Uber drivers: legal documentation has little impact on relationship between worker and engager, expert says

Out-Law Analysis | 31 Oct 2016 | 4:38 pm | 3 min. read

FOCUS: Much has been made of the new flexibilities the so-called 'gig economy' offers to businesses and workers. However, whether these flexibilities truly exist will depend on the actual relationship between the parties, as last week's decision against Uber shows.

On Friday, an employment tribunal ruled that two Uber drivers were in fact 'workers', and thus entitled to the protection of both national minimum wage and paid holiday leave (40-page / 3.5MB PDF). It did so largely because the reality of the position was that Uber was in business as a transportation business, the drivers worked for Uber and had no contractual relationship with the ultimate customer and, while working for Uber, the drivers had very limited control over how they carried out the work and what could be charged.

The case itself did not create any new law. It was simply an application of the existing law to a new way of working. But the tribunal was clear that what was important was the substance of how working relationships operate rather than the form they are presented in. Use of clever legal language will not be determinative, and the employment tribunal was quite scathing about the "fictions" and "twisted language" with which Uber sought to portray its relationship with the drivers.

However, what the case does not do is give the drivers rights as employees; nor does it follow that they would be liable for tax as employees.

'Worker' status is an intermediate status between employees and the genuinely self-employed who are running their own business. Workers have certain minimum rights, in particular the right to the national minimum wage under the National Minimum Wage Act and paid holiday leave under the Working Time Regulations. They do not, however, have the same redundancy or unfair dismissal rights as employees.

Uber operates by providing an 'app' to registered customers, through which they can book a taxi. It then allocates a driver to the customer from the pool of available drivers who are logged into the system. The app calculates a route for the driver then, once the journey is completed and the driver presses 'complete trip' on his or her smart phone, calculates the fare. The customer then pays Uber directly by credit or debit card. Cars used belong to the driver, who is paid weekly by Uber less a 'service fee' of 25%.

At the employment tribunal, Uber's position was essentially that it does not run a transport business and is merely a technology company. It argued that drivers are under no obligation to work for Uber, and when they do they are not subject to control to the extent necessary to make them workers.

The documentation that sets out the relationship between the driver and Uber was, on the face of it, consistent with the drivers not being workers. But the tribunal concluded that it was "unreal to deny that Uber is business as a supplier of transportation services". The notion, it said, that Uber in London was "a mosaic of 30,000 small businesses linked by a common 'platform'" was, in the opinion of the tribunal, "faintly ridiculous". It also highlighted that what matters is whether or not the individuals concerned could be said to be in a subordinate or dependent position.

The tribunal's decision was based on the facts of the case and Uber's own business model, so does not necessarily mean that every individual engaged in the gig economy must be classed as a worker or an employee. However, if individuals are engaged to work directly for a company and they are not genuinely operating their own business then it is likely that they will be at the very least 'workers', and thus entitled to some minimum rights such as national minimum wage and paid holidays.

The government recently appointed Matthew Taylor, chief executive of the RSA, to lead a review on how employment practices need to change to keep pace with modern business models. The Uber case will give some food for thought in that review. Although the case shows that the law can be adapted to deal with new business models, the problem for many who operate in this space is the lack of certainty and clarity.

Whether you can ever have absolute certainty and retain sufficient flexibility in the system is no doubt an issue that the Taylor review will look at. In the meantime, the important message for businesses is to focus on the substance of commercial relationships and not get carried away with trying to dress a relationship up as something that it is not.

Stuart Neilson is an employment law expert at Pinsent Masons, the law firm behind Out-Law.com.