In a landmark decision, handed down today, the UK Supreme Court has unanimously held that Uber drivers are workers.
The appeal relates to the employment status of two test claimants, Mr Yaseen Aslam and Mr James Farrar, both of whom were licenced to drive private hire vehicle drivers and provided their services through the Uber app.
The central question raised in the litigation related to whether an Uber driver is a “worker” for the purposes of employment legislation which gives worker rights:
- to be paid at least the national minimum wage;
- to receive annual paid leave; and
- to benefit from certain other protections.
In addition to this the Supreme Court also considered the question of what time counts as working time for the purpose of the relevant rights.
Uber’s² position was that the drivers do not have these rights because they work for themselves as independent contractors, performing services under contracts made with passengers through Uber as their “booking agent”.
Previous case law³ succinctly summarized that employment law distinguishes between three types of people:
- those employed under a contract of employment;
- those self-employed people who are in business on their own account and undertake work for their clients or customers; and
- an intermediate class of workers who are self-employed but who provide their services as part of a profession or business undertaking carried on by someone else.
Some statutory rights, such as the right not to be unfairly dismissed, are limited to those employed under a contract of employment; but other rights, including those claimed in these proceedings, apply to all “workers”.
Statutory Definition of a “worker”
The statutory definitions are set out in the Employment Rights Act 1996 (ERA) and are often referred to as limb (a) or limb (b), reflecting the sub section of the legislation. The Uber judgment concentrated on the limb (b) test.
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 (or, where the employment has ceased, worked under)
(a) a contract of employment4, or
(b) any other contract, whether express or implied and (if it is express) whether oral or in writing, 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 contract that of a client or customer of any profession or business undertaking carried on by the individual; and any reference to a worker’s contract shall be construed accordingly.”
Similar definitions of all these terms are contained in section 54 of the National Minimum Wage Act 1998 (NMWA) and regulation 2(1) of the Working Time Regulations 1998 (WTR).
The Limb (b) definition
Limb (b) of the statutory definition of a “worker’s contract” has three elements:
- a contract whereby an individual undertakes to perform work or services for the other party;
- an undertaking to do the work or perform the services personally; and
- a requirement that the other party to the contract is not a client or customer of any profession or business undertaking carried on by the individual.
The original employment tribunal found that Mr Aslam and Mr Farrar satisfied this test and worked under workers contracts for Uber London. The employment appeal Tribunal and the Court of Appeal (by a majority) dismissed Uber’s appeals. The judgment of the Supreme Court handed down today unanimously held that the drivers were indeed workers.
Philip Henson, Head of Employment at ebl miller rosenfalck says:
The importance of this decision for Uber cannot be overstated. At the time of the original employment tribunal hearing (back in 2016) the number of people registered with the Uber app in London was 2 million. At the same time, the number of Uber drivers operating in the UK was estimated to be around 40,000, of whom 30,000 were operating in the London area.
Uber will now face a huge liability. The judgment may also affect Uber’s business model in the UK and other jurisdictions (where they have ongoing litigation relating to workers status), and it may have an impact on how Uber – and other tech companies with a similar model – are viewed by the markets. The judgment will be studied carefully by lawyers, accountants/ tax advisors – and HMRC – for a long time to come.
Status Risk assessments
Employers would be best advised to carry out a risk assessment of the status of their teams, and how their contractual relationship is recorded, and – crucially to review the hours worked – as the Supreme Court found that working time includes the period when drivers are logged in and ready and willing to accept trips. This will lead to holiday claims and claims for unlawful deductions of wages/breach of contract.
Review National Minimum Wage Records
We recommend that employers consider carry out a spot check of the hours worked by employees. The method for calculating pay over defined pay periods is complex, and we recommend that employers liaise closely with their lawyers, accountants and tax advisors.
Employers are obliged to keep certain records in relation to the hours worked by, and the payments made to, workers to establish that their workers have received the National Minimum Wage (NMW). These records must be made available for inspection by workers or HMRC enforcement officers.
Most employers are not aware that to establish whether they have received the NMW, a worker has the right to require their employer to produce their pay records by issuing a “production notice” and to permit them to inspect their records and take a copy. If the employer fails to allow access to the records within 14 days of a written request, the worker can bring a claim in the employment tribunal. This means that employers need to be able to act very quickly.
The NMW is enforced by HMRC. The enforcement measures available to HMRC include service of notices of underpayment, civil penalties, “naming and shaming“, recovery of underpayments through tribunals or civil courts, and criminal prosecution.
Risk of criminal prosecution (in certain circumstances)
Whilst civil enforcement is the most common approach, employers need to be aware that from a risk the NMWA 1998 makes it a criminal offence to:
- Refuse or wilfully neglect to pay the NMW.
- Fail to keep the required records.
- Keep false records.
- Provide false records or information.
- Intentionally obstruct or delay an enforcement officer.
- Refuse or neglect to answer questions or provide information to an enforcement officer.
Serious offences under NMWA 1998 are triable as indictable as well as summary offences. If the offence is committed by a company with the consent or connivance or by the neglect of an officer of that company then that officer, as well as the company, is guilty of the offence5. Although since 2007, only 15 employers have been successfully prosecuted for underpaying the NMW. Four cases were referred to the HMRC Fraud Investigation Service for criminal investigation over the course of 2018/19.
Mass litigation now expected
This landmark judgement will open the door to mass employment tribunal litigation – not just for Uber drivers who will be waiting in the wings now that the test case has been resolved – if the cases are not settled before hand. The Tribunal system already has an incredibly backlog of cases in the system, and there will most likely need to be another recruiting round for more employment tribunal judges.
Further impetus to reform the law
There will now be increased pressure on the UK Government for the legislation to respond to the changes in modern life, and to move forward with legislative changes to give more clarity on modern working practices6.
For further information and advice, please contact our employment team.
The material contained in this article is provided for general purposes only and does not constitute legal or other professional advice specific to your situation, and should not be relied upon. Appropriate legal advice should be sought for your specific circumstances and before any action is taken.
© Miller Rosenfalck LLP, 19 February 2021
¹ Uber BV and others (Appellants) v Aslam and others (Respondents) https://www.supremecourt.uk/cases/docs/uksc-2019-0029-judgment.pdf
² Reference to Uber collectively includes the first appellant (Uber BV, the Dutch company which owns the rights in the Uber app; Uber London and Uber Britannia Ltd.
4 A “contract of employment” is defined in section 230(2) of ERA to mean “a contract of service or apprenticeship, whether express or implied, and (if it is express) whether oral or in writing.” An “employee” means an individual who has entered into or works under a contract of employment: see section 230(1). However, the terms “employer” and “employed” are defined more broadly to refer to the person by whom an employee or worker is (or was) employed under a worker’s contract: see section 230(4) and (5).
5 Section 32 NMWA 1998
6 This may involve further consideration of the Taylor Review https://www.gov.uk/government/publications/good-work-the-taylor-review-of-modern-working-practices