Uber must provide its drivers with the same employment rights as permanent employees and no longer treat them as self-employed individuals, the UK Supreme Court has ruled.
The popular ride-hailing app has been embroiled in a four-year court battle as it sought to have the ruling of an October 2016 employment tribunal brought by two of its former drivers overturned.
In that instance, the tribunal determined the drivers should be treated by the company as workers, rather than self-employed individuals, prompting Uber to unsuccessfully challenge the ruling in an Employment Appeal Tribunal (EAT) in November 2018.
The company, meanwhile, is of the view that its drivers should be classified as self-employed, independent workers on the basis that its app merely connects drivers with potential customers, with whom they enter into a contract for the duration of their journey, but at no point do the drivers work for Uber.
The EAT was the first of several appeals the company would go on to lose, including one in the High Court in December 2018, followed by today’s in the Supreme Court.
The Supreme Court’s ruling confirms that the thousands of drivers Uber relies on to deliver its ride-hailing service in the UK must be paid minimum wage, are entitled to rest breaks and holiday pay, which is likely to add to the firm’s operating costs.
It also marks the end of the road for Uber’s opportunities to challenge the ruling in the UK courts, with the Supreme Court confirming in its summary judgment that the company’s appeal was “unanimously” dismissed by the panel of six justices enlisted to oversee the case.
This dismissal was informed by several factors, including the fact that Uber – not the drivers – is responsible for dictating how much drivers are paid for the work they do, and the company also “exercises significant control” over the way in which drivers deliver their services through its driver rating system.
“Any driver who fails to maintain a required average rating will receive a series of warnings and, if their average rating does not improve, eventually have their relationship with Uber terminated,” the summary document said.
“The contract terms on which drivers perform their services are imposed by Uber and driver have no say in them…also, once a driver has logged onto the Uber app, the driver’s choice about whether to accept requests for rides is constrained by Uber.”
Estimates published by the GMB Union in the wake of the Supreme Court ruling suggest that “tens of thousands” of the firm’s drivers could be in line to receive £12,000 each in compensation.
The case could also have big implications for how the UK’s wider gig economy functions, because it sets a legal precedent for how other firms operate in the sector, in terms of how the people responsible for delivering their services should be treated.
Andy Chamberlain, director of policy at the Association of Independent Professionals and the Self-Employed (IPSE), said the fact that the case made it as far as the Supreme Court serves to highlight that UK employment law is long overdue an overhaul to accommodate gig economy workers.
Read more about IR35 and the gig economy
- As the countdown to the IR35 reforms being rolled out to the private sector continues apace, HM Revenue and Customs issues compliance guidance for firms in-scope of the new rules.
- An inquiry into the government’s plans to extend the IR35 reforms to the private sector concludes that the roll-out should be delayed because the entire off-payroll legislation is flawed and in need of a revamp.
“The gig economy is enormously complex, including many people who are legitimately self-employed and many others who really, based on their working circumstances, should be classed as workers,” he said. “It is a patchwork of grey areas between employment and self-employment. The only way to resolve this tangle is to clarify employment status in UK law.
“With the pandemic still raging and its financial impact ever more visible, it is more urgent than ever that struggling people who should technically be classed as workers get the rights they deserve. To bring this about – and protect the freedom of legitimately self-employed people – we urge government to write a definition of self-employment into law.”
Dave Chaplin, CEO of contracting authority ContractorCalculator, said the case should also serve to inform the preparations of medium to large private sector firms for the incoming IR35 reforms, and remind them why using “contrived ways” to avoid giving workers their due rights is not on.
One of the recurring criticisms of the reforms, which come into play in the private sector in April 2021, is that contractors whose engagements fall in-scope of the IR35 legislation will be treated as employees for tax purposes, but employee benefits – such as paid holiday and sick leave – will remain off limits to them.
Therefore, there is a growing concern among contracting stakeholders that private sector firms, which will assume responsibility for determining how the contractors they engage with should be taxed as part of the reforms, may use the legislation to build out a “zero-rights employee” workforce.
“Firms should not be misclassifying workers in contrived ways to avoid their duties as employers and give workers their due rights,” said Chaplin. “The drivers were not carrying on their own business undertaking, were providing personal service, and were heavily controlled by the Uber app.
“The takeaway for the contracting community and IR35/off-payroll matters is the reinforcement of what we know already – make sure the contractual paperwork is correct and a true reflection of the engagement. Then there should be no issues.”
James Poyser, CEO of the OffPayroll.org.uk website, which allows contractors to share feedback anonymously on how their clients are responding to the incoming IR35 reforms, said the ruling has the potential to cause chaos for private and public sector organisations – particularly those that are heavily reliant on inside-IR35 classified contractors to function.
“Inside IR35 means you are treated as a worker for tax purposes, but without any rights that workers are afforded,” said Poyser. “As a result of this landmark trial, it is likely that those deemed inside IR35 are, in fact, workers, and thus afforded protections under the Employment Rights Act 1996, the National Minimum Wage Act 1998 and the Working Time Regulations 1998.
“This should serve as a wake-up call to any organisation engaging with gig-economy workers, contractors and other independent professionals. The position is now very clear: you must either engage them as workers, and provide them with the protections the Supreme Court has today confirmed they are entitled to, or engage them as self-employed professionals, thus falling outside the scope of IR35.”
Read more on IT legislation and regulation
IR35 private sector reforms: Contractors call for further delays to April 2021 start date
IR35 private sector reforms: Deloitte confirms post-April 2021 ban on PSCs
IR35: Former Treasury secretary Mel Stride calls for ‘dreaded’ off-payroll rules to be ‘abolished’
IR35 off-payroll rules have ‘never worked satisfactorily’, rules Finance Bill Sub-Committee