Insights

Uber: Why Workers’ Rights Threaten Flagship of the Sharing Economy

Written by Martin Pratt
17/08/2015

It comes as no surprise that, in England, Uber is facing litigation seeking to establish that its drivers are workers, not contractors or, as the company puts it, “partners.” Uber lost a similar action in its home state of California, where the company failed to stop at least one of its drivers being regarded as an employee under state law. That ruling may open floodgates, prompting fears of a massive class action suit in the US.

The issue of employment rights is potentially as big a threat to Uber’s business model as the licencing issues that have provoked protest, and even riots, in cities from Paris, France, to Perth, Western Australia. Uber maintains that its drivers are all self-employed, using the Uber app to do little more than facilitate introductions to passengers. After losing the Californian case, Uber stated that “It’s important to remember that the number one reason drivers choose to use Uber is because they have complete flexibility and control. The majority of them can and do choose to earn their living from multiple sources, including other ride sharing companies.  We have appealed this ruling.”

In multiple jurisdictions, employees enjoy enhanced legal protection that results in increased costs for their employers. In the UK the GMB union is seeking to show that Uber drivers, at the very least, should be considered “workers.” The “worker” status in UK law can (very crudely) be thought of as a half-way house between full employment and independent contractor status.

“Workers” don’t have as many rights as employees in the UK. For example, they don’t, as employees do, have the right to claim unfair dismissal. Nevertheless, workers do have some very significant rights that independent contractors don’t have. Workers have the right to be paid the national minimum wage, to take paid leave and (once the relevant staging date has been reached) to a pension contribution from their “employer” under Government’s auto-enrolment scheme.

The GMB, correctly in my view, is not going so far as to argue that the drivers are necessarily employees. That would be a much tougher test to pass, requiring the union to show that Uber had a high level of control over how the drivers worked. However “workers” are defined as employees or as individuals who have entered into a contract to personally perform work or services for the other party; in effect, the GMB is arguing that Uber is that other party. The GMB contends that Uber not only pays the drivers, but also effectively controls how much passengers are charged. The GMB asserts that Uber requires drivers to follow particular routes and uses a ratings system to assess drivers’ performance, those drivers face a far greater level of control than true contractors.

For its part, Uber maintains “One of the main reasons drivers use Uber is because they love being their own boss. As employees, drivers would drive set shifts, earn a fixed hourly wage, and lose the ability to drive elsewhere as well as the personal flexibility they most value.” Additionally, Uber argues that drivers may see tax advantages in working for themselves, rather than paying income tax under PAYE.

If the GMB wins, then Uber will have to re-examine its whole business model in the UK. The company has not built the provision of paid holiday, let alone pension contribution, into its plans. Thus, it is inevitable that such costs would have to be passed on to customers, making the service far less attractive in comparison to competitors like Addison Lee or (in London) traditional Black Cabs.

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Martin Pratt

I am a partner in the employment law team and represent both individuals and employers, but specialise in acting for professionals such as public company directors, lawyers, hedge fund managers, accountants, MDs in investments banks, private equity principals and tech entrepreneurs, both as individuals leaving old employers and setting up or joining new enterprises. I advise senior individuals on new employment contracts and joining LLPs. On the employer side my expertise covers the employment aspects of mergers, acquisitions and outsourcing. My varied employer client base includes professional services firms, hedge funds, publishers, marketing agencies, charities, fitness studios and medical practices. I represent clients in all types of employment related disputes, involving matters like whistleblowing, discrimination, bonus claims, harassment, TUPE, High Court injunctions and unfair dismissal.  

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