updated on 07 April 2021
Being aware of which category of worker one falls into is important because it determines the level of rights and protections afforded by law. There are three main categories:
The distinction between these three classes is a difficult one to draw and an extensive task which the courts have grappled with for many years.
Caselaw adopts dated terminology like ‘master and servant’ or a ‘contract of service’ when referring to employees and a ‘contract for service’ when referring to a genuine self-employed person.
Over the years the courts have toyed with various divisive tests to determine an individual’s employment status, including the control test, integration test and economic reality test. Courts and tribunals now adopt a holistic approach by looking at multiple factors indicating status, including but not limited to whether the employer exercises control over the worker’s operations, if there is a right to substitute (however such clauses which can never conceivably be used are liable to be a ‘sham’ see Elias J in Consistent Group Ltd v Kalwak and others), and whether there is mutuality of obligation.
It must be acknowledged that labels of status are indicative but not conclusive. Ready Mixed Concrete Ltd v Minister of Pensions held that the nomenclature used is determinative but not conclusive (ie, looking at substance). A tribunal may depart from a self-imposed label if it is manifestly incorrect as to the true representation of the actual agreement in practice or where it defrauds HMRC (where the doctrine of illegality would be invoked to prevent any benefit obtained to the individual).
Mutuality of obligation means offering work and accepting thereof. Employment contracts can be divided into two types. First, most contracts aim to fill in a particular role lasting for a certain duration (eg, days, weeks, months, years or indefinitely). Second, other contracts aim to carry out tasks or engagements where the individual works intermittently. The so-called gig economy rely on the latter whereby individuals are assigned work as and when it becomes available provided they can work. Due to the nature of their work, gig workers are not provided with much job security or guaranteed hours from their employer due to benefitting from flexibility.
For a long time, there has been uncertainty around the status afforded to gig workers (ie, individuals employed under short-term contracts without permanent employment). The long-drawn-out debate regarding how gig workers should be regulated and what corresponding entitlements they should receive was finally clarified and settled in the landmark decision Uber BV v Aslam and others, which concerned claims for the failure to pay the minimum wage and provide paid leave.
The decision applies to the 25 drivers who brought forward the claim but no doubt sets an important precedent for the treatment of gig economy workers who have previously been in a precarious uncertain position.
Six justices in the highest court of the land unanimously held that Uber drivers must be regarded as working for Uber London Limited (ULL) as a ‘limb (b) worker’ as opposed to self-employed or independent contractors.
Ramifications for Uber drivers
Workers are entitled to the following basic statutory protections:
Uber BV v Aslam and others
On 19th July 2016, the Employment Tribunal (ET) at first instance ruled in favour of two former Uber drivers, Aslam and James Farrar holding them as ‘workers’ within the meaning of s230(3)(b) of the Employment Rights Act 1996 (ERA), National Minimum Wage Act 1998 (NMWA) and Working Time Regulations 1998 (WTR). Their working time started when they had the “App switched on and was ready and willing to accept trips”. Further, the ET stated that drivers are in a “position of subordination and dependency to Uber”.
Subsequently, Uber’s grounds of appeal to the Employment Appeal Tribunal (EAT) were that the lower tribunal “had erred in law in disregarding the written contractual documentation”. Applying Autoclenz’s authority, Judge Eady dismissed the appeal holding that the ET had been correct to regard the “reality of the obligations and of the factual situation” over the particular language adopted by the parties. She agreed with the ET’s findings.
Their claim was upheld in the EAT, the Court of Appeal and now, after a two-day hearing in July 2020, the Supreme Court judgment delivered on 19th February 2021 has similarly firmly entrenched the decision. Uber has lost four times in total over its treatment of its drivers.
The Supreme Court confirmed Autoclenz’s case – “the written documentation may not reflect the reality of the relationship. The parties' actual agreement must be determined by examining all the circumstances, of which the written agreement is only a part”. Therefore, the written contract is not then the beginning and the end, and the tribunal is entitled to look at the reality of the working arrangements.
Further, the court concluded five reasons inclining worker status. First Uber dictated the remuneration of drivers (eg, drivers are not permitted to charge more than the fare calculated by the app).
Second drivers have little to no bargaining power to negotiate their own written terms of contract. It is simply imposed on them by the employer.
Third, once a driver has logged on to the app, Uber monitors their ‘acceptance of trips’ rate and imposes penalties that influence drivers’ decision-making.
Fourth, the court found that Uber exercises a significant degree of control over their workers (ie, how drivers deliver their service, a passenger ratings system and setting fares, etc). This was sufficient to conclude a worker status.
Finally, the court determined that Uber restricts drivers from forming any relationship with its passengers, beyond the minimum necessary to perform the trip.
Lord Leggatt dismissed Uber’s arguments of agency (ie, that there was a direct contractual relationship between the passenger/rider and the driver itself). Uber argued that as a matter of agency, they were not privy to that contract as a licenced private operator. They contended that all Uber drivers were running their own mini-businesses and they were just a platform to connect them with clients. However, due to the amount of control, this was dismissed.
Leggatt observed that “on the facts found in the present case… I think it clear that the employment tribunal was entitled to find that the claimant drivers were ‘workers’ who worked for Uber London under ‘worker’s contracts’ within the meaning of the statutory definition. Indeed, that was, in my opinion, the only conclusion which the tribunal could reasonably have reached”.
The trade union GMB said it will now consult with the 25 Uber driver members over a forthcoming compensation claim at the EAT, which could take several months due to covid-19.
However, this decision has opened the floodgates for around 1000 other similar claims against Uber. If these claims succeed, this could potentially adversely damage Uber’s bottom line. Prior to its Initial Public Offering, the company aimed to reduce its operational losses which at the time stood at $3 billion.
Katie Maguire, a partner at Devonshires, stated: ”The ruling will come as a blow to Uber and other companies using gig economy workers and they will now need to alter their business models. This may well result in an increase in costs that they face as a result of this judgment being passed on to the consumer.”
In 2016 there were about 40,000 UK Uber drivers of which 30,000 were in London. Commentators have estimated that the ruling could cost Uber more than £100 million.
Other companies such as Ola, Addison Lee and Deliveroo also operate similar business models where individuals are hired on an assignment basis. Although this judgment does not automatically grant everyone in the gig economy sector immediate ‘worker’ status it certainly opens the door for them to bring similar legal challenges using this precedent. For example, The App Drivers and Couriers Union (ADCU), a trade union representing UK Uber drivers filed a claim against Uber challenging being “fired by algorithm” for contravening Article 22 of the EU General Data Protection Regulation (GDPR).
The gig economy accounts for around 60,000 drivers in the UK. Trades Union Congress figures highlighted in 2019 that approximately five million people were employed within the UK’s gig economy. The pandemic’s effect is likely to have increased these figures.
In response to the Taylor Review in 2017, the government published the Good Work Plan in December 2018. A subsequent report recommended need for a greater balance between flexibility and employment rights and more security and certainty for gig economy workers.
In the US Uber (along with powerful tech companies, including Instacart, Doordash and Lyft) lobbied intensively for legislation called Proposition 22 to exempt them from a California labour law. They even threatened to pull out of California if the courts decided otherwise.
The UK's decision comes as new legislation is being drafted by the European Commission which is expected to announce whether further scrutiny is required on the gig economy.
Uber has recently released a white paper (February 2021), which suggests establishing a ‘portable benefits fund’. It aims to lobby EU policymakers to provide a ‘new standard’ of work.
Fatima Mumtaz is a post-graduate LLM student.