The Employment Appeal Tribunal (EAT) has dismissed an appeal by the app-based taxi service provider Uber against the decision of the Central London Employment Tribunal that two of its drivers were in fact ‘workers’ for the purposes of the Employment Rights Act 1996 (‘ERA’), and not self-employed contractors, as claimed by Uber.
The Employment Tribunal (ET)’s decision in Uber BV v Aslam hit the headlines in October 2016 as it was one of the first cases in which a high profile name in the so called ‘gig economy’ was successfully challenged over the purported employment status of those providing services on its behalf. The ET concluded on the evidence before it that if an Uber driver had the Uber app switched on, was within the territory for which they were authorised to provide services for Uber and was available and willing to accept assignments on behalf of Uber, then he/she was operating as a ‘worker’ for the purposes of section 230(3)(b) ERA. Critically, this meant that such a driver would be entitled to various legal rights, not available to the genuinely self-employed. Such rights include, in particular, the right to be paid the national minimum wage, work a maximum 48 hour average working week and be paid holiday pay.
Uber appealed to the EAT.
Uber's case on appeal
At the EAT, Uber argued that the ET’s decision was wrong as it had disregarded the written contractual documentation between Uber and its drivers, which clearly stated that Uber provided its services to drivers as their ‘agent’ by procuring customers for them. Uber also argued that the ET should not have taken account of regulatory requirements which were imposed on Uber, (as a condition of its Private Hire Vehicle Operator’s license), to support its conclusion that Uber exercised sufficient levels of control over its drivers in relation to the manner in which services were delivered for those drivers to be considered ‘workers’ under the ERA. Finally, Uber argued that the ET had made a number of inconsistent findings about drivers being ‘required’ to work in certain circumstances, and failed to take proper account of other matters which indicated that its drivers were in fact genuinely self-employed independent contractors.
Dismissing Uber’s appeal, the EAT held that the ET been right to reject Uber’s characterisation of its relationship with its drivers as one of ‘agency’, as described in the contractual documentation. The EAT found the ET had correctly relied on the 2011 Supreme Court case of Autoclenz v Belcher, which established that where there is an inequality of bargaining power between those who may be workers and those who may be their employers, then written contracts drafted by a putative employer, which do not reflect the reality of the relationship between the parties, can be disregarded by the courts when determining the true contractual arrangements.
The EAT found that, on the basis of Autoclenz, the ET in Uber had been entitled to find that the written documentation, drafted by “an army of lawyers” engaged by Uber, did not reflect the reality of the situation of the claimant drivers. In reality, the drivers were inherently incorporated into Uber’s business of providing transportation services, and subject to levels of control inconsistent with their being independent contractors entering into direct contractual relations with each passenger they transported further to their use of the Uber app. >
Although it upheld the ET’s decision in this case, the EAT was at pains to emphasise that questions of employment status must be assessed on the basis of their individual circumstances, taking into account the whole factual matrix in each case.
While the EAT judgment in Uber is an interesting development in the complex area of employment status and the gig economy, it is unlikely to be the end of the story. Uber has said it will take the case to the Court of Appeal, followed by the Supreme Court, if necessary. (This is not surprising, given the potential negative impact of the decision on Uber’s particular business model).
However, unless or until successfully challenged, Uber will be binding on other ETs and, as such, may have an impact outside the developing app-based service sector.
The EAT’s decision does not mean organisations cannot successfully operate business models which are heavily reliant on self-employed labour, but it does highlight the importance of appreciating that neither the ‘label’ attached to a relationship (even if mutually agreed), nor an individual’s tax status, will necessarily be determinative if there is a subsequent dispute as to employment status. Employers wishing to minimise the risk of a successful legal challenge should conduct a close analysis of actual working practices to ensure that individuals are not incorrectly labelled as self-employed.
The Taylor Review of Modern Working Practices, published in July this year, highlighted the difficulties caused by the current lack of clarity surrounding legal employment status. (See our briefing: Taylor Review of Modern Working Practices recommends introduction of ‘dependent contractor’ status. The government is currently considering whether – and, if so, how and when – to implement any of the numerous recommendation contained in the Review. It will be interesting to see if the EAT’s decision in Uber spurs the government on to take legislative action on the issue of employment status.
We will of course continue to monitor developments in this area and keep members updated.