Uber: Supreme Court confirms drivers are workers

24 February 2021

In a much anticipated decision, the Supreme Court has confirmed that Uber drivers are properly to be categorised as "workers" for the purposes of employment law, so upholding the original 2016 decision of the Employment Tribunal.

While much of the judgment focuses on the specific factual matrix under which Uber and its drivers operate, the decision has wider implications for clients across all sectors, not just those in the gig economy:

Impact of "worker" status?

Employment law recognises three types of service provider: employees, workers and independent contractors (sometimes called freelancers, consultants or the genuinely self-employed). Each group benefits from a different degree of protection – for example only employees are able to bring unfair dismissal claims under the Employment Rights Act 1996. That Act sets out a definition of worker, and it is that definition that was under scrutiny in this litigation.

Amongst other things, workers are entitled to the national minimum wage (NMW), pension benefits, and to the rights to holiday and rest contained in the Working Time Regulations 1998 (WTR). The most significant financial impact for many employers, and for Uber in this case, stems from the interplay of those rights. 

Here, as a good example of that interaction, the drivers will now be entitled to backpay at the relevant NMW rate for the entirety of their working time, and to holiday pay. The precise quantification of each driver’s claim will now be determined by the Employment Tribunal.  

Enforcement of holiday pay rights has been a particularly contentious area in recent years, at both a UK and EU level. The current UK position is that claims can be brought either under as unauthorised deductions from wages, in which case damages can only be awarded for the two years before the claim, or under the WTR, but only if the claim was brought within three months of each shortfall (i.e. a long series of shortfalls cannot be included in a single claim). A 2016 ECJ decision confirmed, however, that where an individual has been deliberately miscategorised so that paid holiday has been deliberately withheld, a claim can be made for the entirety of the miscategorised period. That principle is difficult to reconcile with a restricted two-year claim period, and appears to be an area ripe for further litigation.

How can clients be sure their contractors are not workers (or employees)?

The answer to this key question is that there can be no guarantees. Each set of facts must be analysed on its own terms, taking into account a series of relevant factors established by the courts over a huge number of decided cases in this complex field. Key questions include the following. 

  • Is the individual required to perform the services personally?
  • Can the employer give instructions to the individual as to what to do, where to carry out the work or when and how to do it?
  • Is the individual expected to work a set number of hours?
  • Can the employer move the individual from task to task?
  • Is the individual paid by the hour, week, or month (as opposed to a fixed fee)?
  • Do the parties to the contract have the right to give notice to terminate it? 
  • Does the individual receive/qualify for overtime pay or bonus payments? 
  • Is the individual entitled to typical employee benefits? (e.g. private medical insurance, permanent health insurance, pension contributions, participation in incentive plans)
  • Is the individual integrated into the organisation? An employee would form part of the normal reporting lines; they would have a company email account and business cards; they would be required to comply with the business’s policies and procedures and, if relevant, they would be subject to the business’s disciplinary and grievance policies. 
  • Can the individual send a substitute in his/her place or hire someone else or additional people to do the work?
  • Does the individual risk their own money? A self-employed person is regarded as being in business on their own account and therefore financial risk and the opportunity to make profit is regarded as an indicator that the individual is self-employed. 
  • Does the individual provide the main items of equipment he/she needs to do his/her job, not just the small items that many employees provide for themselves?
  • Is payment conditional on the rendering of invoices?
  • Does the individual agree to do a job for a fixed price regardless of how long the job may take?
  • Can the individual decide what work to do, how and when to do the work and where to provide the services?
  • Is the arrangement an exclusive one or does the individual regularly work for a number of different people?
  • Does the individual have to correct unsatisfactory work in their own time and at their own expense?
  • Is the individual responsible for payment of their own income tax and NICs on their earnings and responsible for registering for VAT (if the level of their supplies exceeds the relevant registration limit)?

No single one of the above factors (or no minimum number of them) is determinative but rather the court will step back and consider the entirety of the relationship having analysed all the facts in deciding whether the individual has achieved worker status. 

Importantly, the Supreme Court has reemphasised that the contractual documentation put in place between the parties is only one relevant factor. Since employment legislation is designed to protect each delineated category of service provider, correctly identifying each individual’s status is primarily a matter of statutory interpretation. A contract that does not accurately reflect the facts on the ground will therefore not help an employer – as Uber has found to its cost in this case.

Cases so far in this field – involving Pimlico Plumbers, City Sprint, Deliveroo and Uber – have focussed on worker status. This is because the individuals in each case have generally been free to decline assignments offered to them. That freedom to decline work is inconsistent with status as an "employee", which is why that most protected status has not typically been asserted in these cases.

Action points for clients

There are a number of practical points for clients to bear in mind.

  • Audit: Many organisations will find it beneficial to undertake a comprehensive audit of their contractor population. This will enable an accurate assessment to be made of employment-status risk, and will also assist tax and national insurance compliance, having regard to the revised IR35 regime coming into force in April 2021. A note on the revised regime can be found here.
  • Documentation: It is essential that contractual documents reflect the true factual position. Where an audit throws up anomalies, these should be addressed rather than ignored. Changing contractual terms that are problematic, whether from an employment or tax perspective, will typically need agreement from both parties, but clients should be robust in explaining the compliance-driven rationale for these types of amendment.
  • Changed facts: Where documentation cannot be amended, for whatever reason, clients may need to consider changing the facts on the ground so that they mirror the contractual position. This might, for instance, mean making active use of a right of substitution, or changing an individual’s degree of integration. These kinds of change can be challenging to implement, and clients should carefully consider whether they have the contractual and statutory ability to enforce them as well as the commercial will to do so.

The Supreme Court’s ruling can be found here.

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