Why Businesses Engaging Contractors Should Take Note of the Uber Decision

In a widely publicised decision last Friday, the Supreme Court upheld the decision of the London Central Employment Tribunal, the Employment Appeal Tribunal and the majority of the Court of Appeal that Uber drivers have the status of “worker” and so are entitled to be paid the National Minimum Wage and for their holidays.

Uber drivers were not held to be employees, but to be in the hybrid category of “worker”, a status that comes with some, but by no means all, employment rights. They may remain self-employed for tax purposes, though they will gain some employment protections including not only the minimum wage and holidays, but rights arising from whistleblowing and anti-discrimination legislation.

Uber lost largely because their complex contractual documents were held not to reflect the reality of the relationship between them and the drivers. Uber claimed not to have a contract with passengers, but instead to act as agent for the drivers to themselves contract with passengers. The Supreme Court dismissed this argument, relying on a prior decision of Autoclenz v Belcher which had confirmed that Tribunals should look at the reality of the relationship in determining employment status, even if that means departing from the written contract. The Uber decision arguably goes further, by explaining that Tribunals should not start with the contract when determining whether a Claimant has statutory rights, referring to the fact that these rights are a minimum floor created to give workers more than they might be able to agree in a contract. Instead, Tribunals should look at the reality of the relationship between the parties, and any written contract will only be a part of that exercise.

In the Uber case, the high level of control they exercise over drivers and the clear evidence of subordination was enough to support a finding that the drivers have worker status.

It’s a decision that has wide reaching consequences. Uber denies that it applies to all their drivers, claiming that contracts have changed since 2016 when the Employment Tribunal heard the original case, but the reality is that it will not only affect them and the wider “gig economy”, but all businesses engaging contractors. It will no longer be possible simply to point to written terms in contracts to deny that a contractor is a worker with, for example, the right to be paid whilst on holiday.

So, does this mean an end to written contracts? Absolutely not. Since April 2020 all workers and employees have the statutory right to a statement of particulars on Day One of the employment relationship. A written contract is the natural home for that statement. It also allows the hirer to set the ground rules for the engagement. But the Uber decision drives home the need to look at the reality of the relationship, the extent of control needed over the contractor and their integration into the business, before assessing their true status. Only then can rates be properly costed (to include holiday pay and pensions or not) and only then can the hirer understand their obligations and potential liabilities.

Photo by Dan Gold on Unsplash