The Impact of the Uber Ruling on the Gig Economy

The Impact of the Uber Ruling on the Gig Economy

Uber's recent employment tribunal will massively impact the company, but what about the gig economy as a whole?

By Michelle Last

In a landmark ruling on 28 October, the London Employment Tribunal determined that two Uber drivers should have been treated as 'workers' rather than self-employed. This means the individuals who brought the claims should have been entitled to basic workers’ rights, including the right to be paid the national minimum wage, statutory sick pay and statutory holiday pay. The potential cost implications for Uber and other employers operating similar models could be significant. The case comes at a pivotal time in the UK as the jobs market increasingly moves away from traditional, full-time employment to a more flexible 'gig' employment model.

Self-employed vs. worker

To be genuinely self-employed, an individual must be effectively running a business on their own account and have control over their work. If an individual is obliged to perform work personally, they will still be deemed to be a worker and not genuinely self-employed.

As the jobs market has changed in recent years, more and more individuals have declared themselves self-employed in order to take advantage of the flexibility and increased tax advantages that are not available to employees. However, many businesses are seemingly unaware that, although not entitled to full-employment protection as employees, such individuals may still be entitled to some basic employment law protection as 'workers'.

The Uber ruling serves as a reminder to employers in the industry that simply labelling an individual as self-employed does not deprive them of basic statutory employment rights. Getting it wrong can be disastrous both from a financial and reputational perspective, and lead to an unhealthy interest in your business from HMRC.

The new way of working :

The gig economy has been growing steadily over the past six months (Source: Online Labour Index)

Uber facts

In the Uber case, the drivers received contracts that stated they were self-employed and not required to work any minimum hours. However, the drivers were required to perform their work personally and could not sub-contract their work to a third party. Furthermore, once a driver accepted a job, they would be notified of the destination and would face penalties for rejecting a job or when a customer lodged a complaint about their experience. Deductions were often made without prior notification to, or consultation with, the driver.

The GMB brought two test cases against Uber on behalf of drivers engaged on a self-employed basis. The drivers brought backdated claims for failure to pay statutory holiday entitlement and the national minimum wage. One of the drivers claimed to earn just £5.03 per hour after expenses in one month.

Wider implications for Uber

Unfortunately for Uber, although this claim was only brought on behalf of a small number of individuals, represented by two test cases, the decision is likely to be relevant to the 40,000 licensed Uber drivers in the UK. In a statement to the press, the GMB union, which represented the drivers in the claims, stated:

GMB will be getting on with the business of campaigning and recruiting at Uber to ensure [its] members’ rights are respected.

GMB Union statement

The GMB also indicated it would be “reviewing similar contracts masquerading as bogus self-employment”. Uber is said to be appealing the decision, so this claim is likely to rumble on through the tribunal and court system for several years.

Issues for employers

Employers that engage individuals on a self-employed basis but require them to perform work personally may be at an increased risk of claims following the publication of this decision, particularly where the individual is a low-paid worker and may have a distinct financial incentive to bring a claim. Similar claims are reported to be pending against CitySprint, eCourier, Excel and Addison Lee.

Individuals engaged on a self-employed basis can bring claims alleging they should be treated as workers, either whilst they are still engaged by the business, or usually within three months of the termination of their engagement. If an individual brings this kind of claim, the business should be wary about taking any action against the individual, such as terminating their contract or providing a poor reference. There may be legal risks for businesses that do so.

What can employers do?

Impacted employers should review their operating model to determine whether it is possible to engage individuals on a different basis. Alternatively, it may be possible to accept the risk of worker status and seek to pass on the cost to customers.

Many claims can be back-dated so it may be prudent to take a proactive stance where there may be a risk of claims and to make appropriate financial provision for this, both in terms of backdated claims and future costs. Any decision to recognize worker-status should be carefully managed to minimize the risk of expensive back-dated claims.

About the author

Michelle Last is a consultant solicitor at Keystone Law, specializing in employment law. She is a regular contributor to the press and has been published in The Times, The Financial Times, The Sunday Times, HR Director and Personnel Today, among other titles. Last is frequently ranked as the “most viewed” employment law solicitor and regarded as a “thought leader” on LinkedIn.