The quiet hive of activity: the Supreme Court in lockdown

By Stephanie Creed, Ian Hunter, Elizabeth Lang, Tim Spillane, Alison Dixon

08-2020

Given everything else going in the UK, employers could be forgiven for missing a quiet hive of activity in the UK's Supreme Court.  The Court has been busy hearing key cases with potentially wide-reaching implications for employers.  Below, we look at two of those currently under consideration:

  • Uber: Gig economy rights under review
  • Equal Pay: Asda's appeal on comparability for equal pay

Uber: Gig economy rights under review

Uber BV & Ors v Aslam & Ors

Summary

A two-day hearing on the worker status of Uber drivers got underway in the Supreme Court on 21 July 2020.  Uber are seeking to convince the Supreme Court to overturn the Court of Appeal ("CA")'s earlier decision that Uber drivers are "limb (b)" workers and are therefore entitled to certain statutory rights, including to be paid the national minimum wage and to take paid holiday.

Uber maintains that it provides a platform which connects self-employed drivers with customers.  Uber's underlying premise to date has been that drivers enter into individual contracts with customers and provide driving services to those customers.

Whilst a number of other businesses with similar models have faced similar claims (e.g. Pimlico Plumbers, Addison Lee, Hermes, CitySprint, Deliveroo), this is arguably the most high-profile of the gig economy cases.  Companies and gig workers alike will be watching with interest given the potential legal and financial implications for both sides.

How did we get here?

A number of drivers brought claims against Uber in 2016 seeking payment of the national minimum wage and holiday pay, and alleging detrimental treatment for whistleblowing.  In order to proceed with these claims, the drivers had to show they were "limb (b)" workers or employees, as opposed to self-employed contractors (as Uber asserted).

  • The Employment Tribunal ("ET") held that the drivers were workers, finding that Uber's business was to provide taxi services rather than to generate leads for drivers to grow their own businesses.  The ET took into account various factors, including the significant control Uber exercised over the drivers (including Uber's practice of disconnecting drivers who didn't accept a sufficient number of trips or who didn't have sufficiently high customer ratings).  The ET concluded that drivers were engaged as workers for so long as they were in the territory in which they were authorised to work, logged into the Uber app and ready and willing to accept work. 
  • The Employment Appeal Tribunal ("EAT") dismissed Uber’s appeal, echoing the ET's findings and reasoning.  The EAT admitted to having difficulty in identifying the time during which drivers could be treated as Uber’s workers.  It concluded that drivers were clearly workers when they had accepted trips, but it was less sure in relation to in-between periods.  Uber appealed to the CA.

What did the Court of Appeal say – and will the Supreme Court take the same approach?

The CA, by a majority, held that Uber drivers are workers, not self-employed contractors.  Two of the judges found that Uber exerted a high degree of control over drivers, which they held was sufficient to qualify them as workers.  They were also sympathetic to the position advanced by the drivers that being logged into the Uber app and ready to work was enough to constitute working.

The drivers asserted that Uber contracts with the passengers to provide driving services and the drivers perform the services.  Whereas, Uber argued that it acted only as an intermediary, providing booking and payment services - it is the drivers who contract with the passengers and therefore provide a driving service as independent contractors to each of their passengers.  It was noted that contractual documentation reflected Uber's position, but the majority of the CA held that this did not reflect the practical reality of the relationship.

In his dissenting judgment, Lord Justice Underhill found no inconsistency between the contractual terms and the reality of the situation – he equated the Uber-driver relationship to that of a standard minicab model (in which drivers are currently considered to be self-employed).  Underhill LJ said that Uber's position was neither unrealistic nor artificial, and emphasised that giving gig economy workers greater protection required statutory intervention.  

At the Supreme Court hearing, Uber's focus appeared to be on the applicable contractual terms between the parties, rather than primarily on issues of control.  Whilst this may be an indication that Uber intend to change their terms in light of the Court's decision, it remains to be seen whether the Supreme Court will focus solely on the contractual terms in their judgement, or whether they will take a broader approach to give the judgment greater applicability across the gig economy.  The stakes for Uber are potentially significant, with around 1,000 claims stayed pending the Supreme Court's decision, as are the possible ramifications for other businesses engaging "gig" workers as self-employed contractors, who may in some cases have to re-think their entire business models.    

Equal Pay: Asda's appeal on comparability for equal pay

Asda Stores Ltd v Brierley & Ors

Summary  

The latest hearing in the long-running equal pay claim brought by Asda shop floor workers got underway on 13 July 2020 in the Supreme Court.  Asda, which this year reportedly overtook Sainsbury's to become the UK's second largest supermarket, has some 600-plus stores (of varying sizes) with around 130,000 hourly-paid employees employed on retail terms.  It also has 25 distribution centres where approx. 12,000 hourly-paid employees are employed on distribution terms.

