Uber's Supreme Court Ruling - Is the Gig Over?
Last month, a monumental ruling by the UK Supreme Court classified a small group of Uber employees as workers rather than self-employed, ending a six-year legal battle that had been escalating through the lower courts. This judgment comes at a time when the gig industry has been increasingly scrutinised for exploiting their workers, who often work long hours and earn less than the minimum wage. While this lawsuit only concerns the original group of employees, it opens the door for other Uber employees, or even gig workers for other companies, to follow suit.
The case began in the employment tribunal in 2016 by two drivers, James Farrar and Yaseen Aslam, who took Uber to court on behalf of a group of others, arguing that they were employed by the firm rather than working for themselves. The classification would have entitled them to a wide range of benefits, from holiday pay, sick pay, guaranteed minimum wage and a pension. The tribunal ruled in favour of the drivers, stating that they are considered workers when their apps are switched on and are ready to accept trips. Uber appealed this decision over the course of 6 years, first through the tribunal in 2017, then the Court of Appeals in 2018, before finally landing at the Supreme Court. Three failed appeals mean that Uber now has to accept this ruling, and the employment tribunal will decide how much compensation to award to the drivers in the original case.
The Supreme Court’s decision was based on five factors:
Firstly, the money paid to the drivers for each trip is fixed by Uber, and drivers have no say in the amount. Drivers are not permitted to charge more than the fare calculated by Uber, and Uber has complete control over whether to make a full or partial refund of the fare in response to a passenger complaint.
Secondly, the contract on which drivers perform their services is dictated by Uber, and drivers have no say over it.
Thirdly, although drivers have the freedom to choose when and where to work, once a driver has logged onto the system, a driver’s choice to accept requests for rides is constrained by Uber. Uber operates a rating system, and drivers with consistently low ratings are terminated from the app. The app also monitors the driver’s rate of acceptance of trip requests, with too many cancellations leading to a series of escalating warning messages leading to the driver being automatically logged off the Uber app for 10 mins. This places drivers in a position of subordination to Uber.
Fourthly, Uber exercises significant control over how drivers deliver their services. While drivers provide their own cars, Uber vets the types of car that might be used. The technology of the platform is also wholly owned by Uber.
Finally, Uber restricts communication between the passenger and driver to the minimum necessary to perform the particular trip and prevent drivers from establishing a subsequent relationship with a passenger. Drivers are prohibited to exchange contact details with a passenger or contacting a passenger after a trip ends.
Overall, these factors mean that Uber very tightly controls the drivers’ service, and the drivers have little or no ability to improve their economic position through professional or entrepreneurial skill.
This ruling opens the floodgates for similar claims against Uber for gig workers in the UK. Leigh Day, one of the law firms involved in the case, said that drivers might be entitled to an average of £12,000 each in compensation, depending on how long they have worked with Uber in the past. It is estimated that over 20% of the 60,000 Uber drivers in the UK have already filed a mass action lawsuit, which will severely impact the company’s bottom line. Uber has aggressively expanded over the past ten years, expanding into many geographical regions worldwide. However, like many other aggressive tech start-ups, it has been unable to turn a profit, and its rising costs had been fueled by its investors. The prices of regulatory battles over the past few years have already driven its costs up, and the consequences of the ruling will add further strain to their financials. This verdict will also set an example for Uber’s operations around the world.
Uber argues that the ruling only applied to the small group of drivers who filed the claim in 2016 and that their classification as a ‘worker’ is different from that of an employee. They emphasised that they have made significant changes to their business since then, and some of the evidence in the trials were no longer relevant. Working drivers were also sent a message through the app to disregard the Supreme Court rulings.
This is not the first time that Uber has gotten into trouble regarding the classification of its workers. Last August, the California courts ruled that riding hailing companies such as Uber must treat their drivers as employees, with the ruling intended to go into effect in 10 days. In response, Uber, amongst other ride-hailing companies such as Lyft, spent over $200m lobbying Californians to pass Proposition 22. This would have allowed ride-hailing companies to continue to treat their workers as independent contractors, but with the caveat of providing limited healthcare options and having a minimum earnings guarantee. They argued that the shift towards treating their workers as employees would have meant that many people will be trimmed from the workforce and that their drivers preferred the flexibility that came with being self-employed. The proposition was passed with a vote of 59% to 41%, but it has led some drivers to feel betrayed, and there have been reports that a few drivers are worse off financially after the ruling as a result.
Uber is not alone in facing these issues – the whole gig economy is under attack. The shift in public opinion towards supporting equal working rights for gig workers meant that there had been more activity and unionised action towards this issue. In Europe, following the UK Supreme Court’s ruling, Spain has ruled similarly. As Alexandra Mizzi of law firm Howard Kennedy remarks: “Businesses can’t have it both ways, to protect their brand through tight quality control, and to claim that the individuals providing the service are self-employed”. The future of the gig industry hangs in the balance.