What are the Implications of the Uber Tribunal?

October 28, 2016
by John Websell

Described as ‘employment law’s case of the year’, a tribunal in London today has submitted its judgement on the well-publicised case brought against Uber – the ride-hailing service that connects individuals in need of transportation with local drivers via a smartphone app – by some of its drivers. The verdict, delivered this afternoon, found in favour of the drivers.

Before discussing the ramifications of this result for both Uber and similar companies involved in the gig economy however, it’s necessary to take a more in-depth look at the case itself, and the arguments on both sides to see how this monumental decision was reached.

The case

The case was originally brought by two Uber drivers named James Farrar and Yaseen Aslam (though a subsequent 17 claims have been made) earlier this year, who brought their grievances to the GMB Union in an effort to prove that they are not freelance workers as claimed, rather they are regular employees of the company, and, consequently, entitled to the same employment rights as other workers.

One of the key arguments cited by the drivers, is that they don’t have the requisite level of autonomy to be considered self-employed. Aside from this lack of freedom, drivers are also subject to reprimand should a customer complain about the level of service – which regular freelancers wouldn’t have to deal with. On this subject, Jason Galbraith-Marten – the couriers’ barrister – points out that to be considered self-employed, the individual must undertake the work themselves alone, providing a “personal service”, whereas a business is able to delegate tasks to an employee if necessary.

Thus, as far as they’re concerned, Uber drivers should be considered company employees, and therefore entitled to basic employment rights, such as holiday and sick pay. Yet minimum wage is probably the major sticking point, which, according to Mr Farrar, falls way below the national minimum. For instance, he claims his earnings in August 2015 were as low as £5.03 an hour (after the firm took its 20% commission).

Uber, on the other hand, contends that it is merely a technology business that uses an app to connect passengers with freelance drivers, rather than a transportation service. It refutes assertions that drivers are standard employees, as it doesn’t impose shift patterns or minimum hours, so as to provide the freedom and flexibility that attracted the drivers in the first place. Moreover, contrary to Mr Faffar’s statements, Uber asserts those working with the company make an average of £16 an hour, after service charges.

Perhaps more tellingly, there are plenty of drivers who are more than satisfied with the current working conditions and pay. Talking to the BBC Jonathan Esseku explained he does consider himself as self-employed: ““When I want to work I log on [to the Uber app], and when I don’t, I log off”. He also testified to the fact that he works 35-40 hours per week on average, making approximately £13 an hour.

Ramifications for Uber

In the short term, the biggest concern for the organisation will be the serious financial impact of the result. Uber will now have to start paying its drivers minimum wage and provide the full range of benefits workers should receive. It will also be necessary to provide remuneration for the wages and benefits its UK drivers have failed to collect over the course of their partnership with the firm.

Looking further afield, Uber would have to change its business model, not just in the UK, but around the world. How it operates in contractual terms will be the first thing that must be revised. For instance, until now, if a driver called in sick, crashed a vehicle, decided to go on holiday, or retired, Uber wasn’t legally responsible for covering any costs incurred, providing significant savings. In future however, it will be the organisations obligation to repair damaged vehicles, cover sick and vacation costs, and deliver a retirement package.

Unfortunately, customers are likely to suffer too. Given the vast amounts of money that will have to be expended to cover the abovementioned costs, Uber will surely have to up its fares in response. Additionally, it may have to cut driver numbers as well, negatively affecting both the flexibility and responsiveness of the service.

People who rely on the service frequently will unquestionably be frustrated by the changes, should they come to pass, but it’s fair to say most will agree that employee rights are more important than convenience.

How will this affect the gig economy?

First things first: what is the gig economy? Essentially, this refers to an environment in which temporary positions are common, and thus organisations contract independent workers regularly to cover short-term projects; this approach has become increasingly popular in the digital age, thanks to the connectivity of our society. As a result, freelancers can take advantage of the freedom afforded to pick and choose jobs that suit their skills set, working style, and lifestyle at the click of a button, generating a better work-life balance. Employers meanwhile, benefit from the ability to choose individuals with specific abilities that best suits the project’s needs. Moreover, there are substantial financial benefits open to organisations that follow this paradigm, as they can save money on office space and training, and don’t have to pay as much in benefits.

Returning to the matter at hand, the simplest answer is that the case will have huge implications for employment law around the world; even though, as partner at Burges Salmon Luke Bowery says the outcome won’t technically be “binding on [other] employment tribunals” merely “highly persuasive”. Still, this influence will likely lead to fundamental changes in employment law, supporting efforts to better safeguard worker rights.

The verdict will almost certainly precipitate a deluge of similar suits in the coming months and years too, aimed at established organisations with a similar business model to Ubers. Likewise, startup’s looking to get involved in the gig economy will have to change their strategy, making sure they adhere to all current employment laws, and pre-empt future regulations; for instance, today’s ruling will probably extend the reach of existing legislature to more people than ever before.

Ultimately, the result means companies working on disruptive technologies in the gig economy, with the intention of taking advantage of emerging trends and markets, will have to consider their business model going forward, ensuring innovations aren’t exploitative, whilst remaining profitable.

Latest Tweets

Clients / Candidates?