The Supreme Court has confirmed that Uber drivers are ‘workers’ for the purposes of employment legislation. This means that the drivers are entitled to be paid at least the National Minimum Wage for all working hours and must receive paid holiday. They also have auto-enrolment pension rights. Some other  protections will apply too – for instance protection against being subjected to a detriment because of whistleblowing and the right to be accompanied at a disciplinary meeting. This finding will be very expensive for Uber.

The decision, which was unanimously agreed upon by a panel of six judges, will not have come as a surprise to those who have followed the case since it started in 2016. However, the force of some of the reasoning used to reach the verdict is important. Although it is based firmly in well-rehearsed legal principles, the ‘purposive approach’ adopted in Lord Legatt’s judgment has not been articulated so unequivocally before. This judgment will shape decisions on worker and employee status for years to come.

What is ‘worker’ status?

Most people will be aware of ‘employee’ status and its opposite, self-employed status. Workers sit somewhere in-between and have some, but not all, of the statutory rights granted to employees, although employers are not required to make PAYE deductions in respect of workers’ pay.

Worker status arises where there is:

1. A contract where an individual undertakes to perform work or services for someone else;
2. The individual undertakes to do the work or perform the services personally (i.e. they have to do the work themselves and cannot subcontract); and
3. the other party to the contract is not a client or customer of any profession or business undertaking carried on by the individual.

It therefore covers many informal and ‘gig economy’ arrangements where individuals who are not employees carry out work in return for pay.

How did the Supreme Court determine the drivers’ status?

A key reason for the Court’s decision was the structure of the contractual relationships between Uber, the drivers and the passengers.

Uber tried to argue that its role is not to provide a transport service, but simply to provide a platform to facilitate a direct contractual relationship between passengers and drivers. For a number of reasons the Court found that it was free to determine for itself the terms of the contract between Uber and the drivers, looking past the written documents in place. This was not least because the drivers signed an agreement with one Uber company (based in the Netherlands) which contained some of the terms relied on by Uber and passengers entered into another contract with an Uber company based in London which contained other key terms relied upon by Uber, but which was never provided to the drivers.

The Court found that worker status exists where there is a relationship between an individual and an employer that features subordination and dependence. In these relationships the reality of the bargaining powers between the two parties will mean that the individual must accept the terms presented because they are dependent on the other party for income. A level of control exercised in the relationship will indicate that the individual is a worker for statutory purposes.

The Supreme Court found a number of factors which demonstrated control on the part of Uber:

1. Uber alone decided the pay that drivers received for journeys – drivers could not decide to charge more.
2. Uber decided the contractual terms on which drivers provided services – drivers could not drive for Uber without accepting their standard form contract and Uber decided the terms of each ride.
3. Uber effectively controlled the rides that drivers accepted by not telling drivers the location that they would be driving to until they accepted the ride and by providing minimal information about the passenger to the driver. It monitored how many rides a driver accepted and penalised drivers who did not accept sufficient rides.
4. Drivers had to drive a vehicle from Uber’s approved list and in practice were often obliged to take the routes that Uber suggested.
5. Drivers are prohibited from making contact with passengers after a ride’s conclusion.

In a significant loss for Uber, the Court also found that the drivers are workers not only when they actually accepted a ride, but as soon as they had opened the App and were available to accept a ride booking. This significantly increases the pay and holiday due to the drivers in respect of quiet periods.

The Court’s findings on written contracts

Previously, it has been thought that when determining worker or employee status the first place to look would be any written contract between the parties. Only if this contract does not accurately reflect the intentions of the parties, could a court consider the reality of the working arrangements between the parties as a whole.

That is no longer the case when workers can be regarded as being in need of protection from being paid too little for the work they do or required to work excessive hours.

For as long as there has been employee and worker status, contract terms have been drafted with the objective of seeking to avoid individuals possessing that status. The Supreme Court held here that such contract terms contradict the purpose of the law, and will therefore be void. Intricate and clever legal drafting will simply not be effective.

Although lawyers will no doubt continue to include ‘status’ provisions laying out expressly that an individual is not an employee or worker, these now appear wholly redundant. Employers across the gig economy and beyond will need to consider whether individuals they engage are, as a result of subordination to and dependency on the employer, the intended recipients of statutory protections. Statutory entitlements will need to be provided accordingly and those paying people who are not employees should consider the rights which will apply.

It must be remembered that where an individual has worker status, they may also qualify for employee status.