At the end of October 2016, an employment tribunal ruled that two Uber ‘test case’ drivers were not self-employed independent contractors but workers (for the purposes of the Employment Rights Act 1996, the National Minimum Wage Act 1988, and the Working Time Regulations 1998).
Please note: This post was last updated in April 2017.
This was the first case about job status in this part of what’s often called the gig economy. This was swiftly followed by a CitySprint case in February 2017, you can read the details here, and in March 2017, an Excel cycle courier case and it was announced that the GMB are representing 23 current and former workers of Parcel Delivery firm X who also believe they are not self-employed.
The decision means the drivers are entitled to the national living / minimum wage, sick pay (SSP), holiday pay, rest breaks, protection under whistle-blowing laws, and pension contributions (under pension auto-enrolment laws). As freelancers, they had no legal right to these benefits.
Uber had argued that its drivers, or ‘partners’ as it calls them, were self-employed independent operators, while GMB (the union representing them) argued they were in fact workers, because of the degree of control Uber has over them.
How the Tribunal described the Uber system
- Once a passenger request is received, Uber London locates the driver closest to the passenger and informs them via their smartphone app of the request.
- The driver has 10 seconds in which to accept the trip. If they do not respond within that time, another driver is allocated. The driver is only told the passenger’s first name at this point.
- If a driver accepts the job, they and the passenger are put into direct contact through the Uber App to communicate. Drivers are strongly discouraged from asking passengers for the destination before the pick-up.
- At the end of the trip, the fare is calculated by Uber based on GPS data from the driver’s smartphone, taking into account time spent and distance covered. This is the recommended fare, although drivers can agree lower fares with passengers.
- The passenger pays the fare to Uber and receives a receipt by email. Separately, Uber sends a document to the driver that looks like an invoice addressed to the passenger from the driver. This serves as a record of the trip and fare.
- Uber pays its drivers weekly – the fares they have earned less a ‘service fee’ for using the App, which is now 25% of the fare.
- Uber’s position is that drivers are at liberty to accept tips from passengers, but the Tribunal were shown documents that “evidence their disapproval of drivers soliciting tips”.
- If passengers complain that they have been overcharged (e.g. following an inefficient route), Uber considers the complaint and whether to compensate the passenger. If there is no proper ground for holding the driver at fault, Uber bears the loss.
Whether ‘personal service’ was required in the relationship between the drivers and the company
A worker is defined under the Employment Rights Act as (summarised):
An individual who has entered into or works under
- a contract of employment, or,
- any other contract, whether oral or in writing,
- where the individual undertakes to do or perform personally any work or services for another party to the contract.
Uber relied on the following to demonstrate their relationship with the drivers:
- Drivers can work for or through other organisations, including direct competitors
- Drivers must meet all the expenses associated with running their vehicles, including funding their Private Hire licences.
- Drivers are free to elect which ‘products’ to operate , e.g. which type of Uber service to provide as there are several driving services offered (the Tribunal dismissed this by saying “whose product range is it if not Uber’s?” – one driver can only offer one product).
- The Drivers treat themselves as self-employed for tax purposes.
- Drivers are not provided with any clothing or apparel that is an Uber uniform and in London are discouraged from displaying any Uber branding.
Uber also said in its defence that Uber drivers were never under any obligation to switch on the App and if they did they were not under any obligation to accept any driving assignments. Therefore, this was incompatible with the existence of any form of employment or contract.
The Tribunal accepted that there was no obligation to turn on the App but when the App was switched on “any driver who:
a) has the App switched on
b) is within the territory in which they are authorised to work, and
c) is able and willing to accept assignments
d) is, for so long as those conditions are satisfied, working for Uber under a ‘worker’ contract”.
Uber also suggested that they supplied the drivers with leads, which suggests the driver is put into contact with a possible passenger with whom they have the opportunity to negotiate and strike a bargain. But the Tribunal felt that the drivers do not and cannot negotiate fares with passengers (except to reduce the fare set by Uber). They are offered and accept trips strictly on Uber’s terms.
