Uber Ruling; Death Knell for the Gig Economy?

When you are a driver and you use an app to gain customers, does that make you an employee or a freelance worker? This was the question posed to the courts and, according to the employment tribunal, the answer was you work for Uber as an employee.  Without a doubt this is a landmark ruling, inviting much analysis and discussion. There has already been a call from the prime minister to conduct a Review of Modern Employment to be undertaken by RSA Chief Executive Matthew Taylor. However, does this ruling meaning a victory for workers rights? Or does it mean the potential end of the gig economy as we know it?

Much of the case revolved around two drivers taking the taxi-demand service to an employment tribunal stating that due to their working conditions they were not self-employed freelancers but rather employees for the company.  Uber, which works with more than 40,000 drivers in the UK, insists that it is a technology company that facilitates independent drivers connecting with passengers, as opposed to being a traditional taxi company. But an employment tribunal today ruled in favour of the two drivers stating that they are in fact employees, rather than contractors.

Employment rights are in place to help protect the worker.  As General Secretary of the GMB Frances O’Grady said “For many workers the gig economy is a rigged economy, where bosses can get out of paying the minimum wage and providing basics like paid holidays and rest breaks.”[1]

Employees are entitled to certain employment rights, including:

• getting the National Minimum Wage
• protection against unlawful deductions from wages
• the statutory minimum level of paid holiday
• the statutory minimum length of rest breaks
• to not work more than48 hours on average per week or to opt out of this right if they choose
• protection against unlawful discrimination
• protection for‘whistleblowing’ – reporting wrongdoing in the workplace
• to not be treated less favourably if they work part-time

They may also be entitled to:

• Statutory Sick Pay
• Statutory Maternity Pay
• Statutory Paternity Pay
• Statutory Adoption Pay
• Shared Parental Pay

This differs from the gig economy as If you hire a freelancer, consultant or contractor it means that:

• they are self-employed or are part of other companies
• they should look after their own tax and National Insurance contributions (NICs)
• they unlikely to be entitled to the same rights as workers, eg minimum wage
• you’re still responsible for their health and safety[2]

The disadvantage of being an employed driver is regulation and the major appeal of Uber and much of the gig economy is flexibility. To state that you are self-employed gives a flexibility of being your own boss, working the hours you choose, and more. However, the downsides of self-employment are if you are sick, or want to take time off, there is no cover or sick pay for you to take advantage of.  However, with Uber’s business model stating that you ‘work what you want’ this would put workers squarely in the self-employed bracket, surely? However, according to the drivers involved and the GMB, Uber regulates their drivers heavily.

Justin Bowden of the GMB said in reality drivers did not have much choice. “If you fail to pick up a certain number of journeys and you logged off the app for a period of time, you get put in the so-called ‘sin bin’.”[3] These actions are “not consistent with somebody who is self-employed, it is absolutely consistent with somebody who is a worker.”[4]

It is this discrepancy that caused Uber to lose on this ruling.

For the vast majority of Uber drivers, on the other hand, this comes as terrible news.

In a recent survey conducted by Contractor Calculator; 80% of self-employed freelancers categorically said that they do not want any rights at all, 88% do not want maternity/paternity rights,  82% do not want sickness pay, 85% shun holiday rights and pay, 75% do not want to be forced into auto-enrolment of a pension, 80% do not want extra rights to help with grievances or disciplinary matters and 94% do not want any restrictions on hours worked and are happy to manage their own affairs.[5]

These statistics are not irrelevant, they are very significant as to what happens when Uber conduct an appeal. As Dave Chaplin, CEO and founder of Contractor Calculator stated “The [Uber] case does not paint the full picture of self-employment and there are thousands of self-employed freelancers who are very happy with the way they work, they do not want rights and do not see themselves as vulnerable workers.”[6] This ruling seemingly goes against the 80% of workers and focuses on the 20%. This is where much of the issue lies with this ruling, as it can ‘open the floodgates’ to more freelancers challenging the platforms or apps they work for, for rights that many do not want.

The implication of this ruling could be huge. With the increased costs of having to provide sick pay and minimum wages to their workers, Uber could either increase their prices or pull out of the UK completely, leaving more than 40,000 out of work. Increased prices seems the most likely however the major appeal of Uber for consumers is that of a good quality low-cost service, especially in London.  It also goes beyond Uber and could impact the entire gig economy.

For many businesses they saw the Gig economy as a way of helping to fill the skills gaps in certain industries, and for the most part help keep costs down. To hire someone as a freelance contractor is very different to recruiting someone part or full time. With freelance you often pay for the job in total, not a per hour or salaried wage. As a result as soon as the work is completed, the ‘gig’ is done.

So how can this affect recruitment? Are there alternatives? Agency work is a popular alternative, as are zero hour contracts. These too have come under scrutiny in recent years as the rights surrounding temporary work differ from that of employment rights. The recruitment industry could suffer as the liability would change with the employment status. Tania Bowers, general counsel at The Association of Professional Staffing Companies (APSCo), said it best:

“Recruitment firms have been responsibly supplying compliant agency workers and professional contractors to the employment market for decades before the phrase “gig economy” was coined and will continue to be an essential component of the flexible labour market. Nonetheless it is important that the recruitment sector does not get landed with the responsibility – and ensuing liability – for determining an individual’s employment status – as is planned by the proposed changes to IR35 legislation for workers in the public sector.  We believe there is a need for greater clarity and we support the Review of Modern Employment to be undertaken by RSA chief executive Matthew Taylor at the request of the Prime Minister.”[7]

To summarise we will end with a quote and a question. Maria Ludkin, GMB’s legal director, said: “This case represents the first proper legal review of whether jobs in this part of the so-called gig economy really represent a new paradigm of freedom and self-employment, or in fact are simply a new technology ploy to deny employed workers ordinary employment rights and a national minimum wage.” What are your thoughts on the case and do you feel that this could be the end for the gig economy?

[1] http://recruitingtimes.org/news/15397/uber-drivers-win-key-employment-case/

[2] https://www.gov.uk/contract-types-and-employer-responsibilities/freelancers-consultants-and-contractors

[3] https://www.bloomberg.com/news/articles/2016-10-28/uber-loses-london-lawsuit-over-drivers-rights-law-firm-says

[4] https://www.bloomberg.com/news/articles/2016-10-28/uber-loses-london-lawsuit-over-drivers-rights-law-firm-says

[5] http://recruitmentbuzz.co.uk/uber-outcome-disaster-uk-plc/

[6] http://recruitmentbuzz.co.uk/uber-outcome-disaster-uk-plc/

[7] https://www.recruitment-international.co.uk/blog/2016/10/apsco-responds-to-uber-case-ruling