Uber Update: What does the Supreme Court’s decision mean for businesses?.

What was the decision?

On the 19 February 2021 the UK Supreme Court (the Court) unanimously decided that Uber drivers should be considered “workers” and not self-employed individuals.

Uber is the arguably best known operator in the so-called gig economy. Its drivers and customers access services via an app. Drivers log into the app when they wish to work and await a customer booking in their locality, which they are notified of via the app. The driver can then decide whether or not to accept the booking.

Uber failed to persuade the Court that the company was merely a third-party booking agent and its drivers were self-employed independent contractors. Uber argued that a separate contract comes into existence between the customer and the driver when a ride is accepted and that the company merely facilitates the provision of transportation services whereas the driver provides such services.

The Court dismissed these arguments, stating that Uber entered into contracts with their drivers to carry out the transportation services. Therefore once drivers logged into the app they would fall under the definition of a worker. “Workers” are those who do work under a contract for personal service.

The Court decided that Uber drivers are not self-employed as Uber controls much of their drivers’ work, including allocating customers, imposing penalties for increased cancellation rates, dictating fare prices and therefore fixing drivers’ remuneration.

The decision reaffirms the position that the tribunals and courts will ‘look behind’ any written contractual arrangements and determine status by looking at what actually happens in practice.

Uber has 70,000 UK drivers who will now be classified as “workers” and therefore entitled to a number of employment protections which include: national minimum wage, paid holiday, pension rights, sick leave, against unlawful discrimination, against unlawful deduction from wages and whistleblowing.

Uber’s response

After a five-year battle of appealing through the UK courts, Uber has responded to the Court’s decision by announcing, on the 17 March 2021, that it recognised their UK drivers as workers and will give all drivers the National Living Wage once the drivers have accepted a trip request and after expenses. This, it should be noted, does not accord with the decision of the Court, which found that the drivers are workers during their waiting time once logged onto the app as well.

All UK Uber drivers will be automatically enrolled into a workplace pension plan in line with legislation. Workers will also receive paid holiday time based on 12.07% of their earnings, free insurance to cover sickness and injury as well as maternity and paternity payments.

What are the implications of the decision for businesses?

Over the last few years the gig economy has grown rapidly with many other businesses creating online platforms for on-demand services. The Supreme Court ruling against one of the largest names in the industry will have an impact on the many other businesses operating under a similar model to Uber’s. A shift in industry standards is expected as businesses assess the status of those engaged by them and potentially reclassify them as workers to comply with the ruling and look to avoid the possibility of similar claims being made.

The additional cost for businesses that operate in the gig economy could lead to smaller businesses ceasing trade or implementing restructuring plans to reduce their workforce in order to cover the increased costs associated with the rights that come with worker status.

The ruling means that businesses cannot solely rely on written agreements and signed contractual documents as the courts will also consider the conduct and the course of dealings between the parties to determine the working relationship between the two.

Future developments

The Independent Workers Union of Great Britain (IWGB) has welcomed the Supreme Court’s ruling and has called for drivers to receive the National Living wage from when they log onto the app until they log out and not only when they carry out trips as suggested by Uber. This would account for unpaid waiting times that Uber drivers often face. Drivers have also called for compensation for missed entitlements such as backdated wages, holiday pay and pension contributions and the IWGB has called on HMRC to investigate back-pay. There are at least two large-scale claims involving multiple claimants which are in progress to reclaim Uber drivers’ alleged historic losses based on the Court’s decision.

If you need assistance determining the status of those engaged in your business get in touch, we’re here to offer some tailored advice specific to you.

The contents of this article are intended as guidance for readers. It can be no substitute for specific advice. Consequently we cannot accept responsibility for this information, errors or matters affected by subsequent changes in the law, or the content of any website referred to in this article. © Mundays LLP

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