On Friday February 19th, following a lengthy legal fight, Uber lost a momentous battle at the Supreme Court in one of the most significant employment cases in recent decades. The UK’s highest court ruled against the firm, concluding that its drivers should be classed as workers rather than independent third-party contractors, which entitles them to basic employment protections such as holiday pay and minimum wage. The so-called ‘gig economy’, where people work for one or more companies on a job-by-job basis, has faced criticism from unions who argue it is exploitative, while businesses highlight the flexibility as an advantage. Although the ruling currently only applies to a small group of Uber drivers who opened the case, this decision threatens the taxi app’s entire business model, opening the doors for other drivers to sue the company. It also holds broader implications for the gig economy and for labour markets regarding employment status.
An employment tribunal in London first ruled Uber drivers should be classed as workers in 2016, when James Farrar and Yaseen Aslam, who previously worked for the company, successfully stated their case. Uber said its drivers were self-employed and it, therefore, was not responsible for paying any minimum wage nor holiday pay, triggering a long-running legal battle, with the Silicon Valley-based firm appealing the original decision all the way to Britain’s top court. The company appealed against the employment tribunal decision, but the Employment Appeal Tribunal upheld the ruling in November 2017. Then, in December 2018, the ruling was upheld once again when the company took the case to the Court of Appeal. Eventually, on Friday February 19th, the Supreme Court ruled in favour of 35 Uber drivers who began the case, despite claims that the judgement applies to all 90,000 drivers who have been active with Uber since and including 2016. The court argued that the drivers were not self-employed because much of their work is controlled, with their customers being allocated to them and their fees dictated.
Although it could take months for the details to be worked out, the victory, described by the GMB union as “historic”, paves the way for drivers to claim compensation of up to £12,000 according to Leigh Day, the law firm fighting the case for some of the drivers who were represented by the trade union.
The growth and struggles of self-employment
Campaigners have long argued that the rise of the gig economy has led to an increasing number of workers being wrongly classified as contractors, and so denied holiday pay, the minimum wage, and other entitlements including a workplace pension scheme. This issue has grown stronger since the Great Recession in 2008, with a significant proportion of the employment growth experienced since then being driven by self-employment.
This ruling is one of the most important defeats Uber has suffered in global battles over the status of its workforce. Despite the company’s drivers having come to symbolise the flexibility and entrepreneurial freedom of gig economy work, Yaseem Aslam, who begun the case in 2016, claimed that this is in fact a “false dream,” stating that “the reality has been illegally low pay, dangerously long hours and intense digital surveillance.” The pandemic has cast an even harsher light on the financial struggles experienced by Uber drivers, with many earning only £30 gross a day as fares remain 80% below normal levels. Given that the self-employment grants issued by the government only cover 80% of a driver’s profits, this isn’t even enough to pay for their costs. Under the new rights, those Uber drivers would at least be entitled to the minimum wage to live on.
What does this mean for the future of Uber and the gig economy?
When Uber filed to go public in 2019, James Farrar’s and Yaseem Aslam’s case was one key risk to its business that was identified. The company said in this section that if it had to classify drivers as workers, it would “incur significant additional expenses” in compensating the drivers for things such as the minimum wage and overtime. Joe Aiston, a senior associate at law firm Taylor Wessing, said that any move by the taxi-hailing firm to engage its drivers as workers “would almost certainly involve passing those costs on to Uber’s customers in fare increases,” which risks making the company less competitive going forward.
Another important aspect that the filing mentioned is that if Uber were to lose the case, HM Revenue & Customs (HMRC) would then classify the company as a transport provider, and VAT would have to be paid on fares. HMRC and Uber are still in dispute about the firm’s VAT liability and the question also remains of whether HMRC will now pursue the company for past infringements. Mr Maugham, a barrister specialising in tax and employment law, applied to HMRC to ask for a judicial review and demand that Uber pay VAT, believing that the company’s past VAT infringements with interest is valued at over £1bn.
Uber, which currently has around 60,000 drivers in Britain, 45,000 of those being in London, said after the ruling that it would study the verdict carefully to understand the far-reaching consequences of the case. The ruling opens the way for thousands of other drivers to sue the company, with Paul Jennings, a partner at law firm Bates Wells, which represented the Uber drivers, saying there were at least 15,000 claims from other drivers that had been waiting for the decision. This could encourage similar challenges in other companies with similar business structures such as Deliveroo, but also ranging well beyond the gig economy into other companies that rely heavily on a self-employed workforce.