Uber decision: does it affect your business?

7th November 2016

Uber decision: does it affect your business?

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There has been a lot of publicity over the preliminary hearing to decide the status of the Uber taxi drivers. Much of the publicity has reported the decision incorrectly, describing the drivers as employees. This was not the decision of the tribunal. The tribunal concluded that the drivers are workers. The decision (which is worth a read just for Judge Snelson’s fantastic demolition of Uber’s arguments) may be very concerning for Uber but is it not a surprise, nor is it ground breaking. We successfully used similar arguments to those advanced on behalf of the Uber drivers, in a case we dealt with in December 2013 against Paydens Ltd, a company operating a chain of pharmacies across South East England.

These status cases are important because workers (as opposed to the truly self-employed) have certain rights under UK employment law, including the entitlement to the National Minimum Wage and paid annual leave. For the 40,000 or so Uber drivers in the UK (and Mrs Wooller in the Paydens case), the decision could make an enormous difference to their earnings. According to the Guardian on 28th October 2016, research by Citizens Advice has suggested that as many as 460,000 people in the UK could be falsely classified as self-employed, leading to a huge loss in tax and National Insurance to the UK and a potentially crippling risk to UK employers. (https://www.theguardian.com/technology/2016/oct/28/uber-uk-tribunal-self-employed-status)

What is a worker?

A worker is defined as an individual who has entered into or works under:

(a)  a contract of employment; or

(b)  any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual.

There are extended definitions of worker under other legislation but for the purposes of this article, we will stay with the definition above, which is often referred to as the limb (b) worker test. This was the main test in discussion in the Uber and Paydens cases.

The limb (b) test has three elements which must be examined in order to determine worker status:

  • There must be a contract;
  • There must be personal service;
  • The question must be asked – what is the business or professional relationship between the worker and the employer. More particularly:
    • Does the individual have a profession or a business undertaking; and, if yes
    • Can the employer be characterised as a client or customer of the profession or business of the individual.

A tribunal will look at the reality of the situation and will consider issues such as control, mutuality of obligation (the obligation to provide work and to accept work) and whether the individual can provide a substitute worker to carry out the work in their stead. The tribunal can and will disregard the labels placed on individuals in the contractual documentation, if they conclude that the labels don’t reflect the reality of the situation.

The Uber case

Although we are talking about Uber, Uber is comprised of a number of legal entities established throughout the world. In this case, the claims were against three legal entities, one of which is Dutch. For the purposes of this article, I am going to use Uber, as I am not intending to mention anything about the jurisdiction elements of the case.

Uber painted a complex legal picture of the relationships between Uber entities, the drivers and the passengers. Uber, particularly the Dutch entity, styled itself as a technology platform and throughout the evidence, Uber as a whole maintained the position that all Uber does is provide the tools for small businesses (that’s the drivers, to you and I) to grow their businesses. Uber argued that there was a contractual relationship between the driver and the passenger and they acted as an agent for the drivers.  Uber argued that they provide an app to drivers through which passengers can order and pay for a taxi, but Uber is not the provider of the taxis and is not a taxi company. Uber earns a ‘service’ fee for each fare, being a percentage of the fare.

From the details in the decision, the reality for the drivers is very different from the legal picture. Although drivers are not required to make a commitment to work, when they sign into the app, they are treated as being on duty. The drivers do not know the full name of any passenger and do not know the destination before they accept the fare and they cannot increase the fare directly with the passenger. No money changes hands between the passenger and the driver. The driver is generally obliged to follow the route to the destination dictated by the app. If the driver refuses three fares, they are forcibly locked out of the app for 10 minutes.

According to the decision, under the terms of various documents between Uber and its drivers, the app is personal to the driver and non-transferable. The drivers cannot share accounts or their driver ID’s which are used to log on to the app.

In evidence, Uber was shown to have made a number of statements in the drivers’ packs and in what the tribunal called ‘unguarded moments’ where the language used appeared incompatible with the legal case Uber was arguing. There were many examples on Twitter and other social media of Uber using ‘our drivers’ and ‘Ubers’, meaning Uber vehicles. This kind of language extended to responses to Transport for London consultation in 2015, calling the drivers Uber partner-drivers.

The decision

The tribunal decided that the fact that the app and driver ID could not be shared meant that there was no question of any driver being replaced by a substitute.

In looking at the reality of the situation and despite the documentation provided, the tribunal concluded that the legal documents were full of ‘fictions’ and ‘twisted language’. Of Uber’s witness, they described her evidence as ‘grimly loyal’ and ‘the lady doth protest too much, methinks’.

Instead, the tribunal concluded that the extent of control by Uber over how the app and each fare worked meant that the drivers were four square in the limb (b) definition and therefore workers. If you choose to read the decision (the link is at the end of this article) paragraph 91 made me almost sorry for Uber’s legal team.

In terms of when the drivers were working for the purposes of calculating their rights to the minimum wage and holiday entitlement, they commenced work when they:

  • Switched on the app;
  • Were in their territory; and
  • Were ready and willing to accept trips.

 

This decision serves as a reminder to anyone using freelance staff that unless they are wholly happy to be considered about the level of control and to let the freelancer deputise their work, they could be faced with a similar claim.

If you are an employer with a lot of freelance people, we would recommend you revisit your documentation and give thought to the following to help you avoid being faced with a claim like Uber:

  • ensure that the substitution clause in your contract reflects the relationship accurately;
  • ensure you address the issue of holiday pay;
  • use contractors who provide their services through a limited company.

Finally, as mentioned above, the decision is highly critical of the legal documentation that Uber used to try to justify their position that the drivers were self-employed. I can imagine that Uber spent a huge amount of money on legal fees to try to ensure that their documentation was watertight. However, if the documents don’t reflect reality and in public, you act as if they are your employees, you may find it difficult to explain to a Judge why you think your people are genuinely self-employed.

In summary, if your relationship is not business to business these issues will crop up.

See also: https://www.employease.co.uk/locum-pharmacist-is-held-to-be-a-worker-by-employment-tribunal/

https://www.judiciary.gov.uk/wp-content/uploads/2016/10/aslam-and-farrar-v-uber-reasons-20161028.pdf

 

For more specific information or to discuss your requirements please call either Julie Calleux or Amanda Galashan at Employease on 0333 939 8741, or email us at info@employease.co.uk.

This note does not constitute legal advice on any particular situation you may have.

©Employease 2016

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