From understanding expenses to starting a limited company, our downloadable business guides can help you.
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.
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.
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.
A worker is defined under the Employment Rights Act as (summarised):
An individual who has entered into or works under
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:
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:
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.
In November 2017 the Employment Appeal Tribunal confirmed that Uber drivers were workers and not self-employed contractors. Uber had appealed the tribunal decision saying that it was the “agent” for the drivers who themselves provided the transportation services. The EAT found that Uber were not simply an “agent”, the question to ask was that when the drivers were working, who were they working for? The EAT found that the original Tribunal were entitled to conclude that there was a contract between Uber and the drivers, where the drivers personally undertook work for Uber as part of its business of providing transport services to passengers. Drivers were integrated into it and they could not grow their own business and had no ability to negotiate terms with passengers and had to accept work on Uber’s terms.
They also considered whether drivers were ‘workers’ when they were between jobs (it was obvious they were working when they had a passenger in the car) – when the app was switched on and they were in the territory in which they worked and were ready and willing to accept trips. Uber said that during these times the driver could equally be logged onto the app of a competitor taxi business. The EAT felt that in reality once the driver had the Uber app switched on the driver was obliged to accept at least 80% of trips in order to retain their account status; if they had worked for a competitor during this time they were unlikely to be available for Uber work,
It was immediately expected that Uber would appeal but in December Uber was told it would not be allowed to immediately appeal to the Supreme Court, it must appeal to the Court of Appeal first. So the dispute goes on…..
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.
Unsure of the difference between cash-flow and capital? Business jargon can often be complicated, especially if you're just getting started. We've compiled a glossary of some often-used business and accounting terms and provided easy to understand definitions, with links to further info where appropriate.
You're thinking about growing your business - perhaps with new employees, a new office or forming a new limited company? Here's 10 things you need to know.