Employment law recognises three categories of person: 'employee', 'worker' and those who are 'self-employed'. It is important to know the status of your workers because employees and workers have important employment rights that are not available to those who are genuinely self-employed.

In Aslam v Uber, Uber argued that it is a technology platform (not a taxi service) which puts drivers in touch with passengers. It operates on the basis that its drivers are self employed and are free to accept or reject work. This model of gig working is extremely tax efficient for the employer as it reduces employee NI and PAYE deductions and VAT and means they don't have to comply with National Minimum Wage rules or provide breaks and paid holiday required under the Working Time Regulations.

The Employment Tribunal determined that the drivers were workers and were entitled to be paid when they were logged onto the App. That decision was upheld by the EAT, Court of Appeal and today by the Supreme Court.

The legal background

The term worker is defined by section 230(3) of the Employment Rights Act 1996 to mean: 

"an individual who has entered into or works under ...

(a)  a contract of employment, or

(b)  any other contract, whether express or implied ... whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contact that of a client or customer of any profession or business undertaking carried on by the individual."

It's not the most straightforward definition and, although there have been numerous decisions, the the courts have not been able to devise a single test that will conclusively point to the distinction in all cases.

The issue in Uber was whether there was a contract between the drivers and Uber under which they agreed to perform work or services for them. The parties accepted that the drivers had to perform work personally and Uber was not their client.

The contracts in Uber

The contracts had been carefully designed to give the impression that when an Uber driver accepted a fare (via the Uber App) a contract was created between the passenger and the driver - and not with it. Uber said that it's role was to provide technology services (via the App) and to act as a 'payment collection agent' and 'booking agent' for the driver and that there was no employment relationship between the parties.

It argued that the terms of the contracts were 'clear and unambiguous' and accurately reflected how the relationship operated in reality. It therefore was not appropriate to set the contractual terms aside even if they could be perceived as being disadvantageous to the drivers. 

Supreme Court decision

The Supreme Court said that the starting point was to determine the actual relationship between the drivers and Uber rather than to focus on the contractual terms which were dictated by the company. This is because the purpose of employment legislation is to:

 'protect vulnerable workers from being paid too little for the work they do, required to work excessive hours or subjected to other forms of unfair treatment (such as being victimised for whistleblowing)'

Tribunals have to apply the words of the statute to the individual facts of the case. If they decide that someone is a worker, that's their status - irrespective of what's in the contract. Any contractual clauses which attempts to deprive them of these rights are invalid and can't be enforced, even if the worker has signed the contract and it contains a clause that says it forms the 'entire agreement' between the parties. 

In this case, the contractual agreement was drafted by Uber's lawyers and simply presented to the drivers. They had to accept it in order to use the Uber App. Even if most drivers didn't read the terms, or understood them if they did, there was no practical possibility of negotiating any different terms. It was therefore wrong in principle to start with the contractual terms as this would 'accord Uber power to determine for itself whether or not the legislation designed to protect workers will apply to its drivers.' 

The Supreme Court agreed that these drivers were workers because they were in a position of subordination and dependence in relation to Uber for the following reasons:

1. Although the drivers had a 'substantial measure of autonomy and independence' because they could choose when and how much to work and didn't have any contractual obligation to Uber when they weren't working, they could still be a worker (or employee) when working.

2. The relationship between Uber and the drivers was one of control. Uber determined the price charged to the passenger and fixed the amount it charged the driver for using the App (in this case around 20% of the fare).

3. Uber dictated the contractual terms to the drivers and they had no say in them.

4. Once the driver was logged onto the App and accepted a fare, Uber controlled the information provided to the driver about the customer. For example, the driver wasn't told where the driver wanted to travel to and therefore didn't have the opportunity to turn down a fare if they didn't want to travel to that destination. Uber also monitored the driver's rate of acceptance and cancellation of fares and, anyone whose rates fell below a certain level were sent a series of warning and were automatically logged off the App for 10 minutes. 

5. The drivers owned their own car and had to insure it but Uber vetted the choice of car and penalised drivers if customers complained and they hadn't followed the route set by the App. 

6. Drivers were rated by customers - but this wasn't to help customers choose which driver to select. Instead, Uber used these scores to manage the performance of its drivers. This was a 'classic form of subordination that is characteristic of employment relationships'

7. Uber restricted communication between the passenger and driver to the minimum necessary for the trip. The driver wasn't allowed to share his contact details with the passenger.

8. The Uber app tightly defined and controlled what the driver could do and see. Drivers couldn't offer a distinctive service and had little or no ability to improve their economic position through professional or entrepreneurial skill. And, in practice the only way they could increase their earnings was by working longer hours while constantly meeting Uber's measure of performance.

It also said that the drivers were working from the time they switched on the App - even if they weren't driving passengers around for the entire time.

What this means for Uber

This ruling will, potentially, undermine Uber's working model and it's difficult to see how they will get around it even if they have changed the terms of the contracts between it and the drivers. It's also difficult to envisage that they would have spent the (probably) hundreds of thousands of pounds it will have cost them to defend this case if they believed it would only apply to a few of its drivers.

At the time Mr Aslam brought this case, Uber had 40,000 drivers, 30,000 of which worked in the same area as Mr Aslam. In principle, they will be entitled to recover underpayments of their pay (under the National Minimum Wage Regulations) for up to six years and claim paid holiday (under the Working Time Regulations) possibly from their start date rather than the usual two year period. 

HMRC may also get involved in enforcing NMW breaches and may impose substantial penalties on the company for underpayment.

Is this judgment limited to the gig economy?

No, although it's certainly possible that this decision will encourage other gig workers to challenge their employment status. Some have already done so. In 2018, cycle couriers at Addison Lee were found by the Employment Appeals Tribunal to be workers. By contract Deliveroo riders were found not to be workers, because they have a genuine contractual right to provide a substitute.

But this judgment is not confined to the gig economy. Many employers engage 'independent contractors' who are, in reality workers or employees. Employers won't be able to hide behind cleverly worded contracts to avoid adverse decisions against them - instead the courts will start by looking at the reality of the relationship and will ignore anything in the contractual terms that is inconsistent with those findings. 

This is something that many employers are also starting to think about in the context of IR35 which comes into force for the private sector in April this year.  

How can we help?

We can review the contractual arrangements with your staff and identify any issues that could be challenged. We'll work with you to reduce your liability and protect your business against these these types of claims.

Please contact Glenn Hayes for further information.