The Uber judgment: what it means for the gig economy

February 22, 2021

The Supreme Court’s judgment in the Uber case (Uber & ors v Aslam & ors [2021] UKSC 5) is here, causing jubilation for individuals working in the gig economy and employment lawyers alike, as Lord Leggatt definitively clarifies how courts should approach the question of whether an individual is a ‘worker’ for UK employment law purposes.

The relevance of this landmark judgment is that UK employment law grants various rights and entitlements to workers, for example national minimum wage and paid annual leave, which are not available to independent contractors.

Overview

UK employment law provides 3 categories of employment status for individuals: (i) employee; (ii) independent contractor; and (iii) worker.

The difference between the latter two is that independent contractors are “in business on their own account and undertake work for their clients or customers”. However workers provide their services as part of a business undertaking carried on by someone else. Therefore they are  considered somewhat dependent on and subordinate to the business, and are granted greater protections than fully self-employed people.

The Uber case

From the beginning of these proceedings (originally brought by Uber drivers in the Employment Tribunal 6 years ago) Uber had argued its drivers were independent contractors and did not fall within the definition of “worker” provided for by the Employment Rights Act 1996.

To support its argument, Uber relied on its contractual documentation. To work for Uber, drivers had to sign a Services Agreement with Uber BV (a Dutch Uber entity). Under this contract, Uber BV agreed to provide technology services to drivers (eg the app, which located customers for drivers, and provided payment services) and drivers agreed to provide transportation services to passengers. Under the Services Agreement, drivers expressly agreed that Uber does not provide transportation services, and that by accepting a customer’s request for transportation services, the driver created a contract with the passenger only.

Therefore, Uber argued no contract existed between Uber and drivers for the provision of driving services. Rather, the relevant contract was between Uber and passengers. Uber said the Employment Tribunal (which had ruled in the drivers’ favour) was wrong to hold the drivers were workers, because it had disregarded, without any legal justification, the clear and unambiguous terms of the written agreements.

The Employment Appeal Tribunal and Court of Appeal both upheld the Employment Tribunal’s ruling that the Uber drivers were workers (although Underhill LJ had dissented in the Court of Appeal). The Supreme Court was Uber’s last chance at a different ruling.

The judgment

The Supreme Court’s ruling was unanimous in dismissing Uber’s appeal and upholding that Uber drivers are workers.

As Lord Leggatt succinctly put it, “the primary question was one of statutory interpretation, not contractual interpretation” (69). In other words, whilst the written contract was relevant, it is important to look at the relationship in practice.

In deciding the case, the Supreme Court considered that the general purpose of employment rights legislation is:

“to protect vulnerable workers from being paid too little for the work they do, required to work excessive hours or subjected to other forms of unfair treatment (such as being victimised for whistleblowing”.

In particular it was noted that these vulnerable workers are often “in a subordinate and dependent position vis-à-vis their employers” (71). In determining whether someone is in that position, “the true agreement will often have to be gleaned from all the circumstances of the case, of which the written agreement is only part” (84).

The words of the statute must be applied to the facts of the individual case, bearing in mind the purpose of the legislation and that workers, who are in a position of subordination and dependence, will usually be vulnerable in a way that qualifies them for statutory protection.

The Uber-specific factors

In applying this test to the Uber drivers, the Supreme Court found that the drivers were in a position of subordination and dependence on Uber. In particular, Lord Leggatt relied on:

  • When a ride is booked through Uber, it is Uber who sets the fare. Drivers cannot charge more. It is Uber who dictates how much drivers are paid.
  • The contract terms are imposed on the driver by Uber. The driver has no say in the terms.
  • Once a driver has logged onto the Uber app, the driver’s choice is constrained by Uber (the driver is not made aware of the passenger’s destination until the passenger is picked up). The driver’s rates of acceptance are also monitored. A penalty is imposed if too many trip requests are cancelled or declined (the driver will be logged off from the app for 10 minutes).
  • Uber exercises significant control over the way in which drivers do their job (Uber vets the type of vehicles that may be used and the driver bears financial risk for deviations from the app’s suggested route). Furthermore, there is a rating system under which the passenger is asked to rate the driver. A driver who fails to maintain an average rating receives a series of warnings which may end in contract termination.
  • Communications between the driver and passenger are restricted (passengers are not offered a choice of driver and the sharing of contact details is prohibited once the trip ends other than to return lost property). Uber takes active steps to prevent drivers communicating beyond what is necessary for the journey to take place.

Taking these factors together, the Supreme Court found that the relationship is very tightly controlled and defined by Uber. The drivers have a subordination and dependency on Uber and there is little room for drivers to improve their financial position.

The Supreme Court also upheld that “working time” (for the purposes of the Working Time Regulations 1998 and the National Minimum Wage Regulations 2015) included the time when the drivers were logged into the app (not just when they had accepted a trip request) and therefore presumed to be willing and able to work.

Implications for the gig economy

For Uber, this decision will mean potentially thousands of claims for holiday pay and national minimum wage from its drivers. The case will now be remitted back to the Employment Tribunal in respect of the existing claims.

While this ruling will directly affect Uber and its drivers, the Supreme Court’s ruling has huge implications for anyone working in the gig economy as it has clarified the approach to be taken by the courts when deciding whether someone is a worker.

All the circumstances will be taken into account including the conduct of the parties (not just the written terms), and what matters is whether the individual is in a position of dependency and subordination. A person can be a ‘worker’ even where, as in the Uber case, the individuals have “in some respects a substantial measure of autonomy and independence”. The exercise will be highly fact-sensitive and we are likely to see further litigation in the coming years from other gig economy industries.

 

This article was co-written by Anna Dannreuther, Barrister at Field Court Chambers, and Sacha Sokhi, Solicitor at Irwin Mitchell.

  • Anna Dannreuther is a Barrister at Field Court Chambers practising in employment, public, and commercial law. She represents clients at all stages of employment proceedings, including preliminary hearings, judicial mediations, and final hearings. She also undertakes advisory and drafting work.
  • Sacha Sokhi is a Solicitor in the London Employment & Professional Discipline Team at Irwin Mitchell. She acts for a variety of professionals and senior executives, providing pragmatic advice and solutions in all aspects of employment law.