On 28 October 2016 the Employment Tribunal ruled in favour of two Uber drivers seeking to establish their status as 'workers' as the first of a number of such cases backed by the GMB union. Similar arguments are due to be made on behalf of courier drivers before the end of the year against CitySprint and three other courier companies. The decision has implications for the increasing number of businesses and workers who operate within what has become called the 'gig' economy.

Impact of 'worker' status

In this case, Uber sought to argue that its drivers were independent self-employed contractors who could choose where and when they worked and effectively ran their own businesses. Under relevant legislation a distinction is made between this type of self-employment, and a category of self-employed worker who is not an employee, but not running a business either, often referred to in legal commentary as a 'limb (b)' worker. Such workers are entitled to a number of different employment protections, including the National Minimum Wage and paid holiday under the Working Time Regulations, which were the specific rights claimed in this case.

The Employment Tribunal concluded that any driver who (a) has the Uber App switched on; (b) is within the territory he is authorised to work; and (c) is able and willing to accept an assignment, is working for Uber under a 'worker' contract whilst those conditions are met. The idea that there was an overarching 'umbrella' contract was expressly ruled out (and not argued by the Claimants).

Uber have already announced they will appeal and the final outcome is unlikely to be known for some time. It is possible that claims lodged in response to this decision will be stayed pending the final outcome. If upheld, this decision will open the way for those working for Uber and potentially a number of other organisations to secure the rights claimed, and other rights which apply by law to workers. Such rights are almost identical to those which apply to employees, but exclude parental rights and dismissal rights.

Further, pensions auto-enrolment obligations extend to workers as well as employees and this could represent a substantial financial and administrative burden for businesses. An unintended consequence could be that such workers will need to be included in gender pay gap reporting exercises; the final regulations have not yet been published but there has been a strong indication that they will cover workers and not just employees.

Given the public interest in this case, the Employment Tribunal took the opportunity to provide very helpful forensic analysis on the topic of 'worker' status and distinguished the Uber case from a Court of Appeal decision which concerned a dancer at Stringfellows who paid the club a fee in order to be able to dance at the club and earn money from its clients but asserted employee status. In her case she was held to be self-employed and running a business.  The Employment Tribunal in the Uber case said that it could not agree that there were 30,000 individual self-employed pursuing businesses through the Uber platform

At the same time, the Employment Tribunal reviewed in detail whether the contractual documentation which governed the relationship between Uber, its drivers and the end-user customers truly reflected the reality on the ground. In this case, it was made clear that the label placed on the parties' arrangement was not to be the determining factor as it did not reflect the reality of the situation.

Wider impact

The trend of companies taking on self-employed workers who engage with work through the use of Apps has increased significantly across the world over the past few years. The wider impact of the Uber decision may lead to these companies being faced with similar claims, which could force them into changing their business models, or having to pass the increased costs onto their customers. The UK is unusual in having legislation that distinguishes between the self-employed running businesses and 'limb (b)' workers and the usual issue in most jurisdictions is whether someone is self-employed or employed. 

The growth of the worker economy is likely to be accompanied by a decrease in the number of employees and it remains to be seen whether taxation legislation will be amended to deal with the potential loss of 13.8% in employer national insurance contributions which applies to employees, but not to workers.

The realisation that current legislation has not kept up with the changes in the workplace has led the Prime Minister to order a review of employment practices to ensure workers' rights are protected under changing business models and a growing trend towards flexible or self-employment.

There is now a global scrutiny of the business models adopted by many 'gig' organisations, with companies across Europe, the U.S. and the Asia Pacific region facing similar issues. Employers need to be alert to the laws in the jurisdictions in which they operate and the extent to which they accommodate or hinder the implementation of less traditional working patterns and arrangements. On 29 November 2016 our Asia Pacific team will be delivering a webinar on 'Uberization and Changing Work Patterns' across Australia, China, Hong Kong and Singapore. The webinar will focus on the on-going 'employee-contractor/freelancer' debate and the challenges companies face to protect their business in times where they have less control over their workforce. To find out more and RSVP please click here.