Uber ruling: what happens next?

Photo: Lazyllama / Shutterstock

The Uber ruling in the Supreme Court on 19 February 2021 established once and for all that in the UK the self-employed app-based driver model is no longer viable. But that doesn’t mean it will disappear overnight.

The case of the 25 drivers named on the Uber v Aslam case will now return to the employment tribunal and the claimants will be compensated for the benefits they have missed out on since 2016 including holiday pay and the national minimum wage.

Although this process is likely to take months, Andrew Nugent Smith, managing director at Keller Lenkner UK, which is representing more than 8,000 drivers in pursuing historic compensation, is hopeful that “Uber will now recognise its broader cohort of drivers as workers and treat them accordingly”. He adds that Uber is now required to “confer those benefits on their drivers going forward”. But the company does not sound as if it is publicly acknowledging the change in its circumstances.

The statement by Jamie Heywood, Uber’s regional general manager, in the wake of the Supreme Court ruling did not appear to recognise that much had changed: “We respect the court’s decision, which focused on a small number of drivers who used the Uber app in 2016. Since then we have made some significant changes to our business, guided by drivers every step of the way. These include giving even more control over how they earn and providing new protections like free insurance in case of sickness or injury. We are committed to doing more and will now consult with every active driver across the UK to understand the changes they want to see.”

Continuing to downplay the ruling’s significance, Uber noted that being a worker “is a legal classification that’s specific to the UK” and that the ruling did not find the claimants to be employees – and that the judgement “does not relate to couriers who earn on Uber Eats”.

The changes made by Uber since 2016 included drivers knowing their destinations before accepting a ride; having full transparency over price, and changes in rules concerning drivers who reject multiple consecutive trips.

Regulatory environment

For Michael Powner, partner at Charles Russell Speechlys, these alterations have only limited relevance: “An estimated 40,000 Uber drivers UK-wide could benefit from this decision. Although Uber has made changes since 2016 when this case started, many of them could also initiate proceedings against Uber if it continues to treat them as self-employed and/or does not settle their historic entitlements.”

In February 2020, Uber’s chief executive officer Dara Khosrowshahi announced that he was hoping the regulatory environment for Uber would improve as the company was engaging with regulators around the globe. While this may be true in the US, particularly in light of the California’s referendum on the Uber model in November, it has not been the case in Europe, with setbacks in the UK, France and Germany and the potential for extra gig economy laws from the EU with the European Commission poised to release recommendations for the gig economy later this month.

Analysts suggest that if the 40,000 drivers were all to require minimum wage (and back pay in compensation), Uber’s bottom line would be severely damaged. In the past the company would look to protect profits by reducing drivers’ pay. Prior to its Initial Public Offering in 2019, the company said that drivers would have to shoulder the burden as it looked to improve its financial results and cut operational losses, which at the time stood at $3 billion.

Although Uber has made changes since 2016, many drivers could also initiate proceedings against it if it continues to treat them as self-employed and/or does not settle their historic entitlements.” – Michael Powner, partner at Charles Russell Speechlys

At the time, Uber said it aimed to “reduce driver incentives” and expected driver dissatisfaction to increase as a result. Equity research analysts at Barclays estimated that, in the US, “Any wide-scale reclassification of drivers to employees would be a material negative for ride-hailing and further put into question the long-term profitability of the industry.”

So it is not surprising then that Uber’s response has been seen as minimising the impact of changes. Yvonne Gallagher, employment partner at Harbottle & Lewis, said this would be “disappointing for its drivers” but it was “very difficult to see how any changes to drivers’ contracts, which Uber has alluded too, can lessen the effect of this judgment on the wider workforce”.

She added that: “In terms of enforcing minimum wage and holiday pay rights, individuals can enforce this by making new claims in the tribunal for unlawful deductions from their pay where they have in fact earned less than minimum wage and not received holiday pay. They can also seek arrears only for a maximum period of two years, if there have been no breaks of more than three months in their periods of work for Uber.”

