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[Employment] The ‘gig economy’ - Significant Court Ruling

05 March 2021

Daniel Gray


The ‘gig economy’ - Significant Court Ruling

Recent years have seen the rise of the ‘gig economy’.  Whilst this can offer flexibility to both parties, it often comes at a cost to workers in job insecurity. It has also presented problems for determining their status, both for the purposes of establishing employment rights and for questions of tax liability.

Self-employed or not?

To recap, in UK law, there are three kinds of working status an individual can have: that of employee, worker or self-employed.  The self-employed have very few rights: health and safety is protected and they have a right not to suffer discrimination.  Workers have more rights than that, including paid annual leave and the right to a minimum wage.  And employees have the most rights: all of the above, and also rights such as maternity leave, redundancy pay and, significantly, the right not to be unfairly dismissed.

There is no single test to establish whether an individual is self-employed, a worker or an employee and the courts will consider a number of factors. The decision of the Supreme Court (Britain’s highest court) on Friday 19th February . in Uber BV and others v. Aslam and others concerned the employment status in the context of taxi drivers who work through the Uber mobile app.

Uber BV and others v. Aslam and others.

In 2016 two former Uber drivers took Uber to an employment tribunal, arguing they worked for the company.  Uber argued these drivers were self-employed and were engaged as independent contractors who worked under contracts made with customers and that their app is simply an intermediary platform enabling drivers to connect with passengers.  This argument was rejected by the tribunal who ruled that Uber drivers are workers, not self-employed, and are therefore entitled to paid holiday and the national minimum wage.

Uber subsequently appealed the decision on three separate occasions, most recently in the Supreme Court, which again upheld the tribunal’s decision and confirmed that Uber drivers are workers and are therefore entitled to holiday pay and the national minimum wage.

The court considered several elements in its judgment, pointing out that Uber sets fares, allocates passengers, determines routes and operates an evaluation system to manage drivers. The court concluded that the relationship between Uber and the driver is more like an employment relationship than a simple commercial arrangement where Uber acts as a booking agent.

Implications of the ruling

Although the issue of compensation in this case has not yet been addressed, the Uber drivers who have brought the claim may be entitled to receive backdated statutory minimum wage and holiday pay for up to two years (or more).

The ruling could have huge implications.  Around five million people work within the UK gig economy and this decision may open the floodgates for similar claims from this group, leading to significant liabilities for employers who engage workers in a way similar to Uber.

It is also worth noting that, as again demonstrated in this decision, the way the relationship actually works takes precedence over the employment status specified in the contract.

Because reliance on the written terms alone is not advised, it is recommended that you seek advice in the drafting of employment contracts or consultancy agreements. Failure to do so could prove expensive.

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Daniel Gray