Uber's business model could be under threat after a recent employment tribunal ruled that its drivers are "workers" not self-employed. Such worker status entitles Uber drivers to various rights and protections under employment legislation, including, amongst others:

  • the entitlement to 5.6 weeks’ paid annual leave;

  • the national minimum/living wage; and

  • protection from unlawful deduction from wages.

  • The tribunal disregarded as “faintly ridiculous” the highly complex contractual documentation which Uber had in place which portrayed Uber in London as one of "30,000 small businesses linked by a common platform" with a contract existing

  • between the drivers and each of its passengers. The tribunal deemed it implausible that, as Uber argued, it is just a technology company which allows drivers to grow their own businesses with passengers; they found rather that it was in

  • business as a supplier of transportation services. Hence the drivers worked for Uber (rather than the other way round, as Uber appeared at times to have argued).

In assessing the drivers’ employment status, the tribunal looked at the reality of the relationship, particularly the degree of control within the business relationship. They noted that, on the one hand, drivers are not under any obligation to commit to work; have to supply their own vehicles and are responsible for all running costs, which might appear to support genuinely self-employed status. But, on the other hand, the tribunal noted that drivers are penalised for failing to accept bookings; they cannot negotiate a higher fare with passengers; they can be withdrawn from the app if their ratings fall below a set average; they are not aware of the destination until collecting the passenger and they are expected to follow satellite navigation to the destination.

The tribunal determined that the contractual documentation did not match the reality of the relationship and concluded that once an Uber driver has turned on the app for the purpose of accepting fares within the territory in which they are authorised to drive, then they are a "worker".

What next?

Uber has already stated its intention to appeal the decision, although the grounds for this appeal are not yet known. GMB, the union who brought this claim on behalf of the Uber drivers, claims Uber has attempted to downplay the implications of this ruling by announcing to its drivers that the decision only applies to the two test claimants and not to its 30,000 other drivers.

What does this mean for employers?

As a first instance decision this ruling is not binding and, given that the assessment of employment status is always fact sensitive, will not necessarily be followed in other similar cases. Additionally, the prominence of Uber’s brand and the ways it attempts to control this brand through control of its drivers is likely to have increased the likelihood of worker status.

However, given the rapid evolution of the ‘gig economy’ model of working (particularly with regards to technology firms with online forms of transacting individual skills and services), it will be interesting to track the progress of this appeal.

The case also underlines a familiar point that the courts will look to the substance of the relationship in assessing employment status: no amount of complex documentation will deprive individuals of worker or employee status if that is the reality of the relationship. Despite the innovative business model of Uber, supported as it is by mobile technology, the tribunal found no difficulty in applying the traditional tests to reach their finding.

The trajectory of this case is particularly relevant in light of the Government’s intention to undertake a review of workers' rights and practices in the context of modern day working practices. The challenge will be to balance the desire for highly flexible working practices with protecting individual rights. Meanwhile, if this ruling stands, those who rely on Uber to get around may find that fares increase to meet the costs associated with drivers' rights.