A tribunal has concluded that Uber drivers fell ‘full square’ within the definition of workers, and has dismissed as ‘faintly ridiculous’ Uber’s assertion that they were self-employed.

This means the drivers will be entitled to rights such as the national minimum wage and paid holidays.

What did the drivers claim?

UK employment law provides different levels of protection for employees, workers and the self-employed.

  • Workers don’t benefit from the full spectrum of rights available to employees (in particular unfair dismissal).
  • But workers have more employment rights than those who are self-employed – including the minimum wage and paid holidays.

The Uber drivers insisted that they should be classed as workers, specifically raising claims in respect of the minimum wage and statutory holiday pay. They did not try to claim that they were employees.

How does Uber work?

For those not familiar with the service, here’s the lowdown:

  • Passengers register and book trips via the Uber app. Uber informs the closest driver (of which there are about 40,000 in the UK) of the request.
  • If the driver does not accept the trip within 10 seconds, it is passed to another driver. Once a driver accepts, Uber confirms the booking with the passenger and driver.
  • Uber calculates the fare and the passenger pays this direct to Uber via credit or debit card. Uber then pays the drivers on a weekly basis by passing on the fares less a service fee of around 25%.

Uber drivers are workers

The tribunal listed a myriad of facts in support of its finding that Uber drivers are workers, including that Uber:

  • Interviews and recruits the drivers
  • Sets the default route, from which the drivers depart at their peril
  • Controls the performance of drivers and subjects them to disciplinary sanctions
  • Accepts the risk of loss which would fall on the drivers if they were genuinely self-employed.

A warning to all?

Perhaps as a wider warning shot, the tribunal observed that “any organisation…resorting in its documentation to fictions, twisted language and even brand new terminology, merits…a degree of scepticism”.

A less than gentle reminder from the tribunal that simply labelling an individual as self-employed does not mean that they are – what counts is the practical reality.

The end of the matter?

Given the tribunal’s extremely detailed reasoning and, frankly, damning criticism of Uber, arguing a way out of its findings will not be easy. But given the financial implications, Uber may well appeal.

Of comfort to other companies will be the tribunal’s admission that Uber could have devised an alternative business model in which the drivers were not workers. Its finding was only that the particular model Uber chose failed to achieve that aim.

Time for the government to step in?

Uber is a well-known player in the so-called ‘gig economy’ whereby individuals work in temporary posts or as independent contractors, being paid for separate pieces of work, rather than working for a single employer. However, a 2015 report on bogus self-employment by the Citizen’s Advice Bureau found that one in ten people classified as self-employed could in fact be employees.

Labour MP Frank Field has reportedly stated that “we have had a period where employers have been testing the law and no one has been pushing back”. He applauded as “the beginning of the pushback” the launch by HMRC of a specialist unit to investigate companies that make significant use of self-employed workers.

Earlier this month, the government announced an independent review into ‘modern employment practices’, with questions including:

  • Do workers lose out via emerging business practices?
  • Does the growth in non-standard employment undermine the minimum wage, sick pay, holiday pay and family friendly rights?
  • Do definitions of employment status need to be updated to reflect new forms of working?

The review is expected to take around six months, so should conclude around Spring 2017.

Time to review your own arrangements?

In light of this high profile case and the moves that appear to be afoot in government and HMRC, now would be a good time to review the status of any self-employed contractors in your workforce.

Wrongly classifying an individual as self-employed could lead not only to employment tribunal claims but also potential liability for tax and national insurance, with added interest and penalties.

As acknowledged by the Uber tribunal, it is possible to devise a business model whereby individuals are genuinely self-employed contractors. However, as the tribunal was at pains to remind us, this cannot be achieved solely by way of ‘carefully crafted documentation’ but must be reflected in the ‘real dealings and relationships between the parties’.

Brodies’ employment and tax teams can work through the factual matrix surrounding employment status in your business and work with you to identify any risks and strategies for the future.