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Court of Appeal rejects Uber's worker status appeal

20 December 2018

The Court of Appeal (“CA”) has upheld, by a 2:1 majority, the ruling of the Employment Appeal Tribunal (“EAT”) that drivers engaged by Uber are “workers” rather than independent contractors. The majority also upheld the finding of the Employment Tribunal (“ET”) that drivers are working when they are signed into the Uber app and ready to work.

Background

In 2016, various drivers brought claims against Uber for the national minimum wage, holiday pay and detrimental treatment for whistleblowing. To succeed, the drivers had to be “workers” rather than independent contractors (as Uber argued).

A “worker” is either: (a) an employee (i.e. employed under a contract of employment); or (b) someone who works under a contract through which they undertake to perform work personally, for someone who is not by virtue of that contract their client or customer. In other words, workers agree to work personally and are not running their own business.

This definition has been considered in a series of “gig economy” cases, with Uber being one of the most high-profile. Gig economy businesses typically rely on technology such as apps and smartphones, with many of the people working for them paid for individual jobs or assignments.

Key facts of the case

People using Uber’s taxi service hail cabs via a smartphone app. Uber locates the nearest driver and informs them of the request and, once the booking is confirmed, the driver and passenger can contact one another through the app. A route is plotted by the app and at the end of the trip the fare is calculated by Uber, based on GPS data from the driver’s smartphone.

Uber’s terms (with both passengers and drivers) stated that it did not provide transportation services but acted as agent for third-party providers, i.e. the drivers. Uber contended that it was providing “lead-generation” opportunities for self-employed drivers. It did, however, impose certain requirements as to how the drivers provided the services. For instance, it would deactivate a driver’s access to the app if customer ratings fell below an acceptable level. It also told drivers they should log out of the app if they did not wish to carry passengers.

The ET and EAT decisions

The ET concluded the drivers were workers, finding that Uber was in the business of providing taxi services rather than generating leads for drivers to grow their own businesses. It took into account various factors, including the significant control Uber exercised over the drivers – such as disconnection if sufficient trips were not accepted, and action taken in relation to drivers who did not have sufficiently high customer ratings.

The ET concluded that drivers were engaged as workers for so long as they were in the territory in which they were authorised to work, signed into the Uber app and ready and willing to accept bookings. 

Dismissing Uber’s appeal, the EAT agreed with the ET that drivers were in reality incorporated into the Uber business of providing transportation services, under arrangements which pointed away from their working in business on their own account in a direct contractual relationship with passengers each time they accepted a trip.

The EAT nonetheless expressed difficulty with the issue of at what times the drivers could be treated as Uber’s “workers”. They were clearly workers when they had accepted trips, but the EAT was less sure the same applied in between accepting assignments. This issue is important because it is relevant to a determination of the drivers’ “working time” and their entitlement to the national minimum wage.

Uber pursued a further appeal to the CA.

What has the Court of Appeal decided?

The two judges in the CA majority concluded that:

  • The ET was correct to find that the drivers were workers.
  • The drivers were workers at all times when they had the relevant app switched on.

On the first point, although the written contractual terms said that Uber only acted as an intermediary, this did not reflect the practical reality of the relationship. A court or tribunal can disregard the terms of any documents generated by the employer if they do not reflect the reality of what is occurring on the ground. The facts found by the ET were not consistent with Uber’s arguments. For example, the requirement to accept a high number of trips, the enforced logging-off of drivers who did not comply, and the way in which the ratings system operated as a performance/disciplinary procedure were all significant in showing Uber’s control of the drivers.

On the second point, the majority found this issue difficult (like the EAT) but decided the ET had been entitled to reach the conclusion it did. The judges relied in particular on the high level of trip acceptances required from drivers, and the penalty of being logged off if three consecutive requests were not accepted within a ten-second time frame. Doubt arose from the fact that a driver could have other rival apps switched on at the same time, in which case it was arguable that he/she was not at Uber’s disposal until having accepted a trip. Nonetheless, the majority upheld the ET’s decision on this point.

Dissenting judgment

The other judge (Lord Justice Underhill) disagreed with these conclusions. By analogy with minicab businesses, he said that the ET’s findings were not inconsistent with Uber’s position (as stated in the relevant written agreement) that it simply acted as an intermediary between drivers and customers.  The terms of the agreement, which could not be disregarded by the ET, made it clear that the drivers were not Uber’s workers. An agreement needed to be inconsistent with the reality in order to be a sham, which was not the case here

If he was wrong about this, Underhill LJ said that in any case the drivers were only workers when they had accepted a trip. There was no obligation to accept a trip when offered, and the threat of being disconnected for a specified period if trips were rejected or cancelled did not mean drivers had a positive contractual obligation to accept a minimum number of trips offered. He was troubled by the possibility that a driver could have multiple apps open simultaneously - was he/she then entitled to a minimum wage from all the app providers?

Implications

The CA’s decision in this case has been eagerly awaited by HR and employment practitioners seeking guidance on how the test for “worker” status properly applies in gig economy businesses. Like other recent status cases, however, the judgment is very fact-specific. Other cases concerning people working for gig economy businesses – and even in other taxi firms – will not necessarily be decided in the same way. The majority relied on the ET’s specific findings of fact on how the relationship between Uber and the drivers operated in practice to justify setting aside the terms of the written agreements between the parties.

It is worth noting that there was no suggestion in this case that drivers could be replaced by a substitute. “Personal service” is one of the necessary elements of the test for worker status. As shown by the claims involving Deliveroo, a genuine right to appoint a substitute which is actually used in practice can mean that an individual is not a worker.

The majority judgment emphasises that written terms cannot be used to avoid statutory protection of workers, especially where the relevant terms are standard and non-negotiable and the parties are in an unequal bargaining position. All of the circumstances must be examined, and Tribunals should take a “realistic and worldly-wise”, “sensible and robust”approach to the determination of what the true position is. Underhill LJ is more cautious on this issue, saying that agreements should only be disregarded by the courts if they are a false portrayal of the relationship between the parties, rather than simply disadvantageous to one of the parties who lacks bargaining power.

The CA has given Uber permission to appeal to the Supreme Court (“SC”). The disagreement between the CA judges suggests that there are still arguments to be had in this case, and the result is not a foregone conclusion. This could also provide a useful opportunity for the SC to provide clarity on the circumstances in which ETs are entitled to disregard contractual provisions.

The Government’s Good Work Plan in response to the Taylor Review is looking at legislation to improve the clarity of the employment status tests, although there are no specific proposals at present. Underhill LJ spends some time at the end of his dissenting judgment discussing the protection of those who provide personal services through internet platforms, stating his view that it is for legislation rather than the courts to address these policy issues. It will be interesting to see whether the SC takes a similar view.

Uber BV v Aslam and others - judgment available here

 

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