Uber are in the news for confirming that they will guarantee their 70,000 drivers will receive national minimum wage, holiday pay and pensions.
This follows their long-running battle through the courts over the status of the drivers, which resulted in a Supreme Court decision last month confirming that the drivers are workers rather than self-employed.
What was the case about?
Uber was founded as a smartphone app and is one of the biggest examples of firms in the “gig economy” – those firms where work is assigned on a short-term or job-by-job basis through an app.
The case was brought by named Uber drivers and supported by the GMB union as a test case. The drivers argued that they were workers and therefore should be entitled to the rights and entitlements of a worker. Uber argued that the drivers were self-employed contractors and that Uber acted as agent for the drivers in putting them in touch with customers. There were contracts between the drivers and the Uber parent company; Uber BV, but not between the drivers and any of the named respondent companies. The contracts were consistent with an agency relationship and Uber argued that this contractual position was reflected in the day-to-day relationship with the drivers.
What did the Supreme Court decide?
Following Employment Tribunal, and Employment Appeal Tribunal decision, the Supreme Court concluded that Uber drivers are workers and not self-employed. The effect of this Uber drivers are entitled to claim:
- Minimum wage (including backpay for minimum wage);
- Potentially up to two years’ backpay (or more);
- 5.6 weeks’ paid annual leave each year; and
- They will have whistleblowing and similar rights.
Worker status does not, however, confer ‘employee’ rights, such as the right to a redundancy payment or to claim unfair dismissal.
Why is it so important?
Uber have been one of the firms at the forefront of the gig economy and many other companies will have been watching this decision with interest. With advances in technology, employers are looking for new and innovative ways to have flexibility with staff, and individuals may find the low-commitment nature of gig economy work suits their lifestyle more.
The decision means that employers will not be able to save on costs by having staff who are self-employed. Many employers may now face claims for back pay and holiday entitlement.
How does this affect employers?
Employers will need to consider whether there are any individuals engaged to carry out work who would fall under the definition of a worker rather than a self-employed person.
Organisations who use individuals to personally deliver a service may well find that they are engaging workers if they exercise too much control over the way that service is delivered. This presents an issue in respect of increased costs, risk and tax. Workers will be entitled to additional rights and benefits, and additional tax and NI will be due which could significantly affect profit margins.
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Author: Charlotte Ashton
Senior Solicitor, ESP Law Ltd
Charlotte has over 10 years’ experience in all aspects of employment law. She trained in-house with a large UK company, covering 45,000 employees, and moved to private practice on qualification. Charlotte enjoys helping growing companies understand their legal obligations and has given training and presentations to start up entrepreneurs, and business students, at a local University. Charlotte also specialises in business immigration law for the UK and has helped employers obtain sponsor licences in order to recruit from outside the UK.