Uber decision: What are the key lessons?

Jim Wright

Knights Plc


On 19 February, the UK Supreme Court handed down its long-awaited decision in the case of Uber BV and ors. v Aslam and ors. The English legal system has taken a long hard look at the gig economy model and imposed restrictions and thrown statutory protections over those working within it. International readers may also find it surprising considering that the UK has one of the least regulated labour markets in the world. Importantly, the judgment looks at the international aspects of the Uber model and considered international judgments from other countries in reaching its conclusions.

Recognising that, “new ways of working organised through digital platforms pose pressing questions about the employment status of the people who do the work involved”, the Supreme Court dismissed Uber’s appeal against the decision of the Employment Tribunal, the Employment Appeal Tribunal, and the Court of Appeal, and upheld the finding that the claimant Uber drivers were ‘workers’.

Uber operated in the UK using a complex corporate structure than included a Dutch registered BV and various UK registered corporate entities.

What are the key lessons and implications of the Supreme Court decision for Uber and for other businesses across the UK?

HR professionals and employment lawyers often think of individuals, who are paid for the work they do or services they perform, as being employees, self-employed, or workers. However, as the Supreme Court reminds us in Uber, the correct legal categorisation is subtly, but importantly, different.

There are three categories of people distinguished by UK employment law:

• those employed under a contract of employment;

• those who are self-employed and in business on their own account, undertaking work for their clients or customers; and

• an intermediate class of people who are self-employed but who provide their services as part of a profession or business undertaking carried on by someone else.

Most statutory employment rights apply only to those employed under a contract of employment (category 1), but some, such as the right to the national minimum wage, working time protection, and paid annual leave, apply to all ‘workers’.

A ‘worker ’is defined in UK employment legislation as being someone who is employed either under a contract of employment, or under any other contract, whereby they undertake to perform work or services personally for the other party, but not as a client or customer of any profession or business undertaking carried on by them. It, therefore, includes people in both categories 1 and 3, but not those in category 2.

It is the distinction between those who are self-employed and in business on their own account, undertaking work for their clients or customers (category 2), and those who are self-employed, but who provide their services as part of a profession or business undertaking carried on by someone else (category 3) which is, often, most difficult to determine in a modern, digital, world.

The latter, together with employees, are ‘workers’, entitled to certain statutory employment protections. The former are not.

Central Questions in the Uber Case

The central question in the Uber case was whether drivers, whose work is arranged through Uber’s smartphone app, perform work for Uber (i.e. are in category 3), or work for themselves as independent contractors performing services under contracts made with passengers through Uber (i.e. category 2).

In upholding the decision of the Employment Tribunal, the Supreme Court held that the drivers did perform their work for Uber and were, therefore, ‘workers’, entitled to statutory protection as such. The Supreme Court also decided that the Employment Tribunal had correctly held that the drivers ’working time was not limited to the time spent driving passengers to their destinations, but that they were workers during the whole time they spend logged in to the Uber app.

Describing the decision as a ‘landmark ’and ‘groundbreaking’, the press and many commentators have claimed that it has, and will have, ‘far-reaching ’implications. Of course, by its very nature, any decision of the Supreme Court (the highest court in the UK whose decisions are binding on all other courts) is of great importance, but what are the implications of this decision and how and in what way are they ‘far-reaching’?

Implications for Uber

Clearly, the decision has very significant implications for Uber and its business model in the UK and potentially broader. Its lawyers, HR professionals, accountants, and other advisors, will be considering the decision very carefully.

As workers, rather than self-employed contractors, the claimants and other drivers engaged by Uber on the same or a similar basis are all entitled to basic rights including holiday, rest breaks, paid annual leave and the national minimum wage (including significant arrears in many cases). Uber’s costs and, therefore, prices are likely to have to increase, potentially, making it less competitive. Liability for UK employment taxes and social security contributions may also arise.

Perhaps even more significantly, it has been reported that Uber could be facing a VAT bill of more than £2 billion if, according to Uber’s float prospectus in 2019, losing the case leads “HMRC to classify [it] as a transportation provider requiring [it] to pay VAT (20%) on gross bookings both retroactively and prospectively”.

Uber have tried to suggest the judgment only applies to a small number of historic drivers. But estimates suggest that thousands of drivers could be in line for awards in excess of £12,000.

Implications for other businesses

But, what are the implications for other businesses in the so-called ‘gig ’economy and any business (or anyone) engaging people to do work or perform services personally (other than as a client or customer of a profession or business undertaking carried on by them)?

For them, the Supreme Court decision provides both a clear warning and ‘road map ’as to the way forward:

1. It is the reality of the relationship between the parties which counts and not what the contractual documents state. It is, primarily, a question of statutory interpretation, not contractual interpretation and, in applying the statutory language, facts must be viewed realistically.

2. Although employers are usually in a position to dictate contract terms and the individual performing them has little or no ability to influence those terms, the purpose of the legislation is all-important. Remember, in an employment context, that purpose 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”.

3. When determining whether an individual falls under the definition of ‘worker ’(or employee), the starting point is always the legislation, as it would be inconsistent with the purpose of the legislation to consider the written terms of the contract first. Employers cannot ‘hide ’behind the contract and defeat the purpose of the legislation by determining who would be protected by it. It is for parliament, and parliament alone, to determine the scope of the protection.

4. Any terms which purport to exclude or limit statutory protections, by preventing the contract from being interpreted as a worker’s contract are, therefore, void and must be disregarded.

5. As the degree of control exercised by the putative employer over the work or services performed for it by an individual materially impacts the individual’s level of subordination and dependence (and, therefore, vulnerabilities), the greater the extent of such control, the stronger the case for classifying the individual as a ‘worker’, entitled to protection.

6. By way of illustration, in considering the degree of control exercised by Uber, the Supreme Court focused on five specific factors when reaching its decision and classifying the drivers as ‘workers’:

• Uber sets the fares for each ride and the drivers are not permitted to set their own prices, as self-employed individuals would;

• Uber sets the terms and conditions of using its service;

• Drivers face penalties for cancelling or not accepting rides – sometimes preventing them from working;

• Uber has significant control over the way that drivers work, and the service delivered; and

• Uber restricts drivers and passengers from having an agreement outside of the Uber app.

So what can you take from the Uber decision?

If you engage individuals to perform work or services, you cannot simply ‘pick and choose ’the rules. If the law mandates that individuals should be classed as ‘workers’, there is no contract that you, we, or anyone, can draft to escape that reality. The purpose of the legislation is to protect vulnerable workers. You are required to consider the purpose of the legislation as the foundation of an individual’s status and ensure that the contractual paperwork is a true reflection of the engagement.

The Supreme Court’s decision clearly applies to, and has implications for, all ‘workers’. The principles applied will also extend to and have far-reaching implications for ‘employees ’and others parliament has determined to be in need of protection.

Now is the time to carry out an ‘audit ’to determine employment status of those you engage to work or provide services and ensure that you have appropriate contractual documentation which properly reflects the reality of your working relationships.

What were the international angles to this?

The UK Supreme Court referred to cases in different legal jurisdictions that have also begun to look at the legal issues thrown up by the gig economy. While focussing on the UK legal position, the judgment makes it clear there is a broader position that the degree of control exercises over those working in the gig economy is an international issue. The fact the UK Supreme Court has considered that those working in the gig economy need protection may be relevant, or at least raised in argument, in other countries.

Other international points arise; the fact that drivers are workers exposes Uber BV in the Netherlands to UK employment taxes and raises international VAT concerns.

Join our Legal Network