On the relationship between the drivers and the company, the Tribunal found that the drivers provide the skilled labour through which Uber delivers its services and earns its profits. Relevant factors included:
- Uber says it is the drivers’ agent but it has sole discretion to accept or decline bookings and controls key information such as the passenger’s name, contact details, and destination. Under its terms, access to the App is personal to the driver and cannot be transferred to someone else or shared, so there can be no ‘substitute’ drivers.
- It interviews and recruits drivers – drivers can sign up online but then must attend an induction at a specified location (Uber calls this ‘onboarding’). Uber denied anyone was interviewed, but in an e-mail from Uber in March 2015 it urged an applicant to ‘book an interview slot now’. The Tribunal accepted that Uber did not subject applicants to close interview scrutiny but there was an interview of some sorts.
- Drivers are not allowed to accept then cancel trips – if they did they are given warnings, which culminates in Uber logging them off the system for 10 minutes.
- Drivers are asked to accept 80% of trip requests to retain their “account status”.
- Uber sets the default route and the driver, if they deviate from it, must justify this. Uber also defines what vehicles are acceptable.
- Uber fixes the fares and takes the fare, the passengers do not pay the driver directly.
- It has a rating system that is essentially a performance management system and handles complaints sometimes without involving the driver. Uber requires that the drivers maintain an average 4.4 rating or above or else face “quality interventions”, which ultimately is Uber’s right to deactivate the driver’s access to the App and Uber services.
- In addition, Uber has a ‘Driver Offence Process’ to tackle more serious conduct, which is again a graduated series of measures against the driver, ultimately leading to ‘deactivation’.
- Uber reserves the power to amend drivers’ terms unilaterally (an unequal bargaining position).
- A ‘Welcome Packet’ given to drivers during onboarding includes information on “what Uber looks for”, such as high-quality service stats, low cancellation rates, and high acceptance rates.
Drivers’ working time
- Uber said that the drivers were only working when they were driving passengers.
- The Tribunal found that the drivers are ‘working’ when they have switched on the App, are in the ‘territory’ in which they are licensed to use it, and are ready and willing to accept trips (being available to take passengers was an essential part of the drivers’ service).
- This will have a large impact on the calculation of their national minimum wage payments as, currently, drivers don’t receive payment for time spent ‘waiting’.
The Tribunal’s view
The Tribunal was ultimately critical of Uber’s terms and conditions using “fictions, twisted language and even brand new terminology”, which did not reflect the reality of the situation of how they actually employ their drivers (an example being a description that “Uber drivers are commission based…” , which Uber said was a typographical error).
The decision is by a first-tier tribunal and so not binding on other tribunals. However, it will have implications wider than just costs for the whole ‘gig’ economy, even though it was fact-specific to Uber’s business model.
After the verdict, the Regional General Manager of Uber in the UK said “Tens of thousands of people in London drive with Uber precisely because they want to be self-employed and their own boss. The overwhelming majority of drivers who use the Uber app want to keep the freedom and flexibility of being able to drive when and where they want.”
There will, of course, be an appeal by Uber, and a further Tribunal to calculate the back-dated holiday and pay the drivers should receive.
Since the decision, apparently Uber has e-mailed its 40,000 UK drivers to claim the judgements would only affect the 2 drivers who brought the case. The GMB Union responded by saying it applied to all 40,000 drivers. This fight may go on for quite some time…
If you are an Employer and need ongoing professional help with any staff/freelance issues then talk to Lesley at The HR Kiosk – a Human Resources Consultancy for small businesses – our fees are low to reflect the pressures on small businesses and you can hire us for as much time as you need.
Please note that the advice given on this website and by our Advisors is guidance only and cannot be taken as an authoritative or current interpretation of the law. It can also not be seen as specific advice for individual cases. Please also note that there are differences in legislation in Northern Ireland.