A recent UK Supreme Court judgment on 19th February 2021 has struck at the heart of Uber’s business model, raising concerns as to their profitability in the future.
With the case commencing in 2016, the judgment of the Supreme Court has, much to the dismay of Uber, concluded that Uber’s drivers should be legally classified as ‘workers’, as opposed to their previous status as independent contractors.
This is significant. The ‘worker’ status carries with it a host of legal rights emerging out of UK employment law that must be guaranteed by employers in order to protect vulnerable individuals who may have little leverage over their working conditions or pay. This includes being paid at minimum the national minimum wage, annual leave, and other protections including sick pay. These protections are especially important as employers hold stronger bargaining positions in such discussions, as was the case with Uber.
Key Factors Influencing the Judgment
In defence of their position, the technology giant maintained that Uber drivers were independent contractors, who work under contracts with their passengers. Despite written contracts between the two parties, Uber maintained that the drivers did not work for Uber, and instead they utilised Uber’s technology platform as a service to find passengers. Thus, a ‘service fee’ of 20% was deducted from each trip so Uber could collect payment. This proved unconvincing to the Supreme Court because of several factors.
Due to the nature of this working relationship, Uber exerted significant control over their drivers. Importantly, the court noted how Uber’s control over the drivers’ payments and whether or not a driver could accept a passenger, together with control over how drivers deliver their service (e.g. pick-up locations and customer ratings) were significant in attributing ‘worker’ status to the drivers. A written contract between the drivers and Uber and the restricted communication between drivers and passengers were also important factors in reaching this conclusion.
Significance of the Decision
It is first important to note that at the heart of Uber’s business model is the use of technology; the company powers a ride-hailing marketplace through their app, from which drivers transport goods or people.
The use of technology has allowed the ride-sharing company to thrive and undercut more traditional transportation services. Uber’s business model is therefore a clear example of how novel forms of technology are challenging traditional conceptions of work. However, as this judgement demonstrates, this has served to create strains on enforcement in areas of law such as employment. A more proactive approach to enforcement is now required in order to protect vulnerable workers.
Indeed, the decision is likely to increase Uber’s operating costs, something that could prove to be particularly taxing for a company already struggling to turn a profit globally. This may translate into higher prices for the customer or alternatively a shift in Uber’s business model to render drivers truly self-employed. However, reducing control over the drivers may undermine the reliability of Uber’s ride-sharing service.
This decision not only has important implications for Uber, but also for the wider gig economy. A gig economy is characterised by temporary or freelance workers, and has now become closely connected with digital service platforms who, through the use of technology, are seamlessly connecting consumers with businesses. Familiar examples include Airbnb and Deliveroo.
Many of the workers in the gig economy do not get the benefits of permanent employees and subsequently have little control over their work arrangements. However, this judgement may operate as a catalyst for change in the UK. Costs and returns for gig economy start-ups may rise as companies adjust to the ruling and the precedent it sets for related cases on employment status. Elsewhere, we may see a rise in litigation for individuals that work via online platforms in other jurisdictions such as China or the US.
Only time will tell how Uber and other technology companies in the gig economy will respond to the implications of this judgment. What we can say for certain however, is that the ramifications for both employees and businesses in the gig economy will be great.