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The Uber Phenomenon!


Posted on 7 November 2016

With the recent Employment  Tribunal ruling that Uber drivers are not self-employed but employed by the firm, the far reaching impact this may have on the ‘gig economy’ is yet to be revealed. A gig economy is that whereby the self-employed obtain their work on a freelance basis, in the same way as a musician would take on a ‘gig’, hence ‘gig economy’.

The case taken up by the GMB union on behalf of the drivers centred on the fact that the drivers were employed by the firm rather than being self-employed and hence should be entitled to the National Living Wage (NLW). Uber, however, insisted that they were a technology firm, not a transport business and that the drivers were independent, self-employed contractors who could choose where and when they worked.

The tribunal refused to accept the company’s argument and found in favour of the drivers. The impact of this decision could be one that is felt by many ‘employers’ and it could prove to be a payroll nightmare.

This is big news for the gig economy and will more than likely pave the way for further claims against operators of this nature.

It is worth mentioning that the Employment Tribunal was not asked whether the Uber drivers were employees of Uber, but whether they were ‘workers’ – a distinct legal status under the Employment Rights Act 1996 and other legislation. ‘Workers’ do not have the right to claim unfair dismissal, for example, or receive a redundancy payment, but they do have the right to paid holiday, the National Minimum Wage, and limits on working time, such as rest breaks and so on.

This case is a reminder that an Employment Tribunal is entitled to look at the real relationship between the parties when determining employment status and does not have to go entirely on what the contractual documentation says. It is not inevitable, however, that similar cases against other businesses will succeed.

The trend of firms taking on self-employed workers who engage with work through apps may have to change radically. Faced with similar employment tribunal claims, these firms may either have to change their business models, or pass the increased costs onto customers.

When operated in the right way, many individuals, including some Uber drivers, highly value the benefits the gig economy can bring. These benefits do need to be balanced, however, against potential exploitation and it is unlikely this will be the last of the claims of this type as the gig economy continues to grow.

Interestingly, just before the Uber decision, the government had announced an inquiry to look at issues such as the definition of ‘worker’, the status of agency workers and the self-employed, and issues surrounding the gig economy. It will be interesting to see how that develops.

If you are uncertain on any of the above points or need help with your payroll system please contact our Payroll team here.

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