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What the Uber judgment really means for Uber drivers and the 'gig economy'

Employment solicitor Annie Powell looks at the impact of the Uber judgment in more depth

Posted on 17 November 2016

Last month an Employment Tribunal ruled that a group of 19 Uber drivers are workers, rejecting Uber’s argument that they are self-employed. This means that the drivers are entitled to workers’ rights including paid holiday and the right to receive at least the National Minimum Wage.

This is a significant victory and it is no doubt because of its significance that shortly after the judgment some who oppose its findings started to disseminate misleading information.

Notably, the day after the judgment Uber emailed its customers to say that the judgment only applied to “two drivers” and that “drivers want the freedom to decide where, when and for how long to drive: being classified as workers could deprive them of the personal flexibility they value.”  

The think tank the Institute of Economic Affairs, amongst others, also claimed that Uber is no different to AirBnB and Ebay with the implication that these companies may also have to provide workers’ rights to those who use the platforms to rent accommodation and sell goods.

These claims are all incorrect, as this article explains. It is vital that Uber drivers understand their rights and are not deterred from asserting them on the basis of false information, and policy makers need to understand the decision and how it will – and will not – affect other businesses.

Workers’ rights and the legal definition of “worker”

The 19 drivers who brought a claim had to show each of the following to succeed in their argument that they are workers:

  1. That they entered into a contract with Uber to work for Uber. In other words, that they agreed with Uber to carry out work in return for payment by Uber;
  2. That they had to carry out the work personally (i.e. that they could not freely use a substitute); and
  3. That Uber is not a customer or client of a business or profession carried on by each driver.


The arguments

The Claimants’ argument was straightforward. Put simply, Uber provides a transportation service to members of the public and Uber drivers work for Uber to enable Uber to deliver this service. The drivers are paid by Uber to carry out their work, they are not allowed to use a substitute and in no sense can Uber be said to be a customer or client of a business or profession carried on by the drivers.

Uber’s main defence was that Uber is not a transport company at all but a technology company, a mere internet platform to connect customers with lots of little driving businesses (i.e. Uber drivers) who then provide the customer with a driving service. According to Uber, under this matching arrangement Uber drivers contract directly with passengers to provide the driving service and, as such, drivers could not be workers for Uber because there was no contract to work for Uber.

This argument by Uber is clearly undermined by the fact that Uber pays the drivers, so Uber tried to argue that Uber is in fact only a payment collection agent for the drivers, a bit like Paypal, and that in reality the drivers are paid by customers and not by Uber.

Transport or technology company?

Uber’s argument that it is a technology company and not a transport company caused them difficulties, and not just because Uber holds private hire operators’ licences to allow them to operate a private hire business.

The Tribunal found that the heart of Uber’s enterprise is “the function of carrying people in motor cars” and that Uber offers customers a product range of different driving services. As the Tribunal put it, “whose product range is it if not Uber’s?”

Uber also struggled because it advertises itself to the public as a transport business and has described itself as such to Transport for London (TfL) (all 19 drivers worked in London so the case did not look at regulation outside the capital). Here are two of many examples:

“UberUK: Everyone’s Private Driver. Braving British weather to bring a reliable ride to your doorstep at the push of a button.” – Uber UK’s Twitter feed

“The fact that an Uber partner-driver only receives the destination for a trip fare when the passenger in the car is a safeguard that ensures that we [i.e. Uber] can provide a reliable service to everyone at all times, whatever their planned journey.”(Emphasis added) – Uber’s 2015 consultation response to TfL.

The Tribunal rejected the notion that Uber is not a transport company.

Contract with Uber or with customers?

The Tribunal found that the drivers and Uber entered into contracts under which the drivers make themselves available to carry Uber passengers in return for payment by Uber.

In relation to Uber’s argument that drivers contract directly with passengers, the Tribunal said: “we are satisfied that the supposed driver/passenger contract is a pure fiction which bears no relation to the real dealings and relationships between the parties.”

The Tribunal’s reasons include the following:

  • Passengers and drivers do not agree terms – the terms are already agreed between the passenger and Uber before the driver meets the passenger;
  • Uber sets the default route to be taken by the driver and Uber refuses to tell drivers the customer’s destination until the customer is in the car so as to prevent drivers from refusing a trip because they don’t want to go to the requested destination;
  • Uber refuses under any circumstances to give drivers any of the contact details for the passenger. Uber drivers will only ever receive a customer’s first name, while Uber holds their full details. How could Uber withhold customers’ details from drivers if Uber is the drivers’ agent and if drivers really did enter into a contract with the customer? And how would drivers be able to enforce the purported contract with the customers when they have no way of knowing who those customers are?
  • Uber pays the drivers because it is Uber’s legal responsibility to pay them.

