Uber and beyond: clamping down on the gig economy

The Supreme Court’s judgment in Uber is bold and laudable in its potential reach. It provides workers with valuable tools with which to expose fictitious and misleading contractual arrangements drafted by unscrupulous employers. However, effecting real change for gig economy workers requires more than the flexing of judicial muscle and should not depend on recourse to lengthy and costly litigation. Rather, truly progressive protections will only be achieved by political will, legislative action and through a greater role for the machinery of the State.

The problem of fictional terms

“Let’s just get a few things straight at the start: You don’t get hired here, you come on board. We like to call it “onboarding”. You don’t work for us, you work “with us”. You don’t drive for us, you “provide services”. They’re no employment contracts. They’re no performance targets, you meet “delivery standards”. They’re no wages– but “fees”. Is that clear?”

(Interviewer to Ricky, in the opening sequence of Sorry We Missed You (Dir. Ken Loach) [2019])

The opening lines of Ken Loach’s 2019 film read like the facts of one of the many worker status cases cited before the Supreme Court in its landmark judgment in Uber BV and others v Aslam and others [2021] UKSC 5, which was handed down on 19 February 2021. This fictional film, which tells the story of a hapless and exploited delivery driver Ricky, nonetheless holds a mirror up to the true predicament of many millions of gig economy workers. Lured into joining a courier company by the largely mythical promise of “self-employment”, the film’s protagonist soon realises his “franchise agreement” with the company is not all it’s cracked up to be. He finds that onerous prescriptions are placed upon his work (he is a slave to his handheld device), he suffers penalties for late deliveries and his nominal right to use a substitute is illusory. Lastly, and of most relevance to the plight of the claimants in Uber, the film’s opening scene sees Ricky’s supervisor paraphrase the above fictitious and indecipherable lines from his “terms and conditions”.

The drivers in Uber faced this same problem; terms and conditions arguably mischaracterised the true nature of their daily working relationship with the app-based taxi service. These terms, set out in a Services Agreement, sought to exclude the drivers from a slate of important protections, including their entitlement to receive the National Minimum Wage and holiday pay. Such drafting techniques are commonplace across many sectors of the gig economy and the main strength of the Supreme Court’s decision is the judicial scorn poured on these tactics and the clear direction of travel it signals in favour of a broader, purposive interpretation of the meaning of worker.

The Supreme Court’s decision

The Claimants, all drivers for Uber, had alleged they were “workers” for the purposes of the Employment Rights Act 1996, the National Minimum Wage Act 1998 and Working Time Regulations 1998. They alleged that they were entitled to certain rights under this legislation, including the right not to suffer detrimental treatment for blowing the whistle, the right to be paid at least the National Minimum Wage and the right to receive paid annual leave. The Employment Tribunal, Employment Appeal Tribunal and Court of Appeal had all determined that the Claimants worked under worker’s contracts with Uber and were therefore, in principle, entitled to these protections.

In the UK, employment law distinguishes between three types of people: those employed under a contract of employment; those self-employed people who are in business on their own account and undertake work for their clients or customers and an intermediary class of “workers” who might otherwise be regarded as self-employed but who provide their services as part of a profession or busines undertaking carried on by someone else. Some statutory rights, such as the right not to be unfairly dismissed, are limited to those employed under a contract of employment. Other rights, including those claimed by the workers in Uber, apply to this middle category of “workers”.

The statutory definition of a so-called “limb b” worker’s contract has three elements (as defined by Section 230(3) of the Employment Rights Act 1996 and equivalent provisions within other employment legislation). Firstly, there has to be a contract whereby an individual undertakes to perform work or services for the other party. Secondly, there has to be an undertaking to do the work or perform the services personally. Thirdly, there is a requirement that the other party to the contract is not a client or customer of any profession or business undertaking carried on by the individual. The Supreme Court was only concerned with this first requirement.

