December 6, 2017
The gig economy and workers’ rights are among the most prominent themes of our age. In the future of employment – in particular, what it means to be employed or self-employed – they are critical. Catapulted to the heart of this debate is Uber, which has deployed its ride-hailing platform app in nearly 500 cities around the world since its San Francisco launch seven years ago. But in the UK and elsewhere, it has run into myriad legal problems. Most recent among them, Uber lost a hearing at an Employment Appeals Tribunal (EAT) in London in a case brought by co-claimants, James Farrar and Yaseen Aslam. The verdict in favour of the two Uber drivers poses a threat to the fundamental premise that has fuelled the meteoric rise of the gig economy: that workers work for themselves and not for the apps which rely on them.
In the appeal hearing, Dinah Rose QC for Uber argued that it is not part of the gig economy, and operates a similar business model to local taxi firms. She said the Uber booking app acted merely as an agent and was a “very powerful piece of technology” which gives drivers access to passengers in return for part of the fare. “Potential drivers or users are under no obligation at all to use it and if they don’t use it they don’t have to pay Uber anything at all,” she added.
But the EAT judge disagreed, concluding that Uber drivers were not independent contractors who were making use of an app. Instead, he supported the decision reached by the original tribunal last year, namely that they were “workers” because Uber controlled much of their work, such as allocating customers and dictating the prices charged for each fare. Uber has decided to appeal by taking its case to the Supreme Court, ‘leapfrogging’the Court of Appeal.
This may ultimately answer the question at the heart of the gig economy business model: is Uber a matchmaker, or is it providing a service? Judges in different jurisdictions have decided that the Uber app service goes further than just intermediation.
Many companies operating in the gig economy could be affected by any decision: if they are required to assume the full range of responsibilities as employers, that will mean covering holidays and absorbing labour costs, as well as potentially higher taxes. The net affect may be increased costs passed on to consumers. Gig economy companies like Uber also argue that drivers prefer flexible working rather than restrictions that come with minimum hourly wages and holiday pay.
Inevitably, the EAT decision has provoked much comment in the UK, particularly given Uber’s additional problems over its future licence to operate in London: Uber faces the prospect of losing that licence following a refusal by the city’s transport authority to renew it.
Chief among the critics of the EATdecision is Matthew Taylor, chief executive of the Royal Society of Arts and author of Good Work: The Taylor Review of Modern Working Practices, which was published in July and submitted to the government. The Review concerned employee and workers’ rights in English employment law.
Taylor recently criticised the Uber drivers for demanding improved workers’ rights while at the same time maintaining their self-employed status for tax purposes. He called it trying to have the “best of both worlds”. But this criticism is flawed. Central to the case decided by the EAT is Uber and other comparable businesses operating within the gig economy. They want access to a large, flexible workforce without having to meet the obligations that go with it, namely workers’ rights. That is, indeed, having the best of both worlds.
Traditionally, there are three principal categories of worker in the UK: self-employed or independent contractors; agency workers or temps; and employees. Each category enjoyed different employment protection rights. More recently, a fourth category of ‘worker’ has developed chiefly from EU law developments. In some respects, the ‘worker’ category overlaps with the others.
The chief reason for a new category being introduced was to prevent unscrupulous employers exploiting cheap labour. The EAT decision in the Uber case is a direct result of decisions by previous governments to extend certain rights, including those in relation to discrimination, working time and holidays. The European Court of Justice will soon decide whether Uber should be classified as a tech company or a transport company – if it decides the latter, this will significantly impact all areas of its business across the EU.
For the current UK government, the main driving force appears to be more pragmatic: lost potential tax revenue rather than workers’ rights. To remedy this, a programme, similar to the Construction Industry Scheme, could be introduced for those individuals working within the gig economy. This would deduct a certain amount of tax at source as advance payments towards the workers’ tax and National Insurance contributions.
For now, the saga isn’t over. Although their application, on appeal, to ‘leapfrog’ the Court of Appeal and go directly to the Supreme Court was denied, it has been confirmed that Uber’s case will be heard by the Court of Appeal next year.
Michael Farrelly is a solicitor specialising in employment law at Excello Law