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Business Generating and Passing Work to ‘Independent’ Third Parties May Have to Treat Third Parties as Workers

Businesses which generate and pass work to third party individuals and take a commission each time, should consider whether those third parties may be ‘workers’ and entitled to basic employment law rights under UK law (and not self employed), following an important ruling.

Uber is a company which provides a smartphone app enabling passengers to book trips with an available private hire car driver and pay Uber electronically. Uber then pays the driver, after deducting its commission.

Uber treated the drivers as independent self-employed contractors, rather than employees or ‘workers’. This meant they were not entitled to employment law rights such as the national minimum/living wage, paid annual holidays, rest breaks, maximum weekly working hours and auto-enrolment pension contributions. Two drivers claimed that they were workers. Under UK law, workers are entitled to these basic employment law rights, even though they are not full employees.

The legal test of whether an individual is a ‘worker’ is:

• whether they work under a contract of employment or any other contract (whether express or implied) under which the individual undertakes to do or perform personally any work or services for another party to the contract; and
• the other party’s status is not (by virtue of the contract) that of a client or customer of the individual’s profession or business undertaking

Relevant factors include whether the individual is providing a personal service, whether the employer is a customer of the individual’s business, and the degree of control the employer exercises over the individual.

Uber claimed it was a technology company, not a transportation business (Uber had required drivers and passengers to acknowledge this expressly in their contracts) so it had no need of driver workers for its business. It argued that it simply provided an online platform to connect people wanting to travel from A to B with a driver of a vehicle. The drivers were not its employees or workers but its customers, who paid Uber for access to the Uber app so that they could connect to potential fares.

However, the ET found that:

  • The terminology in Uber’s contracts – such as ‘interviews’, ‘providing job opportunities’, ‘on- and off-duty’, ‘Uber drivers’ and ‘our drivers’ – inferred that it was also operating a transportation business
  • The drivers’ contracts with Uber prohibited them from providing driving services directly to customers. Uber must therefore have been providing driving services for its own benefit, which implied it must be providing transportation services
  • Uber’s argument that it was simply providing the drivers with leads was not sustainable since the drivers had no leeway to negotiate the terms on which they provided their services to the passenger. Both driver and passenger were bound by Uber’s terms
  • Uber exercised significant control over its drivers, inconsistent with them being independent, self-employed contractors:
    • It could accept (or refuse) bookings at its ‘sole and absolute discretion’
    • It recruited and interviewed drivers before allowing them onto the app
    • Valuable marketing information, including passengers’ names and destinations, belonged to Uber. Drivers were not allowed to give passengers their contact details
    • Drivers had to accept jobs, and could not cancel them. Drivers who refused a fare three times were ‘disciplined’ by being logged off the app for ten minutes by Uber
    • Uber set the route to be taken for each passenger
    • Uber set the fares and prohibited driver and passenger from agreeing a different fare. Uber could make deductions from the sum paid to drivers if passengers claimed they had been overcharged
    • Drivers had to follow Uber’s processes and procedures which regulated how they did their jobs and controlled their behaviour in a number of ways
    • Uber rated drivers in a manner akin to a performance management procedure
    • Uber at one point guaranteed drivers’ earnings, akin to a basic salary
    • Uber was responsible for handling complaints
    • Uber bore any loss made
    • Uber had power to change drivers’ terms and conditions unilaterally, similar to an employment contract

The Employment Tribunal (ET) therefore ruled that Uber was not a client or customer of business undertakings run by the individual drivers. Instead, the drivers were workers in Uber’s transportation business during the periods when they were using the app and able and willing to accept fares from it within their local area. They were therefore entitled to employment law rights.

One ET panel member said: “The notion that Uber in London is a mosaic of 30,000 small businesses linked by a common ‘platform’ is to our mind faintly ridiculous.”

Uber is likely to appeal the decision.

Coincidentally, the Commons Select Committee on Business, Energy and Industrial Strategy has launched an inquiry, The future world of work and rights of workers, into issues such as low pay and poor working conditions for workers such as Uber drivers, in the ‘gig economy’.

Responses are required by 19 December 2016.

Operative date

• Now

Recommendation

• Businesses who generate and provide work to individuals who they treat as self-employed should consider whether those individuals may be ‘workers’ under UK law, and entitled to basic employment law rights
• Check out the BEIS inquiry

Case ref: Mr Y Aslam, Mr J Farrar and Others v Uber, Case Numbers: 2202551/2015 & Others

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Jonathan Waters
is the founder of Helix Law. Before qualifying as a Solicitor he worked in industry and in investment banking for over a decade. He was also the Partner in charge of Commercial Litigation, Employment Law and Property Litigation at Stephen Rimmer LLP. Jonathan has wide experience of helping and advising businesses to avoid or to deal with commercial disputes and in particular construction disputes.

This article is written to raise awareness of the issues it discusses and it may not be updated after it is first written, even if the law changes. It is not intended to be legal advice and cannot be relied on as such. Helix Law is not responsible or liable for any action taken or not taken as a result of  this article. If you think the matters set out affect you and you wish to apply them to your particular circumstances then we are happy to give you free initial telephone advice. 

Contact Helix Law on 01273 761 990 or email: [email protected]