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UK Employment Tribunal rules that Uber drivers are employees, not independent contractors

March 7, 2017

The UK Employment Tribunal has ruled that Uber drivers in London are "workers," and thus are entitled to minimum wage and holiday pay under employment standards legislation.

Founded in 2009 in the United States, Uber develops, markets, and operates the Uber mobile app, which allows individuals in need of transportation to use their smartphones to submit a trip request, which is then routed to nearby Uber drivers who use their own cars to drive the individuals to their destination. Trip requests are dispatched through the app to drivers, who have 10 seconds to respond to accept the trip. At the end of a trip, the fare is calculated by Uber servers based on GPS data and is charged to the passenger’s credit card and paid in full to Uber. Passenger fares are then remitted to drivers on a weekly basis, less a "service fee" of 25%. Any disputes over fares are handled and decided by Uber, which sometimes results in recalculation of drivers’ payments if a refund is issued, although Uber bears the loss in situations where the driver was not at fault or in cases of fraud.

Those who wish to become Uber drivers must present their drivers’ licences, vehicle registration, and insurance certificate to Uber and undergo an interview, although they are not subject to close scrutiny. In order to be eligible to receive trip requests, all Uber drivers are required to accept Uber’s Services Agreement, which explicitly states that the agreement is "between an Independent company in the business of providing Transportation Services … and Uber," and that drivers maintain "a contractual or employment arrangement with [the] Transportation Company," separate from the Transportation Company’s agreement with Uber. Among other things, the agreement stipulates that Uber does not direct or control when or for how long drivers use the Uber app, or drivers’ decisions to accept or ignore trip requests. In reality, the vast majority of Uber drivers are sole operators, but for the purposes of the Services Agreement they are an "independent company" providing driving services through their "drivers" – i.e., themselves.

A group of current and former Uber drivers brought claims under the UK’s Employment Rights Act 1996 (ERA), the National Minimum Wage Act 1998, and the Working Time Regulations for failure to pay minimum wage and failure to provide paid leave. In response to the claims, Uber contended that none of the claimants were "workers," and thus they were not entitled to the protections of employment standards legislation.

On October 28, 2016, a three-member panel of the UK Employment Tribunal chaired by Judge Anthony Snelson allowed the claims, finding that the Uber drivers were "workers" within the meaning of employment standards legislation.

While Snelson acknowledged that drivers are under no obligation to switch on the app at any time, he observed that when the app is switched on, "the legal analysis is … different." In his view, "any driver who (a) has the App switched on, (b) is within the territory in which he is authorised to work, and (c) is able and willing to accept assignments, is, for so long as those conditions are satisfied, working for Uber under a ‘worker’ contract and a contract within each of the extended definitions." In reaching this conclusion, Snelson noted that he was struck by the "remarkable lengths" to which Uber had gone to classify itself as an organization that does not provide transportation services, and remarked that the "fictions, twisted language and even brand new terminology" in Uber’s documentation merited "a degree of scepticism."

Moreover, Snelson remarked that it was "unreal to deny that Uber is in business as a supplier of transportation services. Simple common sense argues to the contrary." In this regard, Snelson agreed with the findings of Judge Edward M. Chen of the Federal District Court in San Francisco, who granted Uber drivers class-action status in a similar case in the U.S. (see Douglas O’Connor v. Uber Technologies Inc., reported in Lancaster’s Labour Law, November 3, 2015, eAlert No. 386). Justice Chen rejected Uber’s assertion that it was a technology company, and not a transportation company, stating: "Uber does not simply sell software; it sells rides. Uber is no more a 'technology company' than Yellow Cab is a 'technology company' because it uses CB radios to dispatch taxi cabs."

Snelson also noted the difficult logic of Uber’s position, as its Services Agreement was structured in such a way that the driver would be entering into a binding agreement not with Uber but with the passenger, whose identity he or she did not know, to take the passenger to an undisclosed location, with the route prescribed by Uber, and the fare set by and paid to Uber. In Snelson’s view, "The absurdity of these propositions speaks for itself."

In light of these considerations, Snelson concluded that "the supposed driver/passenger contract is a pure fiction which bears no relation to the real dealings and relationships between the parties." Examining the real relationship between the parties, Snelson noted that Uber: interviews and recruits drivers; controls key information such as passengers’ full names and destinations; requires drivers not to decline/cancel too many trips; sets the default route for rides; fixes the fare for rides; imposes conditions on acceptable vehicles and instructs drivers how to do their job; subjects drivers to performance management/disciplinary procedures through its rating system; handles customer complaints; and accepts the risk of loss. Accordingly, he was satisfied that Uber was a transportation business, and the drivers provided skilled labour through which Uber delivered its services and earned its profits.

In the result, Snelson concluded that the Uber drivers were "workers" within the meaning of employment standards legislation and he accordingly allowed their claims for minimum wage and paid leave.

