14 November 2016

What does the Uber case tell us about the direction of travel in employment law?

It is not often that an Employment Tribunal decision makes headline news, but the recent Uber case was a noisy exception. As was widely reported, two Uber drivers brought a claim alleging that they are entitled to certain employment rights, including the national minimum wage and paid holidays. In its defence, Uber argued that it simply provides a technology platform (through which cabs can be booked) and that each of its drivers operates their own business, with the passengers as their customers. The drivers were therefore, said Uber, genuinely self-employed and not entitled to any employment rights.

It would be an understatement to say that the Employment Tribunal was not entirely persuaded by Uber’s arguments. Amongst other things, the Tribunal noted that Uber interviews and recruits its drivers, it subjects them to performance management and disciplinary type procedures, it exercises a significant degree of control over how they do their jobs (for example, by setting fares and default routes for journeys and by limiting the type of vehicle they can operate), and it effectively manages the relationship with the passenger. The Tribunal therefore, found that the drivers were ‘workers’ and were entitled to certain rights as a consequence.

So what lessons can we glean from the case?

The significance of the decision may have been overstated…

Whilst the decision has generated a lot of headlines, a couple of notes of caution should be sounded about its immediate impact. 

Firstly, because the case was heard in the Employment Tribunal, it does not in itself create a binding precedent which other Tribunals are bound to follow. The decision is also almost certainly likely to be subject to an appeal. 

Secondly, the outcome of the case was ‘only’ that the Uber drivers are workers, not employees as was reported in some newspapers. Importantly, whilst workers benefits from some employment rights (eg paid holidays, the national minimum wage), there are some significant rights that they do not enjoy, notably the right not to be unfairly dismissed. The decision does not, therefore, mean that Uber’s business model, relying on a flexible arrangement with its drivers, is no longer operable, although it may be that it becomes more expensive to operate. 

… but does it point towards a more general trend?

What is arguably more interesting than the headlines is what the decision it tells us about the direction of travel in employment law. 

Firstly, the Uber case provides a keen demonstration of the importance of substance over form in employment law. Uber had done everything it could to create terms designed to make the drivers look as though they were self-employed. But the Tribunal decided that it could disregard these terms because they did not correspond with the reality of the relationship between Uber and the drivers. It was influenced by the unequal bargaining position between the drivers and Uber. In particular, it noted that the drivers would not have been used to “reading and interpreting dense legal documents couched in impenetrable prose”. The decision is in line with a previous Supreme Court ruling that car valeters were in reality employees even though their contracts described them as self-employed. In short, therefore, employers should not assume that they can also use lawyers to draft their way around aspects of employment law that they don’t like.

Secondly, in the battle between business flexibility and employment rights, the latter appear to be in the ascendancy at present. On one hand, the gig economy – which by its nature is geared towards achieving flexibility for businesses - appears to be growing fast. On the other hand, the Uber case is far from the only example where businesses have tried to work around employment law only to be rebuffed in Tribunal or in the court of public opinion. 

Zero hours contracts have been another popular mechanism through which employers may try to reduce their fixed salary costs whilst retaining a workforce at their disposal. Whilst there has been some limited regulation of zero hours contracts (discussed here), of more note has been the decision by a number of high-profile companies to move away from this form of arrangement altogether following adverse publicity. 

Following an investigation by The Guardian and the Business, Innovation and Skills Committee into its working arrangements, Sports Direct admitted not paying the national minimum wage and offered several thousand casual workers the opportunity to move from zero hours contracts to an arrangement guaranteeing them at least 12 hours work per week. This has been followed by similar decisions from companies such as the pub chain J.D. Wetherspoon, the Greene King brewery and the Everyman cinema chain. Meanwhile, there have been calls for the delivery company Hermes to be investigated for allegedly having paid less than the national living wage and calls for a more general investigation into the use of self-employed workers. 

Against this backdrop, the decision in the Uber case seems less dramatic than might have first appeared. Whilst it can take some time for the judiciary and the legislature to decide how to respond to changes in working practices, such as the growth in the gig economy, a picture is beginning to emerge. What that picture tells us is that  the Government and the courts are alert to the possibility of workers, particularly those in lowly paid positions, being deprived of the protections that are intended to exist for them, and that they are not enthused by this. Employers attempting to maximise flexibility in their workforces at the expense of employment rights should therefore expect these attempts to be scrutinised closely. 

1 comment:

  1. another really interesting Article thank you Chris.