In a landmark decision, the UK Supreme Court has rejected Uber’s appeal to overturn a High Court ruling to classify its drivers as “workers.” This is its third setback in Europe. Last year, top courts in France and Spain ruled to classify Uber drivers as employees. And Uber’s troubles are far from over. The company faces an impending class-action lawsuit in Canada and litigation in Massachusetts.
What the Verdict Means For Uber
The UK has three categories of workers: employees, workers, and independent contractors. Employees have the most protections, and contractors have the least. Workers sit somewhere in between. The verdict doesn’t go so far as to make drivers employees. But, as workers, it grants them more benefits and protections. This includes minimum wage, paid vacation, pension, and whistleblower protection. The judgment also requires that Uber pay drivers for the entire time they are logged into the app, not just when they’re driving.
The verdict marks an end to a long legal battle for Uber. It began in 2016 when two drivers, James Farrar and Yaseen Aslam, approached an employment tribunal. They claimed that they were not independent contractors. Instead, they were employed by Uber. They won all prior hearings in 2016, 2017, and 2018.
What Factored into the Court’s Decision?
The Supreme Court rejected Uber’s argument that it was an intermediary. It also disagreed that it is a platform that connects riders with drivers. In its ruling, the Supreme Court based its decision on several factors:
- Uber sets the fares for rides. Drivers have no control.
- Drivers aren’t informed about the destination until pick up.
- Uber’s contractual terms bind drivers.
- Uber penalizes drivers for declining too many trips.
- Uber uses a rating system to assess performance based on customer feedback. Drivers with low ratings are kicked off the platform.
- Uber controls the allocation of rides with the help of an algorithm.
- Uber restricts communication between the drivers and passengers.
It said all these demonstrate Uber’s control over driver’s working conditions. The result is an employer-worker relationship.
Uber’s Reaction
Uber tried to downplay the verdict. It said the ruling applied to a few drivers who used the app in 2016. It also claimed that the platform had changed significantly since based on driver feedback. Uber went on to highlight some measures such as:
- Displaying trip destination and price for drivers.
- Removing penalties for rejecting rides since 2017.
- Providing sickness and injury insurance for drivers.
It said it would reach out to all its active UK drivers for their views and share the results.
Possible Implications For Uber Platform
The ruling is likely to have a far-reaching impact. Europe is already considering legislation to improve working conditions for gig workers. This verdict could give it a much-needed push. Other businesses using contract labor will assess how the court’s decision applies to them. And what changes they need to make to their business model.
The verdict applies only to those drivers who brought the claim against Uber. Currently, the number stands at 25. The ruling allows these drivers to sue Uber for back pay. It also opens the door for others to take Uber to court. Uber might intensify lobbying efforts to avoid this. Or it might try to pull a Prop-22 like it did in California. Uber’s white paper is a preemptive effort in this direction. But the US has only two classifications: employees and contractors. The UK, on the other hand, already has a third “worker” provision. Whether other European markets will be more amenable, only time will tell.
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What’s Next?
Uber has two options. The first would be to extend the benefits stipulated by the verdict to all drivers. But Uber has over 60,000 drivers in the UK. Of these, 45,000 are in London. Implementing the ruling will incur a substantial cost. For Uber to profit, riders will have to bear the financial burden. This would nullify the cost factor that made the service appealing.
To pay drivers for the time spent waiting, Uber may curtail driver supply. This would mean restricting the number of active drivers during off-peak hours. Penalties for rejecting rides might return. Uber may impose restrictions on driving for competitors. All this would affect driver flexibility. With the change in worker status, it also faces an increased tax obligation.
The other option would be to avoid liability. To do this, it would have to limit control over driver tasks to a legally acceptable level. This would require massive changes to its business model and could sacrifice another differentiator – convenience. Either way, it has a tough road ahead.
