The recent Uber case has wide reaching ramifications for the gig economy and worker status. Here we explore what it could mean for your workforce.
The Supreme Court found that Uber’s drivers are workers rather than self-employed contractors and subsequently Uber has decided it will treat all UK-based drivers as workers. This means that drivers are entitled to minimum wage, pension enrolment, rest breaks, and paid annual leave. Uber is thought to have approximately 40,000 drivers who will now all be looking to receive national minimum wage and benefit from this decision. It’s estimated that there are around five million individuals working in the gig economy who may now be thinking about their employment status too.
The Uber case has followed on from the Government’s Good Work Plan published in 2018 which highlighted that businesses and individuals need to be able to easily understand the law in regard to their status. The Government intended to change legislation to improve clarity on employment status tests to reflect the modern working relationships. Changes were made in respect of what information must now be included in written contracts for all workers and employees in April 2020, however clarity is still required on the tests to establish their status.
It’s important to understand the distinction between different types of ‘workers’. In the main there are three groups – employees, workers, and self-employed individuals. What category they fall into determines what rights and protection the person can benefit from. Workers are not entitled to the same protection as employees but do have certain statutory rights, including to be paid statutory benefits such as the minimum wage, holiday pay and pension contributions. They do not qualify for statutory redundancy pay though and are unable to bring an unfair dismissal claim. Self-employed contractors have none of those rights or benefits and instead, what they get paid and how they are treated, is dependent on what was agreed between them and the business.
The Uber case and the decision to treat their drivers as workers is very significant for businesses who engage gig economy workers and those businesses who operate in a similar way to Uber. Uber had argued that the drivers were self-employed independent contractors due to separate contracts existing between Uber and the drivers, and the drivers and passengers. They justified the position by arguing that Uber in fact worked directly for the customers. The Supreme Court did not agree and it is clear from this case, as well as other recent cases, that employment status will be considered on a case-by-case basis, not only looking at what the contractual arrangements are but the reality of the day to day relationship between the business and the individual.
The Uber decision does not mean that all self-employed contractors in the gig economy will automatically be considered workers, but it does substantially increase the likelihood that they could be a worker and claim for backdated pay, pensions, and holiday pay. Businesses may face grievances and potential Tribunal claims from individuals who believe they should be treated as a worker as a minimum.
For businesses, treating individuals as workers is likely to result in increased costs. In Uber’s case each time a driver accepts a trip they will be entitled to the national minimum wage, holiday pay, and any pension contributions. It’s likely these increased costs will be passed onto customers. With other sectors now considering if their self-employed contractors are really workers, it may be that other sectors will need to consider the implication on their costs too and whether or not they can pass it on.
It’s important employers take steps now to assess the status of individuals paid on a self-employed basis and review the working relationship with them. If self-employed contractors raise the topic and indicates they think they are workers it’s worth taking stock of the situation and seeking advice first, as it’s not as simple as just changing their status to become a worker or an employee the next day. There are some potential financial and legal ramifications that need to be considered first.
What is evident from the cases is that it is critical you have a signed well-drafted agreement in place regardless of status to help evidence the relationship. Legislation requires this in any event now for workers and employees. If you don’t have written contracts in place or you’re not sure if they are compliant let us know and we can help.