After criticism of the working practices at Sports Direct and an HMRC investigation into low pay courier firm, Hermes, the latest blow to the gig-economy comes from the Employment Tribunal decision this afternoon that Uber taxi drivers are actually “workers”, with rights, rather than being unprotected self-employed contractors.

The Uber drivers argued in particular that, as workers, they are entitled to the National Minimum Wage and to paid holiday. Uber had argued that it was purely a technology company and not a transport business and that rather than contracting with the drivers, the contractual relationship was actually between the passenger and the driver.

The Employment Tribunal rejected this completely. It found that Uber’s written terms did ‘not correspond with practical reality’; highlighting that courts will always assess a working relationship based on what happens on the ground, rather than what is recorded in writing.

Some of the factors that the Employment Tribunal took into account when finding that the practical reality was that the drivers were workers included the fact that they found that Uber:

  • interviews and recruits drivers
  • controls key passenger information and does not share this with the driver
  • requires drivers to accept trips
  • sets the default route to be taken
  • sets the fare and the driver can only decrease it; the driver is not free to increase it
  • imposes conditions on drivers regarding the type of vehicle they can use, instructs them how to do their work and controls how they perform their work
  • uses rating systems to effectively performance manage/discipline drivers

These factors indicated that Uber had a level of control over its drivers that was consistent with the drivers being workers for Uber, in that they personally undertook to do or perform work for Uber. The drivers were not acting totally independently and autonomously, as a self-employed contractor would.

The Employment Tribunal decided that the drivers were carrying out work for Uber when they had their Uber App switched on, were in territory in which they were licensed to use the App and when they were ready and willing to accept trips. This indicates that the drivers may be ‘working’ even when they do not have a passenger in their car.

The Employment Tribunal concluded that when the drivers were working, they were entitled to the National Minimum Wage and paid holiday. Gina Wilson, Employment Partner at Clyde & Co LLP highlights that, besides the right to pay and holiday, other rights workers are entitled to include rest breaks and a maximum 48 hour working week, but they have no protection from unfair dismissal, TUPE and redundancy.

Mark Howard, Pensions Partner at Clyde & Co comments “This decision is going to also attract the attention of the Pensions Regulator - which is charged with ensuring employers comply with automatic enrolment legislation. The definition of jobholder in the Pensions Act is the same as the definition relied on by the Employment Tribunal in this case. Uber could find itself facing substantial back payments of pensions contributions, including interest payments.”

The decision is only a first level Employment Tribunal decision and will almost definitely be appealed - we will keep you up to date with any new decisions.

This judgment comes in the same week that Ministers announced a new crackdown on firms using large numbers of self-employed or agency workers in order to deny them employment rights. The Treasury Financial Secretary said that HMRC was "transforming" its compliance approach, with the formation of a new team dedicated to tackling such issues. There was also the decision on 24 October 2016 by the Commons Select Committee on Business, Energy and Industrial Strategy (previously BIS) to look into the future world of work, focusing the status and rights of agency workers, the self-employed and those working in the 'gig economy'.

These proposed policy changes follow the announcement by Theresa May earlier this month that she has ordered a review about how to extend workers’ rights in the “gig economy”.

In light of this and the apparent lack of popularity of such contractual arrangements, the wind may continue to blow against Uber.

It would be prudent for businesses engaging self-employed contractors to review their contractual terms and the reality of how these engagements are managed day-to-day.