However, if there have been breaks of more than three months then claims can only be made for the period since the last break, and the need for further tribunal action would potentially reduce the impact on Uber as many drivers may simply not take such action.

A lot would now depend on HMRC, said Gallagher: “HMRC has statutory responsibility for enforcement of minimum wage and it can take action either on its own initiative, or in response to complaints made via an online form. If enforcement action is taken by HMRC, then it will be for Uber to prove that it has complied with its obligations and the two-year limit on claims will not apply.  HMRC also has a right to publish details of breaches by employers.

“Given the high profile of both Uber and this judgment, it might be expected that HMRC will seek evidence of compliance. Uber’s initial response does suggest that it intends to resist the wider impact of the judgment so all eyes will be on HMRC and whether further claims are now lodged in tribunals.”

Transport for London will have a role to play too, which was not good news for Uber given TfL’s history of withdrawing the operator’s licence in the capital. “Uber is required to have licences to operate in the UK, and TFL guidelines indicate that applicants must demonstrate that they have complied with the necessary legal requirements connected with running a business. Given previous issues raised by TFL, we might reasonably expect that it will be looking closely at Uber’s response to the judgment,” she said.

The Hermes solution

One possible outcome of the ruling is that Uber could follow in the footsteps of delivery firm Hermes, which in 2018 lost an employment tribunal ruling in the UK over the status of its then self-employed workers, and the following year ended up coming to a deal with unions which saw couriers offered a “self- employed plus” status.

Under this, Hermes couriers can choose to become “self-employed plus”, which provides a number of benefits such as holiday pay (pro-rata up to 28 days), and individually negotiated pay rates that allow couriers to earn at least £8.55 per hour over the year (9% higher than then national living wage rate). Full union representation was also offered.

Uber’s initial response does suggest that it intends to resist the wider impact of the judgment so all eyes will be on HMRC” – Yvonne Gallagher, Harbottle & Lewis

Then GMB union general secretary Tim Roache said at the time: “Full credit to Hermes. They’re showing that the gig economy doesn’t have to be an exploitative economy and we look forward to working with them through this groundbreaking agreement.

Perhaps with Uber in mind he added: “Other employers should take notice, this is how it’s done.”

Hermes’ willingness to accept the tribunal ruling without appealing won the company plaudits; such generosity in victory may not be applicable in Uber’s case after such a tortuous and lengthy legal process. And not all workers’ representatives were delighted at the Hermes outcome: Jason Moyer-Lee, then general secretary of the IWGB union, struck a more cautious note saying employment law should not be treated as an “option”.

Ramifications

The modest rights won by UK Uber workers could be the gateway to further benefits, some experts have observed. Kate Smith, head of public affairs at finance giant Aegon told the Evening Standard the ruling “could have ripple effects for all gig workers, giving them not only rights to holiday pay, but potentially other workplace benefits such as employer pension contributions”.

She said: “This reclassification is another step towards opening the doors to auto-enrolment for all gig workers, giving them the opportunity to save for retirement, with the important boost of the right to a 3% employer pension contribution.”.

For Powner the finality offered by the Supreme Court could give the judgment far more reach than the Hermes tribunal ruling of 2018 and its subsequent “opt-in” deal. He said: “While this case is based on facts specific to Uber, the Supreme Court’s decision is likely to be a very persuasive authority in favour of tribunals finding others working in the gig economy have workers’ rights.

“This is particularly significant given the court’s focus on the purpose of the legislation, which is to protect vulnerable individuals who are in a subordinate and dependent position. The terms of the written contracts, which the drivers could not negotiate and had to accept in order to continue to use the app, were not the starting point.

“The reality of the working relationship was that it was largely under the control of Uber. It is therefore likely that companies operating similar business models will need to think very carefully about the ramifications of this decision going forwards.”

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