On 19 February, the UK Supreme Court handed down a landmark judgment in the case of Uber BV v Aslam, almost five years since the case was first heard in an employment tribunal.
The Court held that drivers were not independent contractors, but that they worked for Uber and were therefore entitled to certain employment rights.
This Insight explains ‘employment status’ and explores what the judgment means and what might happen next.
What is employment status?
Most employment rights are set out in legislation. Each piece of legislation says who the rights apply to. This is a person’s ‘employment status’.
Most employment law uses the definition of employment status set out in section 230 of the Employment Rights Act 1996. This creates three categories of people:
- ‘Employees’ who work under a contract of service;
- ‘Workers’ who are self-employed but provide their services as part of a business carried out by someone else; and
- ‘Self-employed’ who carry out business in their own account and contract with clients.
Employees have the full range of employment rights. Workers have a limited set of rights, like the National Minimum Wage and holiday pay. The self-employed have no employment rights.
What were the issues in the Uber case?
The case involved drivers who argued that they were ‘workers’ and entitled to rights like the minimum wage. There was an agreement between the drivers and Uber BV (the Dutch parent company) which said Uber is just a platform that drivers (called “customers”) could use to connect with passengers. The bookings were managed by Uber London but there was no written contract between them and the drivers.
The Employment Tribunal called this agreement “a fiction” and found that drivers were, in fact, workers. Its judgment was upheld by the Employment Appeal Tribunal, the Court of Appeal and now the Supreme Court. The Supreme Court noted various ways in which Uber controlled how the drivers provided their service. This included setting the fees, allocating trips, setting routes and restricting contact between drivers and passengers.
Significantly, the Supreme Court found that drivers are working, and entitled to the minimum wage, whenever they have the app switched on in the area covered by their license. This is because while the app is on, drivers must accept a certain percentage of trips.
How significant is the judgment?
In its response to the judgment, Uber said the case concerned “a small group of drivers using the Uber app in 2016,” and its agreement with drivers has since changed.
However, the judgment’s significance is not what it said about individual drivers but about how courts should determine worker status.
Uber argued that if a contract characterised workers as self-employed, the courts should only disregard it if it didn’t represent the true agreement of the parties.
The Supreme Court disagreed. It said you start by considering who the legislation intended to protect as ‘workers’. You then look at all the facts, including the contract but also the conduct of the parties, and decide whether a person is a worker. The key question is whether the person is “subordinate and dependent” on a business. If they are, then they are a worker, regardless of how their contract classifies them.
Importantly, the Court also found that the employer was Uber London, even though it had no written contract with the drivers. This suggests courts might be able to look through complex contractual arrangements to identify the employer.
What happens next?
Uber’s response to the judgment suggests it might not accept that current drivers are workers. This would mean that newer drivers would have to bring further court cases.
HMRC could also take enforcement action against Uber if it thinks current drivers are workers and not being paid the minimum wage. HMRC can issue a ‘Notice of Underpayment’ and impose penalties of up to £20,000 per worker. This could be a significant penalty as there are around 60,000 Uber drivers in the UK. Employment commentator Darren Newman has argued that HMRC should step in.
The judgment didn’t answer whether a person can be classified as ‘working’, or for whom, if they have more than one app switched on at a time.
There is also still a question about substitution clauses. The legislation says workers must perform work personally. In 2018, the High Court held that Deliveroo riders were not workers as they can send substitutes. Substitution was not an issue in the Uber case. However, following the Supreme Court’s judgment, a claimant might be able to argue that their substitution clause should be disregarded because its main purpose is to exclude them from worker status.
Will there be new legislation on employment status?
In 2017, the Taylor Review recommended the Government sets out detailed tests for employment status in legislation to improve clarity. The test for whether a person is a ‘worker’ would focus on the control exercised over them by a business. Some groups disagreed. Academics at the University of Bristol, for example, argued that setting out tests in law could limit the court’s flexibility to address new situations.
The Government consulted on this issue in 2018 and but it has yet to publish any legislation.
In 2019, California passed a law to require companies like Uber and Lyft to classify drivers as employees. However, in 2020 Uber and other companies successfully lobbied for a change in the law so that gig workers can be classified as contractors with more limited rights.
The Uber judgment is significant but there are still many issues left to resolve.
- Insecure work: the Taylor Review and the Good Work Plan, House of Commons Library.
- Employment Status, House of Commons Library.
- Between Statute and Contract: Who is a worker?, Alan Bogg and Michael Ford QC.
- Tax administration shaping tax reform: does employment status matter for tax?, Judith Freedman.
About the author: Daniel Ferguson is a researcher at the House of Commons Library specialising in employment and equality law.