Uber had argued that the courts below had fallen into error by disregarding the way in which the relationship between the drivers and Uber had been characterised in various written agreements (both between Uber and the drivers and between Uber and its passengers). Uber argued that these agreements stated that the only roles of the various Uber companies were to provide technology services and to act as a payment collection and/or booking agent for the drivers.

The Supreme Court disagreed, holding that the way in which a relationship is characterised in a written agreement is not the appropriate starting point in applying the statutory definition of worker. It had been well-established, prior to the Supreme Court’s decision, that employment tribunals should adopt a test that focuses on the reality of the situation where written documentation may not reflect the reality of the relationship (as held in Autoclenz Ltd v Belcher [2011] ICR 1157). The Supreme Court in Uber built further upon Autoclenz and other previous authorities, in clarifying that the correct approach is to consider all relevant circumstances, including not only the written terms but the practical operation of the relationship between the parties and the general purpose of the employment legislation in question.

The Supreme Court rightfully stressed that the rights in question were not contractual rights at all but rather rights created by legislation. Thus, the test for the Tribunal had not been one of statutory but rather contractual interpretation. It endorsed the modern approach to statutory interpretation, which was to have regard to provisions in a way which best gives effect to its purpose. The Supreme Court reminded itself that the general purpose of the employment legislation invoked by the Claimants in this case was to protect vulnerable workers from being paid too little, being required to work excessive hours or being subjected to other forms of unfair treatment (such as being victimised for whistleblowing). Once this purpose was recognised, the Supreme Court concluded that it would be inconsistent with the purpose of the legislation to treat the terms of a written contract as the starting point when determining the statutory question of worker status. Lord Legatt remarked that “it is the very fact that an employer is often in a position to dictate such contract terms and the individual performing the work has little or no ability to influence those terms that gives rise to the need for statutory protection in the first place. The efficacy of such protection would be seriously undermined if the putative employer could by the way in which the relationship is characterised in the written contract determine, even prima facie, whether or not the other party is to be classified as a worker” (at para 76).

The Supreme Court also highlighted various factors which had been considered by the Employment Tribunal to demonstrate that the drivers were in a position of subordination to, and dependency on, Uber. Taking these factors together, the Supreme Court concluded that these factors did create the need for statutory protection and justified the Tribunal’s conclusion that the drivers worked for and under contracts with Uber.

 Strengths of the decision

There are a number of positives to take away from the judgment of the Supreme Court.

The first is that the judgment sensibly recognises the limits of the role the text of an agreement has to play in determining worker status. This approach recognises that contracts regulating the relationships between employers and their workers are different to other contracts (such as commercial contracts) and should not be governed by the same traditional principles. Contracts in the employment sphere, particularly in the gig economy, are usually characterised by a serious imbalance of bargaining positions, largely because terms and conditions are dictated by the company. As the Supreme Court recognised here, there was no practicable possibility of the workers negotiating any different terms so using Uber’s terms as the starting point would in effect be “to accord them the power to determine for itself whether or not the legislation designed to protect workers will apply to its drivers” (at para 77). The purposive approach reaffirmed in Uber will ultimately assist claimant lawyers in future litigation to lift the veil on obscure agreements which seek to misrepresent the true nature of the employment relationship.

Secondly, where the judgment arguably goes even further than Autoclenz and previous authority is to use the statutory restrictions on “contracting out” as further justification for disregarding Uber’s written terms. Under Section 203(1) of the ERA 1996 (and under equivalent provisions in other employment law statutes), provisions of agreements are void insofar as they purport to exclude or limit the operations of provisions under the Act or preclude employees from bringing proceedings before an Employment Tribunal. This provision is usually only relied on to render clauses ineffective when they do either of these things in express terms. The ingenuity of the judgment of the Supreme Court was to see that this statutory protection can extend to strike down terms which seek to do so indirectly, even though they may not do so expressly. The Supreme Court was willing to conclude that it had clearly been the intention behind Uber’s drafting to prevent its drivers from claiming they fall within the statutory definition of worker and so to prevent them qualifying for relevant rights. Accordingly, the clauses relied upon by Uber in the Services Agreement were void. The strength of this reasoning creates a further tool in the armoury of employees with which to challenge terms which seek to exclude statutory protections.

