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Should your business be Uber worried about employment status?

What happened in the Uber case?

The issue of worker status has become very topical following the recent Uber ruling by the Central London employment tribunal. Two drivers brought a claim to argue that they were employed by Uber and not self-employed, as the company were trying to suggest. The ruling confirmed that the drivers were in fact “workers” and were therefore entitled to receive basic workers’ rights including the national minimum wage and holiday pay.

Uber argued that they were a technology based business whose drivers were independent contractors who could choose when and where they worked – this was rejected by the judges. The judgment stated “the notion that Uber is a mosaic of 30,000 small businesses linked by a common ‘platform’ is to our minds faintly ridiculous”.

How does this decision affect your business?

Businesses of all sizes are taking advantage of the emerging freelance economy. In doing so, it is important to be alive to potential issues regarding employment status and manage the risks accordingly.

A courier working for CitySprint recently received a similar ruling that she should have been classed as a worker and not a self-employed cyclist providing services, as CitySprint were suggesting. Similar businesses such as Addison Lee are also facing legal action. Other industries which often use self-employed staff or independent contractors may also be affected, for example freelance roles at creative, digital and media agencies, IT consultants or even hairdressers who rent-a-chair.

The Uber and CitySprint rulings are very specific to their particular business models but there is no doubt that the media interest that they have sparked may encourage other individuals to challenge their employment status. Both companies have indicated that they will appeal the decisions. Both decisions have only been decided at employment tribunal level and are therefore not binding on other tribunals.

What are the legal implications?

Successful claims could prove to be very expensive as claimants could be awarded significant back pay in terms of unpaid holiday pay and sick pay etc. Also, if someone is considered an employee rather than self-employed they would be entitled to increased legal protection, including the right to bring an unfair dismissal claim.

What can I do to protect my business?

You need to take steps to minimise the risk that staff engaged on a self-employed basis might be considered to be workers or employees. It is not enough to rely on the terms used in the contract as Tribunals will look beyond this and consider the reality of the relationship between the parties. Even though the Uber drivers’ contracts stated that they were self-employed and indeed Uber referred to them as ‘partners’ the tribunal rejected this.

Engaging self-employed staff has clear benefits for businesses in the right circumstances, not least saving money by avoiding responsibility to pay national insurance contributions as well as sickness, holiday and maternity pay. However, it can only work in situations where an individual is genuinely self-employed and the business doesn’t require the same level of control as it would have over an employee.

The vast amount of case law in this contentious area of employment law proves that employment status will depend on the particular facts of each case. Factors that may be taken into account include:

  • The degree of autonomy that an individual has in respect of quotations and negotiating their own terms of business;
  • Whether they can refuse work or if there is an obligation to work a minimum number of hours; and
  • The more control that a business exerts over their staff, the more likely it is that those staff are found to be workers or employees.

Moving forward

It appears to be more important than ever for businesses to review the employment status of their workforce and take appropriate action. This issue is likely to dominate the headlines as the labour market continues to change with increasing innovation, technology and flexibility developing new and novel business models. It may be prudent for businesses to obtain legal advice on these issues to ensure that they are keeping on the correct side of the law whilst maintaining an appropriately flexible workforce.