Uber ruling papers over the legal cracks

Some commentators are hailing last week’s Employment Tribunal ruling in the case brought by two London minicab drivers engaged by Uber as a huge victory against ‘bogus self-employment’. The tribunal, and employment judge Anthony Snelson, has indeed ruled that the drivers are ‘employed’ as ‘workers’ under the Employment Rights Act 1996 (as well as under the Working Time Regulations and National Minimum Wage Act) and not self-employed independent contractors as contested by Uber. The judgment will no doubt be appealed, possibly as far as the Supreme Court, and so is unlikely to conclude the issue. Further, the judgment does not even come close to resolving deep-seated tensions that arise from trying to accommodate new and evolving work models and the law governing employment status within the rapidly increasing ‘gig’ or sharing economy.

The Uber judgment will have significant implications for Uber (that will have to change its arrangements for engaging drivers to avoid further claims) and other companies that provide a digitally powered platform to connect customers with service providers in an ‘on-demand’ fashion. Some smaller start-up companies in the gig economy may not be able to absorb the financial obligations of employing workers, for example providing the benefits and minimum wage rates that workers are entitled to and paying employer national insurance contributions. It will also have extensive ramifications, perhaps some unintended, for Uber drivers as well as a significant proportion of the growing band of self-employed people in the UK, almost 4.8 million (15.1% of all people in work) as at October 2016.

It’s not difficult to grasp the financial advantages for a company being able to engage with individuals who provide services on a self-employed rather than an employed basis, but the impact for Uber drivers does not only involve gaining potential back-pay from under-paid wages and basic employment rights as a result of their ‘worker’ status. The effect of the judgment could be more far-reaching, largely because the designation ‘worker’ also carries with it a certain level of responsibility for both sides in the employment relationship.

A lack of job security, holiday pay and other basic employment rights may undoubtedly represent a significant drawback of self-employment for many people. However, if an individual is classed as a worker, they ‘only have a limited right to send someone else to do the work’ for them and they can’t perform the work as part of their own limited company in an arrangement where the ‘employer’ is actually a customer or client. Gaining ‘worker’ status could potentially undermine some aspects of the flexibility that underpins some people’s desire to work on a self-employed basis. Self-employed people have more control over when and where they work, and surveys suggest that on average they are happier than their employed colleagues.

There is no definitive legal test for determining whether an individual is an ‘employee’, a ‘worker’ or self-employed, resulting in a significant body of case law dealing with how someone’s employment status should be categorised. It is a crucial issue for both the individual and the organisation because employees are entitled to a wide range of employment rights in addition to those enjoyed by a ‘worker’, including protection against unfair dismissal, statutory redundancy pay, and maternity, paternity, adoption and shared parental leave. The law on employment status in the UK has caused confusion for employers and individuals for years and was overdue an overhaul even before the rise in self-employment and the gig economy.

The inquiry recently announced by MPs and the Business, Energy and Industrial Strategy Committee into the ‘future world of work…the self-employed, and those working in the gig economy’ therefore represents an urgently needed opportunity to undertake a fundamental review of current UK law relating to employment status. As an earlier blog on the CIPD website asked, what protection should be offered, either by employers or by the state, to people who participate in the labour market, whether as employees or as freelancers?

It won’t be easy to establish a clearer definition of what it means to be employed, or to differentiate between the status of ‘employee’, ‘worker’ or ‘self-employed’. But if we continue to try to shoehorn new forms of working like those emerging in the sharing economy into the confines of the current legal definitions, there will be increasing difficulties for working relationships across the economy – as far as is possible, we need to bring the statutory framework for labour law up to date with the reality of working in the digital age of the twenty-first century. 

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  • Good article

    We are still struggling with the legacy of master and servant and the introduction of workers has further muddied the waters albeit is probably a necessary development