The third strength of the judgment is its potential reach. Whilst the immediate parties to the dispute may have been operating within the gig economy, the reasoning of the judgment is arguably just as applicable to work relationships more generally. The gig economy is by no means the only arena in which one finds dependent and vulnerable workers. Moreover, the passages of the judgment underpinning the importance of having regard to the purpose of statutory protections when interpreting working relationships are very capable of being relied upon by those arguing for the top tier of worker status in the UK, that of “employee”. Indeed, that may even be the next battle for these Uber drivers. Whilst the legal issue of employee status was not before the court as an issue to be decided, there are certainly parts of the judgment (particularly those passages underlying the degree of control which Uber exerted over its drivers) which may imply that, were this stronger status have been argued for, the drivers may have had some success.

Solving the wider problems in defining worker status 

Despite all its strengths, there are a number of wider and engrained problems with how worker status is defined and ultimately protected in the UK, which are not addressed in the Supreme Court’s judgment. This is not a criticism of the court, which could only adjudicate on the particular legal questions before it, but rather a recognition that there is a long way to go to ensure workers are able to access a transparent and user-friendly definition, which enables them to enforce their rights effectively.

The first problem is the language of the current legislative provisions. The definitions of employee and worker under Section 203 ERA 1996 (and under equivalent provisions in other legislation) are unnecessarily opaque and unwieldy. One of the few observations made by Good Work: the Taylor Review of Modern Working Practices (July 2017) that most employment lawyers can probably agree on is the basic diagnosis: a lack of definition clarity. The government has still not done anything to implement the Taylor recommendations, some 3.5 years after their publication.

The current definition of limb b worker also places far too much emphasis on personal service, meaning even employers who wield large amounts of control over workers can often evade protections by offering a right to substitute. This was rightly recognised by the Taylor review but little has been done to propose a proper alternative definition. This is still fertile ground for further legal argument beyond Uber. At the time of writing, the Court of Appeal is yet to rule on an important appeal: Central Arbitration Committee in IWGB v Roofoods Ltd (t/a Deliveroo) [2018] IRLR 84. The IWGB had applied to the CAC to be recognised for collective bargaining purposes but the CAC held its members did not hold worker status as there was a genuine right to send a substitute and evidence this was used in practice.

The second problem is that the current definition creates an unjustified hierarchy of protections. In conferring full employment protections only on those who reach the threshold of “employee”, the present regime only affords second-class protections to those in the middle “limb b worker” category. This has become even less justifiable the more the definitions between these two categories have merged into each other. Prior to Uber, authorities such as Byrne Bros v Baird [2002] ICR 667 and Secretary of State for Justice v Windle & Arada [2016] EWCA Civ 459 had suggested the difference between the two tests was really one of degree rather than one of substance; a test with the same constituent parts (including the existence of a contract, mutuality of obligation and personal service) but with a “lower pass mark” required for the intermediate category of workers than those claiming employee status would have to achieve. Whilst this view has been doubted in other authorities, the danger of this approach is that atypical workers, who do not fit the traditional mould of employment relationships, are likely to miss out on both categories altogether.

Moreover, the argument that is often made that workers have to sacrifice some level of protections for the prize of greater “flexibility” holds even less weight post the Supreme Court’s decision. The court rightly recognised that flexibility is not the be all and end all when assessing what worker status an individual should enjoy. The prize of “flexibility” is also ill-defined itself and is difficult to pin down in any meaningful way. If flexibility simply means having the freedom not to follow fixed hours and the ability to choose when one works, such freedoms have never been the exclusive preserve of the self-employed. Rather, these freedoms can be enjoyed even by full “employees” in a way which is consistent with the purposive approach to interpretation set out in Uber.