This ruling marks a significant win for drivers as Uber continues to face legal battles in multiple countries over its controversial business model. The GMB trade union, which brought the case, called the decision "a monumental victory that will have a hugely positive impact on drivers." Nigel Mackay from law firm Leigh Day, which represented the two test claimants, said: "This is a ground-breaking decision. It will impact not just the thousands of Uber drivers working in this country, but all workers in the so-called gig economy whose employers wrongly classify them as self-employed and deny them the rights to which they are entitled."

On December 13, 2016, Uber launched an appeal of the ruling to the Employment Appeals Tribunal. "Tens of thousands of people in London drive with Uber precisely because they want to be self-employed and their own boss," said Jo Bertram, regional general manager of Uber in the UK. "The overwhelming majority of drivers who use the Uber app want to keep the freedom and flexibility of being able to drive when and where they want. While the decision of this preliminary hearing only affects two people, we will be appealing it."

In Canada, in January 2017, a class action lawsuit was filed in the Ontario Superior Court against Uber Technologies Inc. on behalf of thousands of individuals who have driven for Uber in Ontario since 2012 who were allegedly misclassified as independent contractors. The lawsuit is seeking $200 million in damages for minimum wage, overtime, vacation pay, and other entitlements under the Employment Standards Act, 2000. According to Lior Samfiru, partner at Samfiru Tumarkin LLP, the law firm representing the drivers: "Uber drivers are employees in almost every sense, but are incorrectly classified as independent contractors. They can’t negotiate wages or method of payment. Uber controls assignment of work, what car can and cannot be driven. Terms of employment are dictated fully by Uber."

Uber has also faced and continues to face legal challenges from the taxi industry. In 2015, the City of Toronto filed an application in the Ontario Superior Court seeking an injunction requiring Uber to apply for a licence to operate either as a taxicab broker or limousine under the Municipal Code. While the Court ruled that Uber was neither a "taxicab broker" nor a "limousine service company" under the Municipal Code, and dismissed the application (see City of Toronto v. Uber Canada Inc., 2015 ONSC 3572 (CanLII), a class action was filed against Uber on behalf of taxi drivers in Ontario alleging that Uber violated parts of the Highway Traffic Act, causing those in the taxi industry to suffer damages. A similar lawsuit, brought by taxi companies and drivers in Quebec who claim hundreds of millions of dollars in lost revenue, was given the go-ahead by a Quebec Superior Court judge on January 23, 2017.

Cases in the US have had mixed results. As indicated, on September 1, 2015, Judge Edward M. Chen of the Federal District Court in San Francisco permitted a class action to proceed against Uber on the question of whether drivers are employees or independent contractors (see Douglas O’Connor v. Uber Technologies Inc., reported in Lancaster’s Labour Law, November 3, 2015, eAlert No. 386). A proposed $100 million settlement in that case was later rejected by the judge, who found that the proposed settlement, as a whole, was "not fair, adequate, and reasonable." However, on September 7, 2016, the United States Court of Appeals for the Ninth Circuit reversed a ruling that Uber’s arbitration agreement was invalid and unenforceable, opening the door for Uber to compel individual arbitration of drivers’ claims and thus limit the scope of class action lawsuits. The lawsuit was stayed in November while the Ninth Circuit decides whether Uber’s arbitration agreements preclude drivers from pursuing class actions.

In October 2016, the New York State Department of Labor ruled that two former Uber drivers were employees, and thus were eligible for unemployment insurance payments. The rulings applied only to the claims of the two drivers. A third driver, who was found on the facts of his case to be a contractor, not an employee, by the Department of Labor, has asked for a reconsideration of his case, claiming that the ruling was based on confusion in filling out the paperwork for his claim. On the other hand, on November 23, 2016, a private arbitrator in California, Arbitrator Michael Marcus, hearing a dispute under agreements with Uber providing for mandatory arbitration of disputes with its drivers, found that an Uber driver was an independent contractor, not an employee. In reaching this conclusion, Marcus considered the facts and circumstances of the particular driver’s relationship with Uber, and concluded that Uber lacked the requisite control over the particular driver, or any comparable driver. Marcus noted that Uber did not guarantee rides, did not require minimum activity time, did not prevent drivers from working for competitors, and did not direct driver routes. The rulings of such private arbitrators have no precedential value.

See the full text of the UK Employment Tribunal’s decision and a BBC News report on the case. See also a Financial Post article on the Canadian class action.

View an article in the Guardian, regarding Uber’s appeal of the UK tribunal decision to the Appeals Tribunal, articles in the New York Times regarding the San Francisco Federal District Court’s rejection of the proposed class-action settlement between Uber and its drivers, and the New York State Department of Labor’s ruling confirming two Uber drivers’ eligibility for unemployment payments.