Disrupting the Disruptors: Expensive News for App-based "Gig Economy" as Uber Loses Drivers' Claim
We consider the impact of the U.K. employment tribunal's decision in Aslam and others v Uber BV and others 2202550/2015 and others, including: the status of the drivers; the rights they can now enforce against Uber; and the impact this is likely to have on other operators in the UK's fledgling gig economy. We also take a look at similar litigation regarding Uber in the United States.
Drivers for Uber are recruited and treated as self-employed contractors. Uber drivers, supported by the GMB Union, brought a claim in the employment tribunal (ET) to establish that they were in fact "workers", with a view to enjoying the "mid-level" rights afforded to individuals with this status in the UK. (They did not claim that they were employees.) The drivers argued that many aspects of their work for Uber were controlled by the employer and that their treatment as self-employed contractors was wrong. Uber argued that its drivers were genuinely self-employed, working when and where they chose, how they chose and contracting directly with the passengers they carried, with Uber simply providing the platform to facilitate those journeys.
Uber's "user platform", accessed through passenger and driver smartphone apps, allows drivers to show their location in "real time" on a local map, enabling the app's algorithm to dictate an appropriate price to charge any passenger nearby needing transport, based on factors such as the availability of other drivers, the time of day, distance, local demand etc. The passenger then accepts the offered price (or not), books the journey with the nearest driver (who is given 10 seconds to accept the journey, or it is offered to the next nearest driver), and the passenger then watches on the app as the car approaches. Both passenger and driver deal with each other via the Uber app, including rating each other after the journey in order that both can build up a level of measurable "reliability" for future journeys. Once the passenger pays the fee calculated by the Uber app, 25% (previously 20%) is retained by Uber, the remainder going to the driver, who must provide and maintain their own vehicle to standards set by Uber.
Under UK law, defining considerations as to whether an individual will be deemed to be a self-employed contractor, a worker, or an employee include: (1) the need for the individual to provide the service personally; (2) the degree of control the individual is under from the employer; and (3) whether or not there is a mutual obligation to give and perform work. Self-employment can be shown through a lack of the factors above, as well as by providing evidence that the individual is in business on their own account, bearing meaningful financial risk. This has long been a tense area of employment law and it is this legal framework that the ET was required to apply to the Uber business model.
The case held great interest for the app-based transport, delivery and sharing economies as many similar business models exist based on high levels of flexible delivery and transport capacity, in which couriers and drivers working with self-employed status represent a cost saving for the business concerned, (eg avoiding holiday pay and the national minimum wage), as well as reducing the related management and administrative requirements.
Employment tribunal decision
The London Central ET decided that, when they had the drivers' app switched on and were ready and willing to provide transport, Uber's drivers were helping Uber provide its services as a transportation business and were accordingly deemed to be "workers" under the definition set out in the Employment Rights Act 1996, as well as for the purposes of the national minimum wage (NMW) and working time (annual leave and rest break) legislation.
The employment judge, perhaps aware of the wide global interest the case had generated (those reading the judgment in full were treated to quotations from both Shakespeare and Milton), commented in the judgment that Uber witnesses were "grimly loyal" and that the company had resorted to "fictions, twisted language and even brand new terminology" courtesy of their "armies of lawyers". This, it said, attracted the ET's skepticism towards Uber's argument that it sold a technological platform, not taxi journeys (the judge described this as "unreal"), as well as towards its argument that the contract was in fact between the driver and the passenger, when the ET found that Uber's involvement in that relationship was in fact highly controlling and tangible in every aspect.
Control of the drivers was noted by the ET in "a host of ways", including Uber's setting of a default route for the driver to take, penalties for cancelling trips, requiring drivers not to speak negatively about Uber, fixing the fare, monitoring drivers through its ratings system and removing experienced drivers from the platform then deactivating their accounts if their user rating went below 4.4.
The drivers are now entitled to a maximum working week, regular rest breaks, the NMW (to be calculated under the NMW Regulations based on hours actually worked, as the ET held the drivers perform "unmeasured work") and holiday pay, plus the ability to claim for previously unpaid wages and holiday pay. The drivers will also receive whistle-blowers' protection.
It appears that this clash between the worlds of disruptive technological innovation and the UK's judicial establishment was somewhat ugly, with this decision dealing a severe if not fatal blow to those businesses seeking to revolutionize demand-led, flexible service provision. While this is a first level and Uber-specific decision (ie it does not establish any case law binding on other businesses that may be challenged in a similar way), it sends a very clear message as to how similar issues are likely to be assessed by the ETs.
Uber has confirmed it intends to appeal the decision so the journey of this particular case may not be over yet.
United States litigation
There are also significant challenges in the United States to Uber’s classification of its drivers as independent contractors rather than employees. As in the UK, the distinction between employee and independent contractor impacts the driver’s eligibility for benefits, workers compensation and unemployment, and dictates protection for the driver pursuant to wage and hour, discrimination and other laws.
Most significantly, in 2013, a class action lawsuit was filed against Uber on behalf of 385,000 Uber drivers in the Northern District of California, O’Connor, et al. v. Uber Technologies, Inc., C.A. No. 13-03826-EMC (N.D. Calif.), claiming, among other things, that independent contractors were misclassified and seeking reimbursement of expenses and the payment of each Uber fare the drivers allege represent a tip or gratuity to them. Uber reached a proposed settlement with the class under which it would pay up to $100 million to settle the case, but on 18 August 2016, a San Francisco federal judge rejected the proposed settlement on the grounds that it did not sufficiently compensate Uber drivers. The parties have been given a new deadline of 10 November to reach a settlement agreement. In addition, Uber is currently defending multiple other federal and state lawsuits over Uber’s classification of drivers as independent contractors, including recently filed suits in Massachusetts, Indiana and Texas.
At the same time as courts are examining the question of drivers as independent contractors, non-judicial administrative bodies are also issuing guidance that may impact the ongoing litigation. For example, on 13 October 2016, the New York State Labor Department determined that two Uber drivers were employees, not independent contractors, for purposes of eligibility for unemployment benefits. Significantly, labor departments in 13 states have also found Uber drivers to be independent contractors. Although the trend has been to reject the independent contractor classification for Uber drivers, Uber has prevailed in front of several state administrative agencies in Florida, Texas, Georgia and even New York, given that the determinations are made on a case by case basis. As a result, the state of the law is conflicting and continuing to develop among United States jurisdictions in examining the issue of independent contractors.
Jo Martin of Bond Dickinson co-authored this article.