Uber drivers win in the Supreme Court – what does this mean for the gig economy?

On 19 February 2021 the Supreme Court handed down a unanimous judgment on the case of Aslam & Farrar v Uber, conclusively determining that Uber drivers are workers and not independent contractors as stated in their contracts. Many businesses rely on similar self-employed contractual arrangements as the cost of engaging workers is much higher. It will be interesting to see what steps companies will now take and how much this judgment will challenge the workings of the modern gig economy.

This judgment entitles Uber drivers to additional rights and protections such as national minimum wage, holiday pay and protection from a detriment for whistleblowing.

For Uber drivers, the court considered the following to be significant factors in their finding of worker status:

1. Uber drivers have no say in the remuneration paid to them for their work. The fare is automatically generated through the Uber app, the passenger’s card is then debited for the fare, and Uber pays its driver’s weekly based on the trips they have made, deducting a service fee.
2. The contractual terms on which drivers provide their services are dictated by Uber. Drivers are even provided with a welcome packet containing numerous instructions on how drivers should conduct themselves.
3. Once a driver is logged onto the Uber app, his or her ability to accept or refuse requests for rides is constrained by Uber. If a driver declines three requests in a row, they will be logged off from the Uber app and prevented from logging on for a period of time.
4. Uber exercises a significant degree of control over the way drivers deliver their services by imposing guidelines on the type of vehicle they use (including age, make, model and colour), and directing the drivers to the location where they are to pick up the passengers and drop them off. Uber also uses the rating system to monitor performance.
5. Uber restricts communication between the driver and passenger to the minimum required for the trip and prevents drivers from establishing relationships with passengers to extend the working relationship beyond one trip.

The Supreme Court held that drivers are greatly controlled by Uber, and their involvement in the business is to help develop brand loyalty to Uber rather than a loyal customer base for the individual drivers.

Effects on the gig economy

By far the biggest implication of this case for the gig economy is the approach taken by the court on contractual terms.

The court has emphasised that when considering the employment status of an individual it will look towards the general purpose of employment legislation to see what it is trying to protect. In the case of worker status, the purpose is “to protect vulnerable workers from being paid too little for the work they do, required to work excessive hours or subjected to other forms of unfair treatment.”

The court said that it would be inconsistent with the purpose of the legislation to treat the written contract as the starting point in determining whether an individual falls within the category of “worker”. This is because the employer usually has the power to dictate the terms of the contract, and the worker has little or no influence on those terms. To treat the contract as the starting point would therefore be incorrect.

Employers should therefore be mindful that the courts will adopt a zero-tolerance approach to the misclassification of workers and will place much more emphasis on the working relationship rather than its contractual terms.

Comments

Despite losing at every stage of this litigation, the dissenting judgment of Lord Justice Underhill in the Court of Appeal suggested that there may be an opportunity for Uber to argue successfully on appeal that their contracts were drafted to cover a genuinely complex self-employed relationship. This would reflect the flexible models of work that are currently available due to considerable advances in app-based technology in recent years.

The level of control which Uber exerts over their drivers throughout the contractual relationship and huge disparity of bargaining power between the parties was, perhaps unsurprisingly, fatal to Uber’s appeal. The judgment followed long established case law around employment status and its application to the Uber business model appears entirely sensible.

There are many businesses which rely heavily on similar self-employed contractual arrangements as part of the gig economy and so it will be very interesting to see what steps they may take to adapt their contractual arrangements. The Supreme Court has made it clear that having complex contracts which assert an individual is self-employed will not on its own be sufficient and the arrangements for work must be consistent with an individual working genuinely on their own account. No doubt this will not be last dispute over employment status in the gig economy.