Uber drivers tribunal decision presents challenge to "gig economy" model

Author: Darren Newman

Darren Newman

Consultant editor Darren Newman considers the significance of the recent tribunal decision on the employment status of Uber drivers.

It seems that everyone is talking about the "gig economy". This term makes casual work sound rather more innovative and glamorous than it usually is; there is nothing new or exciting about workers being dependent on irregular and short-term assignments to make a living. What is new, however, is the way in which technology can be used to allocate work only when a customer requires it - bypassing the need to keep a supply of employees available to anticipate the demand for a service. This allows businesses to minimise the risk of low demand - by passing that risk on to those who are actually doing the work.

The much reported case of Aslam and others v Uber BV and others [2017] IRLR 4 ET presents a fundamental challenge to that way of doing business. Uber is almost certain to appeal against the tribunal's finding that its drivers are "workers" and therefore entitled to be paid the national minimum wage and given paid annual leave. However, even if Uber is unsuccessful, the fight will not end there. This was only a preliminary ruling. There remains the no small matter of working out what each driver is entitled to receive, and it is the tribunal's initial findings on that issue that pose the real threat to the gig economy.

The central argument put by Uber was that there was no sense in which it "employed" its drivers. Uber is essentially a software company; it provides an online platform that puts customers in touch with drivers, each of whom is running his or her own business. The essential feature of a worker is that he or she performs work personally for the employer. Uber argued that the drivers were not working for it, but for each of their individual customers. There is nothing inherently new about that argument. It formed the basis of the finding that a lap dancer was not an employee in Quashie v Stringfellow Restaurants Ltd [2013] IRLR 99 CA and that golf caddies were not employed by a golf club in Yuen v The Royal Hong Kong Golf Club (Hong Kong) [1997] UKPC 40.

In this case, however, the tribunal did not accept that all that Uber was providing was an online space for customers and suppliers to meet. In reality, Uber was in the business of providing transportation services to its customers - and it did that through the drivers that it engaged and managed. The drivers were carefully selected by Uber, which took pride in providing a certain kind of experience for its customers. The price was set by Uber (drivers could negotiate a lower price, but not a higher one) and the recommended route to be taken was also worked out by Uber's software. The reality was that the drivers worked for Uber - they were not entrepreneurs using the company's software to grow their own businesses as freelance drivers.

Whether or not the tribunal was entitled to reach that conclusion will no doubt be considered carefully by the Employment Appeal Tribunal. But assuming that the tribunal's decision is upheld, the next issue will be consideration of exactly what hours the drivers were working. It is this issue that will probably end up being the crux of the case.

The crucial point here is that Uber's business model gives drivers complete flexibility about the hours that they choose to work. By logging on to the online system (provided to the drivers through an app) a driver indicates that he or she is ready to accept work and the software will allocate requests from customers accordingly. A driver is free to turn down a request - although the tribunal noted that doing so too frequently is frowned on and may result in the driver being logged off the system.

Uber argued that, even if they were workers, drivers were actually working only when they accepted a job from a customer. However, the tribunal held that this was to confuse the service desired by the customer with the work that Uber needed its drivers to perform in order to provide that service. Quoting Milton - "They also serve who only stand and wait" - the tribunal held that drivers were working when they switched on the app, were in the territory in which they had been authorised to work and were ready and willing to accept customers.

The tribunal found that this was "unmeasured work", a technical term used in the National Minimum Wage Regulations 2015 (SI 2015/621). It means that the drivers will be entitled to be paid at least the rate of the national minimum wage for every hour when they are waiting for a customer as well as those hours when they are actually driving. The only way for Uber to avoid this will be to agree a daily average agreement with each individual driver, which must involve a reasonable estimate of the number of hours he or she will work in a working day.

Currently, Uber drivers can choose when to log on. They may do so during a busy period when they are likely to be offered a lot of work, or they can do so during quiet times when not much work is available. A daily average agreement would mean abandoning this system altogether. On the other hand, if the drivers are entitled to be paid for every hour they are logged on, Uber will clearly need to rethink the way in which work is allocated so that there is an appropriate balance between the number of drivers available and the amount of work being offered to them. It may also need to rethink the extent to which drivers who have logged on - and are therefore entitled to be paid - are free to turn down jobs that do not suit them.

Any business that relies on allocating work only when a customer places an order is threatened by this ruling. It means that the business must bear the risk of insufficient customer orders coming in to cover the cost of keeping a pool of workers available to meet that demand. That risk must be borne by somebody, however, and it may be that the employer is better equipped to bear it than the individual worker.

perspective@xperthr.co.uk