By a two-to-one majority, the Court of Appeal upheld the Employment Appeal Tribunal's (EAT's) ruling that drivers engaged by Uber are workers rather than independent contractors. The majority also upheld the employment tribunal's finding that drivers are working when they are signed into the Uber app and ready to work.

Background

In 2016 various drivers brought claims against Uber for:

  • failing to provide the national minimum wage;
  • failing to provide holiday pay; and
  • treating whistleblowers detrimentally.

To succeed, the drivers had to be workers rather than independent contractors (as Uber had argued).

A 'worker' is either:

  • an employee (ie, someone employed under a contract of employment); or
  • someone who works under a contract through which they perform work personally for someone who is not, by virtue of that contract, their client or customer.

In other words, workers agree to work personally and are not running their own businesses.

This definition has been considered in a series of gig economy cases, with Uber being among the most high-profile (for further details please see "High Court dismisses Pimlico Plumbers challenge to Deliveroo contract" and "Uber's worker status appeal rejected"). Gig economy businesses typically rely on technology such as apps and smartphones, with many of the people working for them being paid for individual jobs or assignments.

Facts

People using Uber's taxi service hail taxis via a smartphone app. Uber locates the nearest driver and informs them of the request. Once the booking is confirmed, the driver and passenger can contact one another through the app. A route is plotted by the app and at the end of the trip Uber calculates the fare based on the GPS data from the driver's smartphone.

Uber's terms (with both passengers and drivers) stated that it did not provide transport services but acted as an agent for third-party providers (ie, the drivers). Uber contended that it was providing lead-generation opportunities for self-employed drivers. However, it imposed requirements regarding how the drivers provided services. For instance, Uber would deactivate a driver's access to the app if their customer ratings fell below an acceptable level. It also told drivers that they should log out of the app if they did not wish to carry passengers.

Employment tribunal and EAT decisions

The employment tribunal concluded that the drivers were workers, finding that Uber was in the business of providing taxi services rather than generating leads for drivers to grow their own businesses. It considered various factors, including:

  • the significant control which Uber exercised over the drivers (eg, disconnecting drivers if sufficient trips were not accepted); and
  • the fact that Uber would deactivate drivers who did not have sufficiently high customer ratings.

The employment tribunal concluded that drivers were engaged as workers when they were:

  • in the territory in which they had been authorised to work;
  • signed into the Uber app; and
  • ready and willing to accept bookings.

The EAT dismissed Uber's appeal and agreed with the employment tribunal that the drivers were incorporated into Uber's business of providing transport services under arrangements which indicated that they:

  • did not work in business on their own account; and
  • were not in a direct contractual relationship with passengers when they accepted a trip.

The EAT nonetheless expressed difficulty with identifying when the drivers could be treated as Uber's workers. They were clearly workers when they had accepted trips but the EAT was less sure that the same applied between assignments. This issue is important because it is relevant to determining the drivers' working time and their entitlement to the national minimum wage.

Uber appealed further to the Court of Appeal.

Court of Appeal's decision

The two judges in the Court of Appeal majority concluded that:

  • the employment tribunal was correct in finding that the drivers were workers; and
  • the drivers were workers when they had the relevant app switched on.

On the first point, although the written contractual terms said that Uber acted only as an intermediary, this did not reflect the relationship's practical reality. A court or tribunal can disregard the terms of any documents generated by an employer if they do not reflect the reality of what is occurring. The facts found by the employment tribunal were inconsistent with Uber's arguments. For example, the following were all significant in showing Uber's control over the drivers:

  • its requirement for drivers to accept a high number of trips;
  • the enforced logging-off of drivers who did not comply; and
  • the way in which the ratings system operated as a performance or disciplinary procedure.

On the second point, the majority also struggled with this issue, but ultimately decided that the employment tribunal had been entitled to reach the conclusion that it did. In particular, the judges relied on:

  • the high level of trip acceptances required from drivers; and
  • the penalty of being logged off if three consecutive requests were not accepted within a 10-second timeframe.

Doubt arose from the fact that a driver could have other rival apps switched on at the same time, in which case it was arguable that they were not at Uber's disposal until having accepted a trip. Nonetheless, the majority upheld the employment tribunal's decision on this point.

Dissenting judgment

The other judge (Lord Justice Underhill) disagreed with these conclusions. By analogy with taxi businesses, he said that the employment tribunal's findings were consistent with Uber's position (as stated in the relevant written agreement) that it simply acted as an intermediary between drivers and customers. The terms of the agreement, which could not be disregarded by the employment tribunal, clarified that the drivers were not Uber's workers. An agreement must be inconsistent with the reality in order to be a sham, which was not the case here.

In any case, Underhill said that the drivers were workers only once they had accepted a trip. There was no obligation to accept a trip when offered and the threat of being disconnected for a specified period if trips were rejected or cancelled did not mean that the drivers had a positive contractual obligation to accept a minimum number of trips. He was troubled by the possibility that a driver could have multiple apps open simultaneously, raising the question of whether they were then entitled to a minimum wage from all of the various app providers.

Implications

The Court of Appeal's decision in this case has been eagerly awaited by HR and employment practitioners seeking guidance on how the test for worker status properly applies in gig economy businesses. However, like other recent status cases the judgment is fact-specific. Other cases concerning people working for gig economy businesses – and even in other taxi firms – will not necessarily be decided in the same way. The majority relied on the employment tribunal's specific findings of fact on how the relationship between Uber and the drivers operated in practice to justify setting aside the terms of the written agreements between the parties.

Notably, there was no suggestion in this case that drivers could be replaced by a substitute. Personal service is one of the necessary elements of the test for worker status. As shown by the claims involving Deliveroo, a genuine right to appoint a substitute which is actually used in practice can mean that an individual is not a worker (for further details please see "Deliveroo defends union recognition application by demonstrating riders are genuinely self-employed").

The majority judgment emphasises that written terms cannot be used to avoid statutory protection of workers, especially where the relevant terms are standard and non-negotiable and the parties are in an unequal bargaining position. All of the circumstances must be examined and tribunals should take a realistic and worldly-wise, sensible and robust approach to the determination of what the true position is. Underhill was more cautious on this issue, saying that agreements should be disregarded by the courts only if they are a false portrayal of the relationship between the parties, rather than simply disadvantageous to one of the parties who lacks bargaining power.

The Court of Appeal has given Uber permission to appeal to the Supreme Court. The disagreement between the Court of Appeal judges suggests that there are still arguments to be had in this case and the result is not a foregone conclusion. This could also provide a useful opportunity for the Supreme Court to clarify the circumstances in which employment tribunals can disregard contractual provisions.

Comment

In response to the Taylor review, the government's Good Work Plan is looking at legislation to improve the clarity of the employment status tests, although there are no specific proposals at present. At the end of his dissenting judgment, Underhill discussed the protection of those who provide personal services through internet platforms, stating that it is for legislation rather than the courts to address these policy issues. It will be interesting to see whether the Supreme Court takes a similar view.(1)

For further information on this topic please contact Hazel Oliver or Richard Lister at Lewis Silkin by telephone (+44 20 7074 8000?) or email (hazel.oliver@lewissilkin.com or richard.lister@lewissilkin.com ). The Lewis Silkin website can be accessed at www.lewissilkin.com.

Endnotes

(1) Uber BV v Aslam - judgment available here.

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