First Round to the Drivers
by Stephen Morrall, Partner, Hunters Solicitors
December 14 2016 - Technology and the law run at very different speeds. In under a decade, new technology has enabled companies like Uber to accelerate from a local start up company in San Francisco to a fast moving global brand and wunderkind of the gig economy, valued at more than £50bn. English law meanwhile, forged in centuries of precedent and statute, moves forward at a more modest pace.
As one the biggest global disruptors, Uber has successfully challenged the status quo in nearly 70 countries and more than 500 cities by providing a personal taxi service that uses a simple app linked to a mobile phone. But this year, after encountering serious legal problems in multiple jurisdictions, Uber has finally hit the buffers in England coming into head-on conflict with our robust employment laws.
On 28th October, a London employment tribunal heard a case brought by two drivers, Yaseen Aslam and James Farrar, funded by the GMB union on behalf of 19 Uber workers. Their argument was simple: they were employed by Uber, rather than being self-employed, and were therefore entitled to basic employment rights, including the right to be paid the national minimum wage and to receive paid holiday, both of which were previously denied to them by Uber.
The counter argument relied on the small print of the contract, very carefully (and cleverly) conceived by Uber's lawyers, from the passenger would be astonished to learn that he was in fact contracting with the individual driver, running his own mini-cab business, and that Uber was only acting as the driver's agent to set up the ride. In simple terms: Uber was claiming to be just a technology company, not a taxi provider. When it was put to the tribunal, which examined in detail how the working relationship operated in practice, that argument was rejected outright as a wholly artificial construct that did not reflect the reality of the situation,
In a landmark decision, the tribunal found that the drivers were in fact "workers" - a limbo status somewhere between being employed and self-employed, but which entitled them to limited protection under English employment legislation. Although workers are not protected against unfair dismissal, and are not entitled to any redundancy payment, they do have rights, for example, in relation to working time (5.6 weeks' annual holiday, a 48-hour maximum working week and appropriate rest breaks); the right to be paid the national minimum wage (£7.20 for 25 and over); the right to receive sick pay; a prohibition on unlawful deductions from their wages; and protection against discrimination and in relation to whistle-blowing.
So does this mean that a sharp brake has been put on the gig economy, which has been largely responsible for the enormous increase in the UK's self-employed workforce? Not necessarily: Uber has already confirmed that it will appeal the tribunal's decision while the law firm which acted for the drivers is planning several hundred further legal claims from other Uber drivers.
Although the claimant drivers may have won the first battle, the war is far from over. The present legal position is that, where individuals provide services as part of a business carried on by someone else, they are likely to have the status of a worker who enjoys limited protection against exploitation by the business in which they are engaged. Ironically, Uber is a victim of its own success given there is anecdotal evidence that many of its drivers positively like the flexibility that is offered them.
It remains to be seen whether the decision will have implications beyond Uber for the numerous companies in the gig economy that engage people to provide services without formally employing them, as well as for those people who work through personal service companies. If the legal structure of the relationship is artificial, it will be open to challenge.
If upheld on appeal, perhaps ultimately going as far as the Supreme Court, the tribunal decision might require other gig economy businesses to treat its staff as workers rather than as self-employed, disrupting their business model. The consequent increase in the pay and benefits of their workers would cost those companies more, which they might then simply pass on to consumers.
The law evolves slowly, taking time to catch up with social developments. While employment law is equipped to give rights to Uber drivers and the like, it may no longer reflect the way in which work patterns have changed and must develop to allow employers (and some workers) the flexibility to operate their new business model. Some will protest that depriving people of employment rights is exploitation, others see it as a restriction on their freedom to do business. But one point seems clear: however far or fast employment law may have to go before it catches up with the gig economy, no amount of artificial contract drafting can change the substance of a situation. Contractual arrangements that do not reflect reality are likely to be rejected by future employment tribunals and by the courts.
The Uber case is therefore a salutary lesson for all employers - whether in the gig economy or not - to look carefully at the terms and conditions of their employment contracts. Try and outrun the law by being too clever and it will eventually catch up with you.
Stephen Morrall is a Partner at Hunters incorporating May, May & Merrimans, advising companies, partnerships and entrepreneurs on all corporate and commercial aspects of their business. Stephen has particular expertise in cross-border transactions. He is the vice chairman of the British German Jurists Association and a member of the IBA.
Hunters incorporating May, May & Merrimans is a leading multi-disciplinary law firm founded in 1715, offering specialist legal advice over a range of services, including private client, businesses, trusts and charities.
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