The U.K. Supreme Court’s recent ruling that Uber drivers should be treated as workers, not independent contractors, could have far-reaching and costly consequences for gig-economy firms and other companies.
In a unanimous decision in February, the court found that U.K. Uber drivers are entitled to benefits such as paid holidays, minimum wage and pensions because the popular ride-hailing platform assigns their rates and rides and disciplines the drivers based on ratings.
The court, rejecting Uber’s long-standing practice of treating its drivers as self-employed contractors, also found the company’s more than 70,000 U.K. drivers must be paid for the hours that they’re logged into the Uber app, regardless of ride demand.
Entitled to Benefits
The decision requires that the drivers be classified as workers, a hybrid U.K. class with fewer job rights than employees but more benefits and protections than independent contractors. It could result in higher costs or revised business models for companies relying on similar arrangements.
“This case is monumental, not only for Uber’s drivers but also for the U.K.’s gig economy, which is likely to be strongly influenced by the decision,” said Tina Chander, an attorney with Wright Hassall LLP in Solihull, England, U.K.
The Supreme Court cited five key reasons for its verdict, “fundamentally centered around the high level of control Uber exercised over its drivers,” Chander said.
In the Uber case, the court found the company decides what drivers are paid, sets contract terms without drivers’ say, constrains drivers’ ability to decline rides, uses passenger ratings to help control drivers, and takes steps to prevent drivers and passengers from establishing relationships outside a particular ride.
While multiple factors must be weighed against one another when considering the employment status, “it is clear that the overall level of control in play is an important indicator of how the relationship should be defined, and employers must be aware of this moving forward,” Chander said.
A Need to Reassess
Employment lawyers noted that the decision was the latest U.K. case finding that people who work on a more flexible basis can be classified as workers if they meet certain criteria.
The Uber case, and plentiful other litigation in the U.K. involving organizations such as Pimlico Plumbers and CitySprint, have demonstrated that the U.K. courts and tribunals will examine the substance of an arrangement in deciding if someone is a worker entitled to certain statutory rights such as the national minimum wage and minimum holiday entitlements, said Charles Wynn-Evans, an attorney with Dechert LLP in London.
“Gig-economy businesses operating by way of platforms have in general failed to defeat the argument that [individuals] working on the services they provide are workers,” he added.
Individuals now “may be more likely to challenge their treatment,” he said, noting, though, that the court didn’t find that the drivers are employees with additional protections, such as the right to claim unfair dismissal.
Decisions like Uber will force companies that seek to treat people as independent contractors or clients of their businesses—rather than workers—to re-examine their hiring arrangements and whether they should start treating people as workers, Wynn-Evans said.
The Uber decision also raises the prospect that the popular ride platform might face backdated claims from workers, lawyers said.
While such claims and government enforcement actions may be complicated, Wynn-Evans said, “they do present potentially significant accrued liabilities.”
Jonathan Maude, an attorney with Vedder Price in London, said organizations will need to review their practices and potentially reassess their business models. He called the ruling a landmark decision but not a surprising one.
A big company like Uber may withstand the ruling’s consequences, Maude noted, but smaller firms like online gyms or teaching and mentoring companies may use similar arrangements, employing on a piecemeal basis people who don’t work for anyone else.
“Those rights and those entitlements cost money,” Maude said. “This will have far-reaching consequences into the future.”
Even though the U.K. has exited the European Union, the two regions share many of the same basic worker entitlements, such as annual leave and rest periods, so the ruling could draw interest in European Union countries, Maude said. While his U.S. colleagues are examining the decision, Maude predicted it will be less significant, although not completely irrelevant, in the U.S.
Uber has made changes to its U.K. operations already, although the drivers who initiated the case maintained the moves fall short.
Uber announced it would start treating its U.K. drivers as workers—paying minimum wage or higher after the driver accepts a trip request and after expenses, automatically enrolling eligible drivers into a pension and contributing to it, and providing paid holidays based on a percentage of earnings.
“Drivers will start benefiting from these changes immediately, while retaining the flexibility to choose if, when and where they drive under the unique U.K. worker classification,” the company said in a release, adding that drivers will continue to receive insurance covering sickness and injury as well as maternity and paternity leave payments.
Dinah Wisenberg Brin is a reporter and writer based in Philadelphia.