In relation to the final point, Uber’s argument that it is just a payment collection agent faced the following problems.

First, Uber has told TfL that Uber pays drivers:

“Uber drivers are commission-based…Drivers are paid commission of 80% for every journey they take.” – Joanna Bertram, Uber’s General Manager for UK, Ireland and the Nordics. In other words, customers pay Uber for each journey, Uber takes 20% and then Uber pays the drivers their commission.

The Tribunal also found that Uber accepts in practice that it has a legal responsibility to pay the drivers for their work. For example, in instances of fraud by a passenger which results in Uber not being paid for a journey, Uber will still pay the driver for his work (provided that the driver should not have been aware that the journey was fraudulent).

Further, if something goes wrong with a journey but through no fault of the driver (due to road closures, for instance), Uber will sometimes partially refund the passenger. In these circumstances Uber does not deduct the refunded amount from the drivers’ pay.

These practices are inconsistent with Uber being a mere payment collection agent as in both Uber pays the drivers more than it has received from the customer and it bears the financial loss.

Uber as a customer of drivers’ businesses?

To succeed on this point, Uber would need to show that it was a customer of a business carried on by each driver, in the same way that, for example, you or I might be the customer of a plumber’s business when the plumber comes round to fix a boiler.

The Tribunal stated that the idea that Uber is a customer of each driver’s business is “absurd”. Here are just some of the reasons why the Tribunal found that drivers work for Uber as part of Uber’s business and are not in business on their own account:

  • Uber recruits and interviews drivers;
  • Uber subjects drivers to a “penalty” for refusing or cancelling  too many trip requests by logging drivers off the app for ten minutes and so preventing them from working;
  • Uber sets the fare the passengers pay and drivers cannot charge a higher sum;
  • Uber sets the default route a driver should take and, if a driver does not follow that route, Uber will make a deduction from his pay if a customer complains and the driver cannot justify the route taken;
  • If a customer pursues a complaint, they complain to Uber (not the driver) and Uber determines the complaint;  and
  • Uber has a performance management process for drivers based on the ratings system whereby customers rate drivers – for example, drivers with a low average rating are required to carry out mandatory training and if their ratings still don’t improve their contracts are terminated (or “deactivated”, as Uber calls it);
  • Uber accepts the risk of loss, for example if a passenger is fraudulent.

The differences between Uber and the likes of Ebay and AirBnB should now be clear. The fundamental difference is that, unlike Uber, Ebay and AirBnB genuinely are platforms which facilitate a direct contractual relationship between those who rent their accommodation / sell their goods and those who buy the goods and services. Ebay and AirBnB, for example, do not fix the price that individuals can charge, they do not pay those selling their goods / services and they do not bear the loss of non-payment.  

Who this will affect and why

Firstly the judgment clearly affects the 19 drivers who brought the claim (and not just the two lead Claimants as Uber falsely claimed). The reasoning behind the judgment should also apply to all Uber drivers, so tens of thousands of drivers can now bring a claim to assert their rights to paid leave and the National Minimum Wage.  

Also, contrary to Uber’s claims, there is no legal reason whatsoever why this judgment will lead to drivers losing their flexibility in terms of when and for how long they work.

Drivers are free to log on and work when they want. The Tribunal, taking into account all the circumstances of drivers’ working conditions including this ability to work when they want, found that they are, and always have been, workers. It is not only false but illogical to state that the Tribunal judgment means that Uber is now required to reduce drivers’ flexibility.

Uber’s success has been built on treating its drivers as workers and the only change the judgment requires is for Uber to give the Claimants workers’ rights. But Uber does not want to give any of its drivers workers’ rights and has stated that it will appeal the ruling.

Finally, while this judgment will only directly affect Uber drivers, we hope and expect that it will encourage other workers who think that they are wrongly classified as self-employed, both in the ‘gig’ economy and the wider economy, to come forward.

There have been numerous recent examples of companies who claim that large numbers of their workforce are self-employed, including Deliveroo and Hermes.  While these claims are yet to be tested, what this judgment has clearly illustrated is that Employment Tribunals will disregard a company’s classification of its staff as self-employed if in reality they are workers or employees, and this is true even if the company makes the worker sign up to a document stating that they are self-employed.