Employed or Self-Employed? The Uber Story
Last month, (November 2016) an employment tribunal held that drivers engaged by Uber were not self-employed contractors. Instead, they fell squarely within the legal definition of ‘worker’ under three sets of legislation:
- Employment Rights Act 1996
- Working Time Regulations 1998
- National Minimum Wage Act 1998
This important ruling confirmed that Uber workers must be employees. As employees, these individuals were entitled to employment rights not available to the self-employed. These include the right to:
- not to be unfairly dismissed
- a redundancy payment
- paid holidays
- the national minimum wage
The tribunal found that Uber’s drivers were also entitled to whistleblower protection.
Self-employed contractors are not entitled to any employment rights.
Why are these workers employed?
The tribunal confirmed that organisations can work with self-employed people in the way that Uber has contended. However – its decision was based upon the company’s specific operation, statements and systems. Analysis of these areas lead to the tribunal’s decision that the drivers were employed workers.
The tribunal stated that its decision arose from the fact that drivers:
- did not know their passengers’ identities
- picked them up to take them to an initially unknown destination received payment at a fee calculated by and paid to Uber
These practices confirmed that no genuine contract existed between the driver and the passenger. Uber argued that it simply gave drivers business opportunities. The tribunal found that Uber ran a transportation business for which the drivers worked. In particular, the tribunal noted the respective bargaining power of the Uber and the drivers.
The tribunal findings also stated disappointment at Uber’s attempts to use terminology to demonstrate that workers were self-employed, such as:
- ‘rider experience’
- preserving the integrity of the platform
- log-off penalties
What does this mean for employers?
This finding confirms that all organisations must determine whether contractors should, in fact, be employees. It can be appealing to use contractors as these individuals do not have worker rights. However – getting this wrong becomes a false economy as workers who should have been employees are entitled to:
- annual leave
- the minimum wage
- detriment for whistleblowing
- pension contributions that their employer has not taken into account
Terminology and documentation are both important in determining the relationship between an organisation and its workers. However – as in Uber’s tribunal case – the reality of that relationship is extremely influential.
Uber plans to appeal against the tribunal’s decision, although the tribunal was clear in its rationale behind the outcome.
Comments from Consensus HR:
“This was a very interesting case in relation to the issue of employees & the self employed,” says Matthew of Consensus HR. “It’s an area that’s been ongoing for a long time. This is because many business owners believe it’s easier to categorise an employee as a self employed person or contractor.”
He adds: “When taking on additional people, business owners need assess fully what is needed. This includes confirming how the individual will be managed by the business.”
Questions that need to be asked include:
- can they work for other people? (This is known as ‘mutuality of obligation’.)
- are they bringing their own tools?
- do they have to ask permission to take holidays?
- do they get paid by the company
- are all their taxes are paid for them by the company
“There are many other questions that need to be asked especially in relation to how they fit within the company, “ explains Matthew. “ Many times you will find that, in practice, they are actually an employee / worker with specific legal rights that need to be offered to them.”
Would you like to know more, or to discuss your company’s situation?