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Contractor or Employee? You'd better be UBER careful!

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Contractor or Employee? You'd better be UBER careful!

To Uber, or not to Uber? That is the question. At least, that is the question that goes through most people’s mind when they’re staring down the barrel of a night tube home in the early hours of the morning, or gazing through the office window as the wintery conditions set in before heading out for a meeting.

And yet, just a few years ago you’d be forgiven for exhibiting a blank stare if someone mentioned the Uber name: very few people had even heard of it. Fast-forward to the present day and you’re more likely to exhibit a look of disbelief if someone announces that they haven’t heard of Uber. Safe to say, Uber has taken the transportation industry across the world by storm since its launch in 2010. In fact, it was valued earlier this year in excess of $60billion and, somehow, Uber has managed to do this without employing a single driver. Instead, by positioning itself as a technology platform that connects self-employed drivers with passengers, it has always maintained that it is not a provider of taxi services but simply a technological facilitator, if you will.

However, the terms of the relationship between Uber and its drivers was called into question and thrust into the spotlight earlier this month when it was reviewed by the London Central Employment Tribunal. It was an enormously important case as it was one of the first times that employment rights had been considered in the context of the so called ‘gig economy’ (i.e. an environment in which temporary positions are common and organizations contract with independent workers for short-term engagements).

What was the case about?

Uber’s view, and argument in the case, was that the drivers were running their own businesses, keeping their own accounts and declaring their own taxes. As such, Uber claimed that they were third party contractors and therefore that the drivers had no employment relationship or rights against them, under either the Employment Rights Act 1996, the National Minimum Wage Act 1998 or the Working Time Regulations 1998. This meant that the drivers would not be entitled to paid annual leave or the national minimum wage because, as Uber stated, they were contractors and not employees.

How was the case decided?

The crux of the decision came down to whether Uber could be classified as a ‘client/customer’ of their drivers and, following previous case law, whether there was an obligation on the employer to provide work and an obligation on the individual to accept that work. It was on this postulation that Uber’s argument fell down, as the Tribunal concluded that the notion of Uber being a mosaic of 30,000 small business linked by a common platform was utterly ridiculous.

Uber had also put forward, as part of their case, that any contract which came into existence did so between the driver and the passenger; upholding their position that they were merely facilitating the deal. By Contrast, the Tribunal pointed to the fact that Uber was responsible for recruiting drivers, setting fares, running an earnings guarantee scheme, administering complaints procedure schemes and imposing conditions as to routing and rebates. Ultimately, the tribunal ruled that the drivers were to be considered as employees rather than third party contractors; hardly a surprise on the facts.

In any event, following the outcome of the Tribunal, Uber has announced that it plans to appeal the decision. Given the staggering potential costs of guaranteeing minimum wages and annual leave for all its drivers, it’s not surprising that an appeal is being contemplated (lawyers’ fees to appeal are, of course, likely to be miniscule in comparison to the alternative!)

Once the appeal has been decided and the fog has cleared, it will be interesting to see how the case affects other companies which rely on the ‘gig economy’ model. As more and more businesses subscribe to this model, (think of, for example, Deliveroo), the importance of gig workers’ employment rights will inevitably become increasingly important. However, if the Tribunal’s decision is upheld, will the Uber’s current model remain financially sustainable or will fares be hiked up to balance the books? If so, will this result in a reduction of users? And, ultimately, will it have a knock-on effect for other gig economy businesses? For the moment, we can only speculate, but we’ll continue to keep you posted with any updates as and when they occur.

What does this mean for me?

If you’re a business owner with employees and/or contractors, then you may want to give some thought to reviewing whether your employees are actually employees and your contractors are actually contractors. After all, you can put any label you like on the job, but it might not stop an Employment Tribunal from finding that your contractors are actually employees and are therefore entitled to employee benefits such as capped working hours, minimum wage entitlement and annual leave entitlement.

Understanding the intricacies of Employment Law can be complex and, frankly, not a lot of fun. Why not have a chat with us and let Hybrid Legal take care of your employment issues. Unlike a traditional law firm, we don't charge by the hour and we won't charge for each phone call or email. Instead, all of our fees are fixed and agreed with you upfront. Why not contact us today to discuss your legal requirements in further detail, we’ll be delighted to talk to you!

By Alex Clark

THE CONTENTS OF THIS ARTICLE ARE INTENDED SOLELY FOR INFORMATION PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS LEGAL ADVICE OR FINANCIAL ADVICE OR OPINION IN ANY SPECIFIC FACTS OR CIRCUMSTANCES.

© 2016 HYBRID LEGAL LIMITED.