Employment status following the Uber Supreme Court case

Establishing an individual’s employment rights can feel like a minefield, with varying degrees of obligations on the employer depending on the employment status. Earlier this year the Supreme Court upheld earlier decisions in the Employment Tribunal, Employment Appeal Tribunal and Court of Appeal that Uber drivers are “workers” of Uber for the purposes of employment rights, and not, as Uber argued, self-employed contractors each operating their own minicab business.

We look at the broader implications of the decision and anticipate points of contention or uncertainty which could give rise to further litigation over the status and rights of those described as self-employed contractors. 

The legal context: employee, worker or self-employed?

The concept of a worker was developed in the late 1990s, when the then-Labour government created new employment rights. The idea was to extend these employment rights to individuals who did not meet the threshold for being an employee, but in a broad sense still “worked for” a business.  

Every employee is a worker, but so too are other individuals who provide a personal service under a contract to a business, and in circumstances where the business cannot be categorised as a client or customer of the individual’s own personal enterprise. The latter part of the definition is to exclude genuinely self-employed individuals from the scope of worker protection. 

Whilst there is a range of rights extended to workers, the two key ones which tend to be the focus of litigation are:

  • the right to receive the national minimum wage for each hour of working time
  • the right to have a minimum of 5.6 weeks’ paid annual leave per year (this allowance being inclusive of any bank and public holidays taken as annual leave)

There are also further employment rights granted to other individuals who fall short of being an employee in the full legal sense, notably protection from unlawful discrimination in a work context, and the right to be automatically enrolled into a qualifying pension scheme. 

Unhelpfully, there are slightly different legal tests for eligibility for both of these further rights, so it should not be assumed that a person who is a worker for the purpose of national minimum wage/annual leave entitlement qualifies for protection from discrimination and/or pensions auto-enrolment, or vice versa. 

What are the implications of the Uber case?

Fundamentally, the Uber decision – and several other decisions in similar proceedings brought against other delivery, courier or taxi businesses – confirms that casual workers in the so-called “gig economy” can and often will be workers.

The main battleground in these cases has been on whether the business is a client or customer of the individual. In turn, the courts have considered factors like the degree of control the individual is subject to in how they provide their services, the extent (if any) to which the individual can do things differently to increase their earning potential, and the closeness of the ties between the individual and the business.  

Clearly, each decision in each case is fact-sensitive. However, there are two wider implications to arise from the Supreme Court judgment in Uber. 

Role of contract terms

The Supreme Court held that the legal documentation between the business and individual could not form the starting point for analysing whether the individual was a worker.  In turn, this means while the legal documentation cannot be ignored, it is only part of the picture. In this case, what persuaded the Supreme Court that the Employment Tribunal had assessed the drivers’ status correctly was the high degree of control Uber exercised over the way the services were delivered. This included setting the price, dictating the route, defining the contractual terms between the driver and the passenger, and limiting drivers’ freedom to decline rides.  In other words, businesses cannot rely on what may be, from their perspective, a robust contract consistent with the individual being a self-employed contractor, if the practical arrangements are inconsistent with that contract. 

Rights during periods between assignments

The Supreme Court held that the drivers were not just due the national minimum wage and accruing annual leave whilst actually driving, but also during waiting periods when they were logged into the Uber app and ready to accept passengers. This was a decision in light of Uber’s particular operating model, and cannot be extrapolated into a general principle that casual workers are likely to qualify as workers during “down time” between assignments.  However, the decision empowers courts to scrutinise whether casual workers are, in reality, subject to sufficient control in between assignments to render these periods working time.  

Where does this leave us?

Businesses in the “gig economy” have to balance the closeness of their relationship with individuals providing services to them, against considerations like brand consistency and service standards.  It is easier to deliver a consistently high service if those individuals delivering the service on your behalf are subject to stringent standards and controls. 

These businesses also need to weigh workforce morale, the scale and likely costs of litigation, and their reputation in the marketplace against the cost considerations. For businesses operating on fine margins or in competitive industry sectors, it simply may not be feasible to bear additional costs without compensating elsewhere, nor feasible to pass such extra costs onto customers if competitors are not doing likewise. In these circumstances, careful scrutiny of the business strategy and appetite for legal risk is needed. 

Although there has been some criticism of the Uber line of case law, to the effect that it will raise prices for consumers and reduce job opportunities for casual work, it is unlikely the genie will go back into the bottle now. 

Moreover, it is not just those within the gig economy that should pay attention. The principles explored in the Uber line of case law apply to all industry sectors and across all business models which rely upon nominally self-employed contractors, where such contractors do not have full control over their working patterns, or over their product or service offering.  

Our content explained

Every piece of content we create is correct on the date it’s published but please don’t rely on it as legal advice. If you’d like to speak to us about your own legal requirements, please contact one of our expert lawyers.

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