It is fair to say that this year has been something of an annus horribilis for Uber. Amid the non-renewal of its London licence, data hacks and numerous other controversies, the ride-hailing business has also been doing battle in the UK employment tribunals. In the latest stage of this particular journey, Uber did not fare well.

The background

For the uninitiated, people using Uber’s taxi service hail cabs via a smartphone app, which the drivers access. Uber locates the nearest driver and informs them of the request. Once the booking is confirmed, driver and passenger can contact one another through the app. A route is plotted by the app and at the end of the trip the fare is calculated by Uber, based on GPS data from the driver’s smartphone.

Uber’s position throughout the tribunal hearings was that it provides ‘lead-generation’ opportunities to self-employed drivers. Uber does, however, seek to control how drivers provide the services in various ways. For instance, it will deactivate a driver’s access to the app if customer ratings fall below an acceptable level. It will also instruct drivers to log out of the app if they do not wish to carry passengers, to avoid creating an unsatisfactory user experience.

Employment tribunal decision

Under UK law, there are three different capacities in which people can provide work: as an ‘employee’, a ‘worker’ or an ‘independent contractor’ (also referred to as ‘self-employed’). Their employment status determines their legal rights at work – employees have more rights than workers, and workers more than independent contractors. The category ‘worker’ includes all employees, but not all workers are employees.

A ‘worker’ is either an employee or someone whose contract requires them to perform work personally for someone (who is not their client or customer). In other words, workers agree to work personally and are not running their own business.

Both sides accepted that drivers were never obliged to turn on the app or to accept work; they could be totally ‘dormant’ if they wished. Uber said that this meant that the drivers could not be workers. The Employment Tribunal disagreed, finding that any driver who (a) has the app switched on, (b) is within their authorised territory, and (c) is able and willing to accept assignments, is a ‘worker’ for so long as those conditions are satisfied.

The employment tribunal did not agree that a contract existed between the driver and the passenger, taking into account that the fee was set by Uber and paid to Uber, the route prescribed by Uber and, in practice, the driver and passenger did not agree terms. The tribunal also took account of the control Uber exercised over the drivers, including its driver ratings procedure, which was effectively a performance-management process.

Uber appealed to the Employment Appeal Tribunal (EAT). Its principal argument remained that its relationship with the drivers was one of agency: the drivers were in business on their own account and Uber merely acted as agent to agree contractual terms between drivers and passengers.

EAT judgment

Dismissing the appeal this month, Her Honour Judge Eady held that the employment tribunal had been entitled to conclude that the drivers were workers. While it was possible to have an agency relationship, the EAT did not consider that had been the case on these particular facts.

The EAT agreed that the drivers were, in reality, incorporated into the Uber business, and the arrangements and controls in place did not support a direct contractual relationship with the passenger each time they accepted a trip. The EAT concluded that the employment tribunal had permissibly rejected the label of ‘agency’ used in Uber’s contractual documentation.

The EAT relied on various factors in reaching this decision, including the fact drivers could not grow their ‘business’ because they could not negotiate terms with passengers, and that they could not establish a business relationship with their passengers as they were not allowed to exchange contact details with them.

The EAT rejected Uber’s contention that it was perverse for the employment tribunal to find both that Uber exercised control over the drivers and that the drivers had no obligation to turn on the app. The employment tribunal had found that, while there was no requirement to accept every trip, the driver’s account status would be lost if he failed to accept at least 80% of trips (Uber disputed that the employment tribunal had made this finding of fact, but the EAT rejected this).

The EAT had more difficulty with the issue of at what times precisely the drivers could be treated as Uber’s ‘workers’. There was no difficulty in accepting that, when drivers had accepted trips, they were workers. But the EAT was less sure that they were also workers in between accepting assignments. This issue is crucially important because it is relevant to a determination of the drivers’ ‘working time’ (and their entitlement to the national minimum wage).

The main difficulty arises because, while in the territory with the Uber app switched on and ‘able and willing’ to accept assignments, drivers might also have other apps open and be available for driving jobs for other operators. The EAT accepted this was a tricky issue, but it was not prepared to find that it was fatal to the drivers’ case. If the drivers had similarly agreed with another operator to accept 80% of trip requests, they were unlikely also to be at Uber’s disposal – it would be a question of fact in each case.

What next?

The EAT’s decision in this case has been eagerly awaited by employment practitioners seeking guidance on how the test for when ‘worker’ status properly applies in the context of ‘gig economy’ businesses. It is clear from the EAT’s judgment, however, that it is highly fact-specific. Other cases concerning people working for gig economy businesses – and even in other taxi firms – will not necessarily be decided in the same way.

Uber had sought to ‘leapfrog’ the Court of Appeal and go straight to the Supreme Court but permission for this has been refused.