The UK Supreme Court recently delivered a landmark judgment, ruling Uber drivers must be considered workers rather than self-employed.
Firstly, this means Uber could be liable for a hefty compensation bill, although Uber have said the ruling centres on only a small number of drivers and has since made changes to its business. It also could have wider consequences for the gig economy.
The background to this ruling is two former Uber drivers took Uber to an employment tribunal in October 2016, arguing they worked for Uber. Uber said its drivers were self-employed and was therefore not responsible for paying minimum wage nor holiday pay. The pair originally won at the employment tribunal.
Uber appealed against the employment tribunal decision, but the Employment Appeal Tribunal upheld the ruling in November 2017. Uber then took the case to the Court of Appeal in December 2018, which upheld the ruling. The recent ruling at the Supreme Court was Uber’s last appeal. As the UK’s highest court, it has final say on the matter. The Supreme Court unanimously dismissed Uber’s appeal and stated drivers should be considered working not only when driving a passenger, but whenever logged into the app. This is a key point as Uber drivers typically spend time waiting for people to book rides on the app. Previously, Uber had said if drivers were found to be workers, then it would only count time during journeys with a passenger in the car.
The court considered several elements in its judgment:
Uber set the fare, meaning they dictated how much drivers could earn.
Uber set the contract terms with drivers having no say in them.
Uber can penalise drivers for rejecting too many rides.
Uber monitors a driver’s service through the star rating and has the capacity to terminate the relationship.
What did Uber argue?
Uber has always maintained that it is a booking agent, which hires self-employed contractors that provide transport. By not being classed as a transport provider, Uber is currently not paying 20% VAT on fares.
However, anyone who has ever booked an Uber will know it does not seem to operate any differently to any other transport provider with an app.
Jamie Heywood, Uber’s Regional General Manager for Northern and Eastern Europe stated: ‘We respect the Court’s decision which focussed on a small number of drivers who used the Uber app in 2016. Since then we have made some significant changes to our business, guided by drivers every step of the way. These include giving even more control over how they earn and providing new protections like free insurance in case of sickness and injury. We are committed to doing more and will now consult with every active driver across the UK to understand the changes they want to see’.
What drivers say
Uber drivers have claimed they have been forced to leave the trade as they could not make ends meet, and many have expressed upset that the ruling has taken so long. There are feelings that the government has let these workers down by not granting them rights long before this. Fares are currently down 80% due to the pandemic and with the government’s self-employed grants only providing 80% of a driver’s profits, this has placed many drivers in a precarious financial position.
Will we pay more for Uber rides?
Possibly. Uber has said if it has to classify drivers as workers it would incur significant additional expenses for paying minimum wage and overtime and a reclassification would require Uber to fundamentally change their business model, consequently having an adverse effect on the business and financial condition.
However, it could be argued, if your business model depends on keeping the people, keeping it afloat, in poverty for your business to prosper, some fundamental change is already required.
It is also a possibility this may spell the end for Uber. In the fourth quarter of 2020 Uber’s total revenue was $4.07 billion. Uber London’s profits were £6.2million. However, its net loss was reported at $1.1 billion. A company making over a billion-dollar loss may be in trouble.
What about VAT?
Uber stated if they lost their case, HM Revenue and Customs (HMRC) would classify the firm as a transport provider meaning Uber would need to pay VAT on fares. It is suggested by Mr Maughan, a barrister specialising in tax and employment law, it will now be difficult for Uber to continue to resist paying what he believes to be more than £1bn in VAT and interest.
HMRC and Uber are still in dispute about the firm’s VAT liability. Although it could be suggested, it is not desirable companies cheat their tax obligations and deprive the public purse of funds to make enormous amounts of profit. Uber paid no corporation tax in 2020 as they were able to use a shares windfall for staff to wipe out its UK tax bill. It should be noted in the interest of fairness Uber paid £1.3million in tax in 2018.
What does this mean for the gig economy?
This ruling could have wider implications for other gig economy workers like other private hire drivers, couriers and delivery drivers.
Dr Alex Wood, an Internet Institute research associate on gig economy at Oxford University, told the BBC that because the UK does not have a labour inspectorate these rules aren’t enforced so it will fall to workers to bring subsequent tribunals. This means it is easy for Uber to ignore this until more tribunals come for the remaining 40,000 drivers.
Uber in other news
This is not the only case concerning Uber to hit the news, or the courts. Uber are also being sued by drivers accusing them of using automated ‘robo-firing’ algorithms to dismiss them. Over 1,000 drivers have allegedly been wrongly accused of fraudulent activity and had their accounts terminated with no right of appeal.
Uber was also banned from operating in London in 2017 after a pattern of failures by Uber that placed passengers and their safety at risk. However, Uber managed to secure the right to continue working in the capital after making improvements, albeit under close monitoring.
The full ramifications from this ruling for both Uber and gig economy workers remains to be seen. It is possible the government will step in and legislate, it is possible Uber will withdraw from the UK (although this may be unlikely considering the £6.2million profit in London for 2020 during a pandemic), it is possible Uber will do their best to circumvent the ruling. It really is a case of ‘watch this space!’.
By Chloe Lydell.
Image credit to AA+W - stock.adobe.com