Over the past seven years, technology company Uber has grown to one of the biggest companies in the world. Uber allows users to book drivers via a mobile phone app connected to their location. It also allows anyone who passes Uber’s criteria to become a “self-employed” Uber driver and set their own hours of work by simply logging on to the app. Over 30,000 Uber drivers already exist in London.
So what is the current issue? Why are so many drivers, who are free to choose their own hours and jobs so disgruntled with Uber? The answer lies in their employment status and the employment rights associated with that status.
On 20 July 2016, two Uber workers took their case to the Central London Employment Tribunal. Their claim, denied by Uber, is that they are wrongly classified as self-employed contractors and instead should be classified as “workers”, a status which gives them access to greater employment rights. Uber argues that they are purely a technology company with whom “driving partners” sign up to to access their customer base and, as a result, they have correctly classified the drivers as self-employed.
What does the law currently say?
In general terms the UK has three main types of employment status: employee; worker; and self-employed. The type of status an individual has dictates the level of employment protection they receive.
Employees: Employees receive the highest level of statutory protection under UK law. This is the most common agreement between individuals and businesses and relates to an individual who works under a contract of employment.
Worker: Workers receive fewer rights than employees, however they are still entitled to claim National Minimum Wage and paid annual leave, for example. They do not have unfair dismissal rights or rights to a redundancy payment, amongst others. A worker is deemed to be an individual who performs work or services for another party and is most commonly found through the use of agency and casual zero hour contract workers.
Self-Employed: also known as independent contractors or consultants, self-employed individuals who are described as being in business on their own account whilst providing services to businesses. Despite having the least amount of statutory protection, there are a number of benefits of being self-employed including tax benefits and flexibility in working patterns.
Ascertaining the status of an individual is not always as straight forward as reviewing their contract. It is not uncommon for Employment Tribunals to disregard the label given to an individual in a contract or other document, whilst instead looking at the evidence of an individual’s day to day working arrangements. To ascertain status, Tribunals will look at a number of tests including, but not limited to: the mutuality of obligation between the individual and the business; how much control the business has over the individual; who provides the equipment used to undertake such work; and the tax position of the parties. None of these tests on their own are taken as a definitive answer to the employment status question, instead collective consideration of the reality of each individual situation is considered before reaching a decision. This can make the question of employment status often very difficult to answer.
The Uber drivers bringing the current claims are trying to convince the Employment Tribunal that they have been misclassified as self-employed and should instead be deemed as workers. Should they succeed it is likely that Uber would face huge payouts to drivers claiming up to 2 years’ back pay for unpaid holiday pay, and in some instances, for breaches of National Minimum Wage.
Do the drivers have a case?
In Autoclenz v Belcher, the leading case on employment status in the UK, the Supreme Court gave guidance on how courts and tribunals should approach the topic of employment status in such instances. In this case, Autoclenz took on a number of self-employed individuals to wash vehicles. The individual’s contracts all stated that they were self-employed, that they could accept or reject shifts and that they could replace themselves with another person should they wish. Such clauses are common in contracts for self-employed individuals and assist companies in strengthening the fact that the relationship is purely that of a self-employed individual. The individuals in this case were to be paid per vehicle cleaned, which at times meant that they were earning less than minimum wage for their time spent working.
In reality, the day to day working of the individuals did not reflect the terms of the contract provided. In particular, the rejection of individuals to work shifts and the replacement of individuals for people of their own choice rarely happened. What did occur was that Autoclenz provided the individuals with uniforms and the materials to wash vehicles with and held a degree of control over the individuals during working hours by dictating their jobs. Taking all of this into account the court ruled that the individuals were employees of Autoclenz, and not self-employed. They were therefore entitled to receive National Minimum Wage and holiday pay.
Applying the principles in the Autoclenz case, the drivers in the Uber case will need to evidence that Uber has a certain degree of control over them whilst they carry out their work. It is clear that no materials, other than the downloadable mobile phone app, are provided by Uber to the drivers. Drivers use their own vehicles and supply their own fuel and insurance. Whilst these facts are not terminal to the drivers’ case, they certainly add weight to any defence Uber may have in the claim.
The counter argument for drivers is the way that Uber monitors their work. All Uber drivers are awarded a rating out of five which the passenger votes for following their journey. Should that rating fall below what Uber deem to be an acceptable level then Uber terminates the driver’s access to the system.
The outcome of the case is eagerly awaited by employment law specialists and the media alike. Should the drivers be successful it is anticipated that individuals signed up to similar business models such as Lyft and Deliveroo could launch their own claims in the Employment Tribunal. Whatever the outcome of the case it is highly likely that the losing side will appeal to the Employment Appeal Tribunal which means this matter may rumble on for some time yet.
What does this mean for you or your business?
Whilst a final judgment in this specific case, including any subsequent appeals, may be some time away, the issue of misclassification of employment status is very much a live issue. Businesses should ensure that their current setup of staff status, including contractors and workers, match the reality of the day to day processes of the individuals concerned. Failure to correctly categorise individuals could see businesses liable for large pay-outs, not only to the individuals themselves but also to HMRC who would likely investigate any tax breaks gained by employers or individuals in such circumstances.
These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.