Outcome of Uber’s UK employment status case still remains uncertain Outcome of Uber’s UK employment status case still remains uncertain

Outcome of Uber’s UK employment status case still remains uncertain
30 Jan 2019

The UK Court of Appeal’s decision to uphold the Employment Appeal Tribunal’s (EAT’s) ruling that Uber drivers are ‘workers’ and therefore entitled to certain employment rights, may still not be the end of the road for the long-running employment status case.

The Uber lawsuit is one of a multitude over recent years concerning individuals working in the so-called gig economy. The courts’ focus here has been to determine an individual’s employment status, that is, whether they are independent contractors – for example, whether they are self-employed or genuinely running their own business providing services to their own clients - workers or employees. 

In the case of employees, there exists a traditional ‘master and servant’ relationship, where a staff member works under a contract providing personal services to their employer - for example, they cannot send a substitute if they take time off work. They are under the control and direction of that employer and are also subject to other factors, such as whether they are provided with tools and equipment or paid a fixed wage or salary. 

There are two types of worker status though:

  1. An employee who works under an employment contract;
  2. A worker who may provide personal services under a contract in which the other party is not their client. This second type is known as a limb (b) and is neither an employee nor self-employed. Instead their status is much more nebulous.

Having worker status, as opposed to being an independent contractor, provides individuals with better workplace protection. Workers are covered under national minimum wage legislation, are entitled to minimum paid statutory holiday, have the right to statutory rest periods under the Working Time Regulations 1998 and are protected against unlawful deduction from their wages.

Even if the contract between an employer and an individual states they are working in a self-employed capacity, a tribunal or court is entitled to look behind the contract if, in practice, it does not reflect the reality of the relationship. This means it is important for employers to classify the relationship appropriately rather than call it something that it is not. 

If an organisation is found to have deemed someone ‘self-employed’ incorrectly, not only will the company be obliged to compensate the individual for unpaid holiday, or back pay if the national minimum wage has not been paid, but a flood of compensation claims from similar workers could also result – a situation that the organisation may well not have reserved against. 

Furthermore, it could lead to unwelcome press attention and expose the employer to unwelcome national minimum wage or other such investigations by Her Majesty’s Revenue & Customs. In short, it makes sense to get the documentation right in the first place.

Uber loses appeal, but…

To go back to Uber though, the firm has been defending cases brought by a number of its drivers in 2015 for its alleged failure to pay the national minimum wage and holiday pay. Two drivers were selected as test cases and, in the first instance, the Employment Tribunal reviewed the contractual and practical working relationship between  them and Uber. It concluded that the drivers were limb (b) workers for the period in which they were signed into the Uber app in the territory they were authorised to cover, as long as they were ready and willing to accept bookings. 

Uber’s principal argument, on the other hand, was that it was simply a technology platform that acted as an agent between drivers and customers, and so it appealed. But the EAT upheld the Employment Tribunal’s decision and also rejected Uber’s argument. Again Uber appealed. 

The Court of Appeal has now ruled against Uber once again though, upholding the drivers’ status as limb (b) workers, who were entitled to certain rights, principally the national minimum wage and holiday pay. It also found the Employment Tribunal was right to look behind the complex contractual documentation and focus on the reality of the working arrangements. 

The Appeals Court likewise agreed with the Tribunal that Uber is a transportation business, and the drivers provide skilled labour through which it delivers its services and earns its profit. 

So far, so familiar. But a particularly interesting aspect of the latest judgement is that it was a majority ruling – and Lord Justice Underhill dissented on both issues set out above. In his view, there was no need to look behind the contracts as they did, in fact, reflect the working arrangements. 

The Lord Justice also believed the relationship reflected a recognised model for private hire car businesses. He likewise considered that drivers should only be treated as if they were working from the moment they accepted a particular trip, rather than just waiting for notification from the app.

Meanwhile, the Court of Appeal has again granted Uber permission to appeal – and given the potential costs involved in workforce terms, plus the dissenting voice of Underhill, Uber may well consider there is still something to fight for at the Supreme Court. But the decision should not be seen as representing any real change for individuals working in the gig economy.

Emma Bartlett

Emma Bartlett is a partner at Charles Russell Speechlys LLP. She advises on all aspects of employment law and has particular expertise in dispute resolution and litigation, notably discrimination, whistleblowing and trade union issues. With a strong record in negotiating and resolving complex employment disputes, Emma is considered a skilled deal broker.

