The end of the ‘gig economy’?

Will Carter, Solicitor in BPE’s Employment team, discusses the implications of the recent Supreme Court ruling that people working for Uber should actually be classed as employees and the potentially huge implications for some of the country’s biggest brands.

How did the Uber case come about?

Uber created an app which allowed people to order lifts in the same way as booking a taxi.  Their drivers were treated as independent contractors and were therefore not afforded the same rights or protection as employees or workers.  The Uber approach has been controversial.  Many traditional taxi drivers were aggrieved that Uber drivers didn’t have to abide by the same regulations they did and some Uber drivers themselves brought a claim to establish whether they should indeed be classed as employees or workers rather than contractors.

This legal action, which started in 2015, aimed to determine whether Uber drivers should be entitled to the benefits of employees, including holiday pay, receiving the national minimum wage and preventing unlawful deductions from their wages.

What was the ruling?

The original employment tribunal in 2016 held that the claimants were indeed ‘workers’ who worked for Uber London under ‘workers’ contracts’. This claim was upheld at the EAT, the Court of Appeal and has now been upheld by the Supreme Court.

A worker is defined as an individual who has:

• a contract whereby an individual undertakes to perform work or services for the other party;
• an undertaking to do the work or perform the services personally; and
• a requirement that the other party to the contract is not a client or customer of any profession or business undertaking carried on by the individual.

At the time the claim was brought, the only point in dispute was the first one, that a contract to perform work or services was not in place. There was no right to substitution, which gave Uber a certain amount of control over the drivers which is usually found in a worker relationship (and has been subject to previous caselaw).

In this case, the written agreement specified that this was not a working relationship. However, it was found that the written agreement should not be the only factor and that it was important to understand how the relationship worked practically too.

In reality, the tribunal found that Uber drivers were “very tightly defined and controlled by Uber and that the drivers had little or no ability to improve their individual economic position through professional or entrepreneurial skill.” The drivers were therefore workers and were ‘working’ when they had the app switched on, were in the right geographical area to provide lifts, and were ready and willing to provide lifts. If all these requirements were met, the driver then became entitled to be paid national minimum wage, rather than just for the lifts they do provide.

Now the Supreme Court has made its decision, the case will revert back to the employment tribunal to make a decision on the claims brought, which will likely become a remedy hearing rather to determine how much Uber owe.

 What implications does this have for the ‘gig economy’?

In the gig economy, individuals take on individual ‘gigs’ for each work – if they are not currently performing a particular gig, then they are not working.

Bizarrely, Uber have not accepted the decision applies to their other drivers, due to a change in terms, so they will still argue that their drivers are members of the gig economy. However, it is likely that this will change in the face of further litigation.  Other examples of those in the gig economy include Deliveroo riders. Deliveroo riders have their own case which is still to be determined.  The last decision in that matter found that they were genuinely self-employed, and not workers, due to the right of substitution. This may now change as a result of the Uber ruling.

Following the Uber decision, we are now more likely to see individuals fall under the definition of worker instead of self-employed or contractor. This will mean increased staff costs for companies and the potential of more employment tribunal claims.  This will inevitably affect margins and may see some companies within the gig economy unsustainable if they don’t make changes.

This case has also extended protection for vulnerable workers in subordinate or dependant relationships with their companies, without the need for government legislation in line with the Taylor Report. This additional protection has long been mooted by government who wish to avoid companies taking advantage of vulnerable workers who try to circumnavigate individuals’ employment rights using certain contractual wording.

What does this mean for you or your business, and what should you be doing now?

If you are part of the gig economy, we suggest that you take advice from our Employment team to determine whether the individuals will fall under the definition of workers and can then discuss how to deal with this situation with you. If they are workers, you will need to take steps to ensure that they receive proper compensation for their hours, for holiday, and for sickness absences.

For other businesses, you will likely see increasing costs for various services, such as postage (various postal services make up the gig economy) or for food deliveries for meetings for example.

For advice on this or any other employment related matters, please contact Will Carter at William.carter@bpe.co.uk or call 01242 248495 or another member of the BPE Employment team.

Full details of the team and the ways we can support you can be found at www.bpe.co.uk/employment

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