Six years after a small group of drivers in the UK took Uber to an employment tribunal demanding to be recognised as workers, the country’s top court has issued a ruling that threatens to crash the app’s business model in one of its biggest markets.
Having reached the end of the legal road, the Supreme Court’s judgment on Friday may turn Uber’s greatest asset — a huge number of drivers awaiting passengers — into a huge cost.
The ruling that the 35 Uber drivers who brought the case should be recognised as workers, and entitled to holiday pay, the minimum wage, sick leave and a pension, opens the way for Uber’s 60,000 UK drivers to bring legal cases, and may upend other companies reliant on gig economy labour.
“The ripples from this decision will travel far,” predicted Mary Walker, a partner at law firm Gordons. She added that historic claims for unpaid minimum wages and holiday pay would force many gig economy companies to “review their practices and the associated risks as a matter of urgency”.
Leigh Day, one of the law firms involved in the case, said it thought that drivers may be entitled to up to £12,000 each in compensation.
The consequences for Uber are so significant that a person close to the company suggested that it may try to repeat its tactics in California last year, where it succeeded in forcing a referendum to amend the state’s new labour law in its favour. In the UK, it could push for the government to bring new legislation to redefine the status of workers, and their rights.
On Friday, Uber declined to comment on how it would have to change its business model in light of the ruling, and the company’s share price barely budged in trading after the news.
But lawyers suggested that a raft of changes may be necessary, especially after the Supreme Court ruled that drivers are working for Uber for the entire period that they are logged into its app, and not just while carrying out trips.
The distinction is critical. A study by the University of California Berkeley suggested that for every 25 hours of driving trips, a driver may be logged in for 40 hours.
Rhona Darbyshire, partner at law firm Cripps Pemberton Greenish, said that Uber may have to move to a shift-based model, and switch to paying its drivers an hourly rate, rather than taking commission as it does currently. “This is a significant change to the current operating model and is likely to be unattractive to both parties,” she said.
Stephen Morrall, a partner at Hunters Law, added that additional costs are likely to be borne by customers. New York City’s minimum wage law, which came into effect in 2019, saw Uber prices rise for travellers in the city.
James Farrar, one of the former drivers who brought the case, also said one question the ruling had not settled was how to handle the practice of “multi-apping”, where drivers are logged on to more than one app at a time.
This was not relevant in 2016, when Uber dominated the ride-sharing market, but is now much more common. Farrar suggested that if drivers have to limit themselves to a single app, it may end up entrenching Uber’s dominance again.
The UK decision came as Uber, and the gig economy more generally, is under pressure across Europe. Earlier this month, Uber itself called for EU politicians to lay down “clear, progressive laws” to clarify workers’ rights in the bloc.
Next week, the European Commission is due to hold a consultation with gig economy workers and employer representatives, with plans to draft new laws on the sector by the end of the year.
Meanwhile, the company has seen a patchwork of legal decisions. Last year, a Paris court ruled that a former Uber driver should have been given employee status, rather than being treated as self-employed.
In the Netherlands, Uber drivers from Portugal and the UK are challenging the company, alleging that they were wrongfully accused of “fraudulent activity” by Uber’s algorithm.
Analysts at Wedbush said the UK decision “could set a precedent for other workers and companies in the gig economy throughout the UK and Europe which would be a body blow to the overall ecosystem.”
Other companies have already been exploring changes to the employment status of drivers. Last December, Just Eat Takeaway announced plans to offer more than 1,000 UK workers benefits including hourly wages and sick pay, although works will be employed through the Randstad agency.
In a letter published in the Financial Times this week, Just Eat Takeaway’s chief executive Jitse Groen said that the “gig economy comes at the expense of society and workers themselves”.
Among those who have faced similar challenges to Uber are food delivery company Deliveroo, which did not comment on whether it was affected by the ruling.
While it has won three court cases in the UK over the self-employed status of its riders, it has faced pushback in Europe, with the Amsterdam court of appeals ruling this week that its riders were employees.
The ruling could also affect drivers working for Amazon under its “Flex” gig worker programme, where drivers work in blocks of time using their own vehicles. The company did not respond to a request for comment.
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Charlie Thompson, employment partner at law firm Stewarts, said that while the Uber case was symbolically important, other companies are likely to contest similar claims by pointing to the fact that they exert less control over their staff or allow them to swap work with someone else.
He added that the decision did not offer a guaranteed amount of work, the right to receive sick pay, or the right not to be dismissed without the company having a fair reason and following a fair process. A gig economy business can still, in practice, “hire and fire” as it chooses, he said.
A spokesperson for ride-sharing company Free Now said that most of its drivers enjoy the flexibility of being self-employed and that it was always looking at ways to improve its service for drivers. “We’ve always given more freedom to drivers compared to our competitors,” they said. Ride-sharing companies Ola and Bolt did not respond to a request for comment.