Uber was once again back in the courts in November in a further round of litigation, this time in the High Court, which has ruled that its business model did not comply with rules governing private vehicle hire.
In a much-publicised decision (which we discuss here), the Supreme Court previously held that Uber drivers are “workers” and therefore entitled to holiday pay and the national minimum (or living) wage, amongst other employment rights.
In this article we review the current legal position in relation to worker status, and suggest how technology companies should respond to recent employment law developments.
The High Court’s decision
The principal issue was whether Uber’s business model complied with the Private Hire Vehicles (London) Act 1998. The claim arose following remarks in the Supreme Court – which decided the drivers were workers – that this legislation would require Uber to be involved in the contract, and not simply to arrange the contract between passenger and driver.
In its judgment in the present case, the High Court agreed and found that the legislation requires Uber (and FreeNow, another party to the proceedings) to contract directly with passengers to provide the journey, not simply to act as a booking agent which facilitates the booking.
The decision is therefore a further blow to the “platform” model, in which Uber argues it is merely providing tech services via its app. The consequences of the decision are significant, as it creates further operational, financial and tax difficulties for the Uber platform.
Whilst the legislation in issue only relates to private hire vehicles, it is part of a much broader trend in the courts to scrutinise contract terms and to intervene when new technologies provide ways of circumventing consumer and employment law protections.
Given the wide-ranging implications for the gig economy and beyond, the issue of worker status is likely to be high on the agenda for technology companies establishing new platforms or reviewing existing business models for continued viability.
What is the current legal position in relation to worker status?
In the UK, there are essentially three types of employment status:
Each status carries a different level of employment law protection, with employee status enjoying the most protection and self-employed contractor status enjoying the least.
Whether someone is an employee or is self-employed is determined by reference to case law which has set out many factors to take into account such as:
“Worker” status, on the other hand, is defined in employment law as a person who “undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual”.
Worker status will therefore not attach to individuals who are in business on their own account, such as London cab drivers, who bear the economic risk of running their own business.
On the other hand, individuals who are not carrying on business on their own account, but are not employees, are likely to be workers. Recent case law examples have included moped couriers, plumbers, members of law firm LLPs and professional disciplinary committee members.
If a person falls within the worker definition, they are entitled to some (but not all) of the protections to which an employee is entitled such as holiday pay, national living wage, discrimination and whistleblowing rights, and pension contributions.
Why is this important to a tech business?
As set out above, the dividing line between genuine self-employment and worker status is not necessarily clear without delving into the practical reality of how a workforce operates. Uber has certainly discovered that the consequences of mislabelling the workforce can be a considerable uplift in operating costs (both for historic employment liabilities and future employment costs).
While Uber may be able to absorb such additional costs, an early-stage tech business which wants to operate a platform or another innovation could quickly find itself answerable to investors and even further away from achieving sustained profitability.
What should tech companies do?
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