Share Article: Uber: Contracts, control and employment status

After a huge amount of publicity surrounding the decision of the Central London Employment Tribunal in the case brought against Uber, one might be forgiven for thinking it was a seminal case fundamentally changing the law as it applies to employment relationships. In fact, whilst big movers in the “gig economy” may be waking up to the fact that employment law applies to them as well, disputes over employment status are nothing new, and the decision was made on well established principles.

Uber drivers brought claims for the National Minimum Wage and for holiday pay, as well as complaints that they were treated badly after whistleblowing. Two “test cases” were heard and the Tribunal found that the drivers were “workers”, meaning that they could continue with these claims. Uber have reportedly told their 40000 UK drivers that the decision does not apply to them and that Uber will appeal. Whilst the latter is undoubtedly true, the Tribunal judgment is clear and would likely be followed in other cases unless overturned by the appeal courts. Any Uber driver wanting to claim minimum wage or holiday pay should get a claim in now, as otherwise they might lose the right to back pay.

The Tribunal were scathing in their assessment of Uber’s claims not to be a taxi company asserting control over its drivers. The decision was essentially made on two well established principles:

  1. that, particularly where there is inequality in bargaining power, paper contractual terms will be ignored if they do not reflect the “true agreement” between the parties
  2. that where a substantial amount of control is exercised, an “independent contractor” is in reality a worker, with rights to the minimum wage and holiday pay

Uber’s terms and conditions were scrutinised and where they did not reflect reality they were discounted. The Tribunal found that the reality was that Uber provide a fleet of drivers to enable passengers to use its service. Those drivers are required to work personally and subject to a large amount of control by Uber. They cannot set their own fares, potentially face penalties if they deviate from Uber’s suggested route, are effectively performance managed by the ratings system, are penalised if they do not accept or cancel trips and are often not even consulted let alone involved in decisions about refunds. The possibility of “deactivation” (itself sounding like something from a dystopian sci fi film) for breach of Uber’s rules or dropping below average ratings in effect acts as a disciplinary procedure ensuring that Uber drivers do what Uber want.

Put in this way, it is not surprising that the Tribunal found that the Uber drivers are workers. It remains to be seen whether the appeal courts will follow the decision but even at this early stage, it has some important lessons for any business working with contractors, whether part of the new “gig economy” or working in more traditional ways:

  1. Your contractual documents should reflect reality. Unless you are contracting with highly paid and sought after individuals, any court or Tribunal is likely to consider that a business holds the balance of power in the relationship. If you draft terms of engagement that do not reflect the real situation, you cannot expect them to be upheld.
  2. If your business model requires a level of control over contractors and for them to work personally for you (rather than sending a substitute), they are likely to be considered workers. This means that they must be paid the minimum wage and holiday pay. They might also be entitled to SSP if unable to work due to illness and may become entitled to pension contributions via auto enrolment.

If you have any doubts about the status of your independent contractors or other atypical workers, it is best to get advice and regularise the position. Doing nothing could prove expensive if workers bring claims for back pay. HMRC has substantial enforcement powers in respect of the minimum wage, including “naming and shaming” those responsible for breaches as well as fines of up to £20000.

Contact Louise Taft for a no obligation chat about how she can help.
020 7935 3522

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