Last month the Supreme Court, the highest court in England and Wales, gave their ruling on the Uber case. The lower courts had already given the verdict that Uber drivers were ‘workers’ rather than self-employed, and the Supreme Court has now confirmed this position. But, what does this mean and how does it impact businesses going forward?
Firstly, it is important to understand the different types of employment status. In England and Wales, we have three: employee, worker and self-employed contractor.
What is an employee?
There are a number of different legal definitions of what an employee is, though none are comprehensive. Probably the best explanation is that an employee is "an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment". An employment contract is a contract of service or apprenticeship, whether express or implied, verbal or in writing.
An employee is someone who is under the control of their employer, who must (within reason) do as they’re told, when they’re told to do it. Their purpose is to advance the aims of their employer, and they are not in business for themselves. Employees in the UK have a vast range of employment protections, from minimum wage, paid holiday and sick pay to the right not to be unfairly dismissed.
What is a self-employment contractor?
A self-employed contractor used to be loosely defined as ‘anyone who isn’t an employee’ but following the introduction of the ‘worker’ category, the distinction is no longer that clear.
A self-employed contract is best described as someone who is in business for themselves i.e. someone who is not tied to a particular employer, takes control of their own business and is responsible for its successes or failures. People often find the example of tradespeople easiest to understand.
Usually a self-employed contractor is responsible for their own tax, but it is possible for a person to have employment status under employment law but not for tax purposes.
What is a worker?
A ‘worker’ is a category between employee and self-employed. "Worker" status reflects the view that some individuals, while not full employees who are entitled to the whole range of employment rights, are deserving of some protection
A worker is defined as an individual who has entered into or works a contract of employment, or any other contract but is not, by virtue of that contract, a client or customer of any profession or business undertaking carried on by the individual.
The definition is far from clear and certainly leaves scope for speculation, but relevant factors include whether the individual is providing a personal service, whether the employer is a customer of the individual's business, and the degree of control the employer exercises over the individual.
This definition of a ‘worker’ also covers employees, so all employees are workers, but not all workers are employees.
Why does it matter?
There has been much debate over the definition of a ‘worker’ in relation to the "gig economy", where individuals are engaged by businesses on a flexible, ad hoc basis. The categorisation of a person as an employee, worker or self-employed contractor has huge implications for both tax and employment rights. A number of high-profile cases have been heard in the employment tribunals in recent years on this subject.
What happened in the Uber case?
Two Uber drivers took Uber to court claiming to be workers, and thus entitled to minimum wage payments and holiday pay. This is important because if the Uber drivers were self-employed, and on a night where they were working they didn’t take any jobs, they wouldn’t earn anything but Uber wouldn’t have to make sure they’d received minimum wage. Workers are also entitled to rest breaks (e.g. lunch breaks and entire days off). Uber were keen to ensure that they didn’t have this entitlement because an employer is responsible for ensuring that workers have their breaks, which would be a huge responsibility and monitoring exercise for Uber.
Perhaps most importantly, as workers, the drivers were entitled to be paid for the time they spent waiting between jobs.
The courts have decided that the employees were workers, and considered the following factors as relevant:
Uber, not the drivers, set the fare and therefore dictated what the driver’s could earn, which wouldn’t be the case if the drivers were genuinely ‘in business on their own account’;
Uber had set contract terms which couldn’t be changed or negotiated by drivers;
The drivers could be penalised for rejecting too many rides, meaning that they didn’t have real authority about the work that they took on; and
The drivers’ ‘star rating’ was effectively a performance management system.
Uber has long argued that it is a booking agent, which hires self-employed contractors that provide transport. However, the Supreme Court (and the Employment Tribunal and Employment Appeals Tribunal) disagreed.
What does this mean for other businesses?
This isn’t the first, nor will it be the last, case on gig workers. Whilst Uber have appealed to the highest court in England and Wales, the fact is that other cases will be brought against other businesses with different facts, until we can build a better picture of how employment status applies to gig workers. The gig economy is relatively new and the law often takes time to adapt. These cases, as is often the case in matters relating to employment status, are highly fact-specific, meaning that in each case careful consideration of the facts of the matter are key. Importantly, the cases show that the courts will always interpret the wording of the contracts in accordance with the reality of the relationship between the parties.
The impact for businesses will primarily be employees’ (or workers’ or self-employed contractors’) awareness of their rights and the potential options open to them to dispute a status that they consider to be incorrect. This case highlights the need for employer’s to carefully consider the reality of the position between the parties. Uber have found out the hard way that it’s not simply a case of sticking the most attractive label on the situation.
If you have any queries about employment status or anything else raised in this article, please get in touch with Charlotte Braham in the Employment Department on 01494 893 529.