OTHER STORIES THAT MAY INTEREST YOU

Uber agrees to settle equal pay claim for $10m 

Uber owes UK workers up to £20,000 each after failing to comply with court ruling

Mexico to trial automatic tax payment system with Uber

 

The UK Court of Appeal’s decision to uphold the Employment Appeal Tribunal’s (EAT’s) ruling that Uber drivers are ‘workers’ and therefore entitled to certain employment rights, may still not be the end of the road for the long-running employment status case.

The Uber lawsuit is one of a multitude over recent years concerning individuals working in the so-called gig economy. The courts’ focus here has been to determine an individual’s employment status, that is, whether they are independent contractors – for example, whether they are self-employed or genuinely running their own business providing services to their own clients - workers or employees. 

In the case of employees, there exists a traditional ‘master and servant’ relationship, where a staff member works under a contract providing personal services to their employer - for example, they cannot send a substitute if they take time off work. They are under the control and direction of that employer and are also subject to other factors, such as whether they are provided with tools and equipment or paid a fixed wage or salary. 

There are two types of worker status though:

  1. An employee who works under an employment contract;
  2. A worker who may provide personal services under a contract in which the other party is not their client. This second type is known as a limb (b) and is neither an employee nor self-employed. Instead their status is much more nebulous.

Having worker status, as opposed to being an independent contractor, provides individuals with better workplace protection. Workers are covered under national minimum wage legislation, are entitled to minimum paid statutory holiday, have the right to statutory rest periods under the Working Time Regulations 1998 and are protected against unlawful deduction from their wages.

Even if the contract between an employer and an individual states they are working in a self-employed capacity, a tribunal or court is entitled to look behind the contract if, in practice, it does not reflect the reality of the relationship. This means it is important for employers to classify the relationship appropriately rather than call it something that it is not. 

If an organisation is found to have deemed someone ‘self-employed’ incorrectly, not only will the company be obliged to compensate the individual for unpaid holiday, or back pay if the national minimum wage has not been paid, but a flood of compensation claims from similar workers could also result – a situation that the organisation may well not have reserved against. 

Furthermore, it could lead to unwelcome press attention and expose the employer to unwelcome national minimum wage or other such investigations by Her Majesty’s Revenue & Customs. In short, it makes sense to get the documentation right in the first place.

Uber loses appeal, but…

To go back to Uber though, the firm has been defending cases brought by a number of its drivers in 2015 for its alleged failure to pay the national minimum wage and holiday pay. Two drivers were selected as test cases and, in the first instance, the Employment Tribunal reviewed the contractual and practical working relationship between  them and Uber. It concluded that the drivers were limb (b) workers for the period in which they were signed into the Uber app in the territory they were authorised to cover, as long as they were ready and willing to accept bookings. 

Uber’s principal argument, on the other hand, was that it was simply a technology platform that acted as an agent between drivers and customers, and so it appealed. But the EAT upheld the Employment Tribunal’s decision and also rejected Uber’s argument. Again Uber appealed. 

The Court of Appeal has now ruled against Uber once again though, upholding the drivers’ status as limb (b) workers, who were entitled to certain rights, principally the national minimum wage and holiday pay. It also found the Employment Tribunal was right to look behind the complex contractual documentation and focus on the reality of the working arrangements. 

The Appeals Court likewise agreed with the Tribunal that Uber is a transportation business, and the drivers provide skilled labour through which it delivers its services and earns its profit. 

So far, so familiar. But a particularly interesting aspect of the latest judgement is that it was a majority ruling – and Lord Justice Underhill dissented on both issues set out above. In his view, there was no need to look behind the contracts as they did, in fact, reflect the working arrangements. 

The Lord Justice also believed the relationship reflected a recognised model for private hire car businesses. He likewise considered that drivers should only be treated as if they were working from the moment they accepted a particular trip, rather than just waiting for notification from the app.

Meanwhile, the Court of Appeal has again granted Uber permission to appeal – and given the potential costs involved in workforce terms, plus the dissenting voice of Underhill, Uber may well consider there is still something to fight for at the Supreme Court. But the decision should not be seen as representing any real change for individuals working in the gig economy.

Emma Bartlett

Emma Bartlett is a partner at Charles Russell Speechlys LLP. She advises on all aspects of employment law and has particular expertise in dispute resolution and litigation, notably discrimination, whistleblowing and trade union issues. With a strong record in negotiating and resolving complex employment disputes, Emma is considered a skilled deal broker.

OTHER STORIES THAT MAY INTEREST YOU

Uber agrees to settle equal pay claim for $10m 

Uber owes UK workers up to £20,000 each after failing to comply with court ruling

Mexico to trial automatic tax payment system with Uber

 

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