Asda is facing claims from thousands of its (mostly female) retail workers claiming that they can compare themselves to (mostly male) distribution depot staff.  The claimants argue that their jobs involve work of equal value to the depot employees, but the terms of employment for depot employees (including hourly wage and bonuses) are more favourable.  If the claimants are successful in their claim, the costs to Asda will be significant.

This case is not only a crucial one for Asda; there are a number of other prominent retailers who are facing similar claims, including Tesco, Morrisons, Next and Sainsbury's.  The value of the Tesco claim alone is estimated at some £4billion.  And the consequences of this case are unlikely to stop here.  Equal pay claims have traditionally been the domain of public sector employers and employees; the Asda case shows that the private sector is a new front for these types of claim, with pay structures in the retail sector particularly vulnerable to challenge.

How did we get here?  And where exactly is here?

The Supreme Court is considering the question of comparability, which forms the first stage of an equal pay claim, so this litigation still has some way to go. Equal pay legislation implies a "sex equality clause" into all employment contracts, which gives an employee the benefit of more favourable terms which apply to a person of the opposite sex in the same employment doing equal work (unless the difference can be explained by reference to a non-discriminatory material factor). Equal work may mean (i) like work; (ii) work rated as equivalent; or (iii) work of equal value.  Claimants may be awarded back pay and/or damages where successful.

For equal pay purposes, an employee can only compare themselves to another employee who is engaged at a different site within a business if "common terms" apply to the two establishments.  Asda had lost on this point at the ET stage – the ET held that retail employees could compare themselves to depot employees.  The EAT and later the CA reached a similar conclusion to the ET, albeit on slightly different reasoning.  It will be interesting to see whether the Supreme Court follows suit.

What did the Court of Appeal say – and will the Supreme Court take the same approach?

  1. North Hypothetical:  according to the CA, the Employment Tribunal had taken the wrong approach in "painstakingly" comparing the terms of employment of the retail and distribution employees (using table charts provided by the parties).  Apparently, no such comparison was necessary as no retail workers were actually employed at depots or vice versa.  Instead, the correct question was this (referred to as the "North hypothetical"): would the comparator still have been employed on terms broadly similar to his existing terms if he were, hypothetically, asked to do his job at the claimant's location (even if this was very unlikely to happen in practice)?  In essence, the CA was asking whether, if there were a depot at an Asda store, the terms of the depot employees working there (including their hourly wage) would remain unchanged.  This is very much a hypothetical comparative exercise and did not require extensive factual evidence.  
  2. Single source: both the retail and depot terms were determined by the same employer who had the power to make them equal – meaning, as the CA noted, the terms had a "single source" (a relevant factor under the applicable EU legislation).  On the evidence presented, Asda's Executive Board and sub-committees of that Board control the financial budgets and oversees the distribution and retail functions at all times.  The CA determined that the Executive Board had responsibility for the differences in pay and the power to equalise them (under the control of its parent company, Wal-Mart).

Asda's position before the Supreme Court remained that retail and distribution are two different industry sectors and that they pay staff the market rates for these sectors.  It challenged the North Hypothetical as applied by the CA, and asserted that the relevant terms and working conditions depended on the type of establishment at which people worked.  It drew attention to the distinction between the retail and distribution workplaces, arguing that they are different types of establishment operating in different geographical locations, in different industries and with different pay-setting processes.

The Supreme Court's decision in this case will give us further guidance on comparability and the question of "same employment", particularly as regards the points flagged above.  This will inevitably affect the structure and approach of other potential claimants.  

In practical terms: 

  • if Asda wins its appeal, the claims will in effect cease, and it is likely that the claimants (and funders) of any parallel claims will be forced to reconsider their claims (and some or all may fall away); whereas
  • if Asda lose, those claimants will inevitably treat this as a positive sign and we could reasonably expect to see the numbers of claimants growing and other claims commencing.  Given the stakes for Asda, we can also expect them to take a similar approach (using all available options to appeal, delay and object to the decisions made at first instance) in relation to the second and third stages of the claims, namely, whether the claimants perform work of equal value to that of their comparators, and whether Asda has a "material factor" defence (i.e. some other reason, beyond sex discrimination) for the difference in pay.

The Supreme Court's decision is expected towards the end of the year and employers should watch this space.

The decisions on both Uber and Asda will be reported in future editions of Frontline.