that all businesses using ‘gig workers’ will have to give them worker status. In the Uber case, the Supreme Court noted that the tight control exercised by Uber over drivers, who were effectively at Uber’s beck and call under contract terms dictated to them, meant that drivers could not really be considered independent contractors or ‘entrepreneurs’.
“The only way in practice for drivers to earn more money was to work longer hours, while also meeting Uber’s performance standards, so [they] had little opportunity to improve their economic status.”
Steel said this will not necessarily be the same for all such workers. “For instance, a Chartered Global Management Accountant [CGMA] who is project managing a particular short-term project for a Plc, or a self-employed lawyer undertaking sub-contracted work for another law firm may be much more likely to be considered [an independent contractor].”
“So the gig economy may not as yet be over, though there is no doubt it is in danger,” he added.
Uber said on its UK blog that “[s]elf-employment is nothing new to the taxi and private hire industry. In 2019–20, 83% of all taxi and private hire drivers in England were self-employed and one in four worked part time, a number which has been broadly stable over the last ten years.”
The 19 February post also said: “Worker is a UK specific legal classification, and a worker is not an employee. Employee status was not claimed in the litigation, and so this ruling does not find the claimants to be employees.”
In an earlier February company statement, Uber’s CEO Dara Khosrowshahi announced it was publishing a paper, A Better Deal, and called on policymakers and others “to come together to set a new standard for platform work”.
Khosrowshahi said: “After taking an honest look at how our platform has benefited workers — and, importantly, how it hasn’t — we’re committing to change.”
5 immediate questions for businesses
Steel said businesses operating in the UK that recognise similarities to Uber in the way they use contractors or gig workers “may want to consult their own employment law advisers to assess whether they can really claim that their people really are self-employed”.
He suggested that they could consider the five areas of Uber’s relationship with its drivers that the Supreme Court looked at and ask questions such as:
- How much control over the contractors’ work do we exercise?
- Do we give them the equipment for performing those services?
- Do we allow contractors to delegate or sub-contract the service?
- What degree of financial risk do the respective parties take?
- To what extent can the contractors actually manage the way in which they work or the volume of work they undertake for us?
The global implications for companies and workers are a bit uncertain.
In November in California, Uber was exempted from legislation that would have required the company to employ drivers and pay benefits.
The UK Supreme Court’s decision only impacts businesses operating in the UK.
Steel said that many other jurisdictions operate on similar principles, and the underlying question of how fair casual employment such as this is when the employer holds most or all of the bargaining power has “worldwide resonance”.
Pinar Ozcan, Ph.D., professor of entrepreneurship and innovation at Oxford’s Saïd Business School, said in a statement: “Research in this space shows that in order to make money as two-sided platforms, [which] are in essence matchmakers between users and providers of a service, platforms have to keep the power of their providers low in order to carve out some value to the platform itself.”
She said that the decision would cause more jurisdictions to question Uber’s practices, and in places where Uber cannot avoid giving employment benefits to drivers, the company’s costs have been predicted to increase by up to 30%.
“In the long run, as more and more people choose fluid work through digital platforms, and as more and more organisations hire a percentage of their workforce through these platforms, regulations will need to be adjusted to make sure that there is a less wide gap in laws between full-time and gig employment,” she suggested.
Meanwhile, on 24 February, the European Commission launched a “first stage” six-week consultation on how to improve working conditions for digital platform workers in the gig economy.
The EC said that around 11% of the EU workforce say they have already provided services through a platform. A European legislative initiative on improving the working conditions of platform workers is expected by the end of 2021.
— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is an FM magazine senior editor.