The problems with the three-tiered approach were not adequately addressed by the Taylor review, which largely recommended preserving the status quo with some tweaks to the language used (for example, re-branding limb b workers as “dependent contractors”). If the definition is to be simplified, it is only Parliament which can properly do so. Regrettably, it does not appear that the current administration has the political will to do so. The government has still not put forward an employment bill to implement even the imperfect set of recommendations set out by the Taylor review.

The IER’s Manifesto for Labour Law offers a replacement single-status definition of worker. Under this test, individuals would qualify for protection if they (a) seek to be engaged by another to provide labour, (b) are engaged by another to provide labour, or (c) where the employment has ceased, were engaged by another to provide labour. There would be an exception where the individual is genuinely operating a business on their own account. Such a definition has a number of advantages. It is not reliant on contractual principles, a part of the existing statutory definition which has given rise to much confusion. It creates a simplified definition, which respects the universality of the employment relationship. Moreover, by introducing a rebuttable presumption in favour of worker status, which can be overturned only if the potential employer can establish that the only possible construction of the engagement is that the individual was not providing labour as a worker, the proposed definition provides workers with some additional layer of protection against attempts to impose misleading terms.

The third problem is the limited means by which individuals can enforce their rights against those who insist on misrepresenting their employment status. Litigation has a role to play but this should be complimented by a larger role for the machinery of the State. The Claimants in Uber had to endure a four-year legal fight for justice. Particularly for workers in less unionised sectors of the economy, litigation in the Employment Tribunal is costly (even if it is now thankfully unencumbered by the requirement to pay fees). The Tribunal system is still beset by backlogs, the effects of which are exacerbated by underfunding from government.

Even when the Uber claimants achieved a resounding victory and a decisive result on the worker status question, their employer’s response was intransigent; it claimed that the court’s decision focused on a small number of drivers using a 2016 version of the app and that significant changes had since been made to its business. To suggest that this landmark judgment applies only to the four-corners of the dispute between Uber and the couple of dozen drivers who mounted this challenge is wishful thinking, to say the least. Thanks to the overriding reach of the judgment and its clarity of reasoning, the usual tactics employed by firms such as Uber are not going to work. Simply tinkering with existing T&Cs or drafting new ones will not prevent Employment Tribunals and the appellant courts from carefully examining the factual reality of working relationships characterised by dependency. If workers have to resort to class action litigation to enforce their rights they should.

Another means of protection must come, however, through a stronger role for State institutions. HMRC already holds wide powers to investigate businesses suspected of paying workers less than the national minimum wage, to issue notices of underpayment and penalties and even to name and shame companies who flout the law. It will be interesting to see whether this judgment paves the way for a more interventionist approach in using these powers to expose efforts by companies involved in the gig economy to circumvent the National Minimum Wage. Ultimately, a stronger role for the State is to be preferred as this can act both to redress the imbalance of power inherent in such relationships of dependent labour and ease some of the load bearing currently done by individuals having to bring their own claims. In addition to creating a dedicated Ministry of Labour, the Manifesto for Labour Law argues for a properly resourced Labour Inspectorate to be established. This would have the power to bring legal proceedings on behalf of workers, as well as the power to issue enforcement notices requiring remedial action and bring criminal prosecutions against serious offenders.

Ultimately, the onward debate now has to be political as well as legal. In other jurisdictions where its drivers have been held to have worker status, Uber’s response has not just been limited to tinkering with terms. The firm has demonstrated its willingness to use its vast resources to influence the political debate around worker status. For example, in the state of California it backed, through an extensive advertising campaign, a referendum measure that would see its workers continue to be classified as independent contractors. Proposition 22, passed in November 2020, overturned a landmark labour law passed in the previous year that ruled gig-economy workers should have greater employee status and the protections that go with it. Such attempts to bend the political agenda towards its aims can and must be countered. The labour movement should use its own collective strength, expertise and persuasive influence to inspire reform in this area.