Is UBER a one-time gig, or the future of work?

Is UBER a one-time gig, or the future of work?

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A closer look at the working models operating in the gig economy and how they could affect self-employment in the UK

The gig economy is big business. In the space of a couple of years it has gone from something most hadn’t heard of, to part of our everyday lives.

Going home late? Order an UBER. Need some DIY? Log on to Handy. Hungry for a takeaway? Use Deliveroo.

By definition, the people working for these gig economy organisations work on a ‘gig’ basis, and are treated by the employer as self-employed. However this can cover an increasingly muddied area of employment law, as new technologies have made it difficult to clearly define this work as true self-employment. So in addition to making your life easier, these new platforms are unsettling the labour market, as well as established players within it.

This type of self-employed status was challenged in London late last year.

Two UBER drivers, supported by the GMB Union, argued their relationship with the platform and the conditions under which they work make them entitled to workers’ rights. The drivers wanted a guarantee of the National Minimum Wage and paid annual leave, among other benefits. This was brought to an employment tribunal.

For its part, UBER said drivers - which it refers to as “partners” - are under no obligation to turn on their app or accept assignments if logged on, and there is no prohibition against “dormant” drivers. Therefore, they were not workers.

The judgement ruled against UBER. The judges stated that “the notion that UBER in London is a mosaic of 30,000 small businesses linked by a common 'platform'” was “faintly ridiculous." UBER’s argument was also said to be reminiscent of the Shakespeare line “The lady doth protest too much, methinks.”

UBER drivers won the right to be classed as workers, not self-employed. When the app is switched on, it was ruled that drivers are under a worker contract and UBER acts as a transportation company, not a technology platform. The judges referenced Supervision, Direction and Control (SDC) in their ruling. [1]

Case closed?

Things don’t end here. For a start, UBER is appealing the case, and feels confident in victory.  If it loses, UBER may face a hefty bill and have to give drivers back pay for unpaid entitlements. UBER will also have to decide how to run their business going forwards.

They could keep everything the same, and honour their legal obligation to offer workers’ rights, such as National Minimum Wage and paid annual leave. This cost could be passed onto consumers in the form of higher fares.

Another option would be to alter the way they interact with drivers and modify working practices. This might mean allowing drivers to travel their own routes instead of following Google maps.

Leading by example

UBER are the first in a number of high-profile legal challenges to the gig economy.

Delivery firm CitySprint has been taken to tribunal by couriers demanding workers’ rights. As have another courier, Hermes, following criticism from Frank Field MP who said some firms “seem to be enforcing an employee contract under the cover of self-employment.”

This might force other businesses in the gig economy to alter their model to point towards self-employment, and avoid incurring the cost and reputational damage of a tribunal.

It’s a difficult balance to strike as increasing regulatory burdens on gig economy businesses could reduce competition. This would benefit existing players able to make the necessary changes and narrow consumer choice. It could also strip the self-employed of flexibility, and raise unemployment by restricting the labour market.

Clarity

Policymakers are watching closely. They have launched a deluge of consultations; the highest profile is the Taylor review on modern employment practices. This was personally commissioned by the Prime Minister and is led by Matthew Taylor, Chief Executive of the RSA.

This forms part of Mrs May’s core domestic agenda - to create an economy that works for everyone (expect to hear this more and more). The current public policy debate over these complex employment status issues, as well as pensions and maternity pay for the self-employed, will likely influence welfare provision for years.

IPSE will be urging Government to provide clarity over employment status, to protect the flexibility of the genuinely self-employed and offer certainty to business.

Forcing employment rights onto the self-employed working in the gig economy because existing law does not clearly interpret new business models, or because a small number of unscrupulous firms are exploiting false self-employment, would only harm the flexibility they value.

It is imperative the explosion of innovation is channelled considerately, with disruptive effects managed reasonably. Though a challenge, careful policymaking in the gig economy could reap massive rewards for the Exchequer, industry, consumers, and the labour market.

Simon McVicker, IPSE Director of Policy and External Affairs, commented:

While noting the result of the court case, it seems to us that UBER drivers tick most of the boxes that would make them self-employed. They work when they want, how many hours they want, and can work for others if they choose. The majority of them enjoy the flexibility this way of working brings. In fact, it wouldn’t be surprising if some UBER drivers were not already IPSE members.

 

Words by Senior Policy Advisor, Adam Waters

 

Useful definitions

Gig economy: Through the proliferation of technology, the gig economy provides a series of short-term gigs to people. These gigs are often for different employers, rather than long term employment.

Worker:  A person is generally classed as a worker if they meet a number of criteria, including: having a contract, turning up for work even if they don’t want to, not working as a limited company. Workers are entitled to certain employment rights, including: the National Minimum Wage, paid annual leave and rest breaks.

Supervision, Direction and Control (SDC): the SDC test is commonly used by Government to determine whether someone is self-employed or not. It is not law, judgement is generally based on the definition of the words. Only one element must be met for the test to apply.

 

A view from the expert: Professor Patricia Leighton

Few court cases received as much publicity as a London employment tribunal decision of October 28th 2016 involving UBER. Sadly, much of the media coverage was either inaccurate or misleading so it is important to look at what, precisely, the decision was about – see the main article.

UBER markets itself as a digital platform. It supplies drivers with phone apps as a means of putting them in touch with potential car passengers who have contacted UBER directly and then provides basic information to drivers on passenger identity, location and intended destination. From an outsider perspective, and ignoring the rhetoric of the sharing economy and drivers being UBER “partners”, this could look like a traditional intermediary/agency arrangement. However the judge ruled that they are a transport provider, not a digital platform (cases in some other jurisdictions have reached different conclusions). More importantly, he firmly stated that even the most carefully crafted documents will be overridden if the facts do not support them.

All digital providers will have to take this on board. If the decision is upheld on appeal to the employment appeal tribunal, documents will have to match work realities. Will there be a rush of claimants? Possibly not, as tribunal fees are high and there are some procedural hurdles. But in any case people appear reluctant to claim against an employer who can simply stop using them with no comeback.

Digital platforms and new ways of skills supply are here to stay. Current laws, certainly in the UK, have struggled to accommodate even the mildest new ways of working, such as job sharing, agency working, home-working, and, say, secondment. It is increasingly recognised that employment and social protections need to be more closely linked, a matter that clearly requires regulation. Some feel we are in a post neo-liberal phase and the calls for removal of red tape must sometimes be resisted. If this happens costs for employers/clients will rise, along with responsibilities. The UBER case may itself be the first, or one of the first, cases to begin this process.