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Datum RPO Blog

Employed or self-employed: Uber's legal loss

Posted by Jarrod Mollison on 09 Nov 2016
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Last month, the multi-billion, technology inspired taxi firm lost a landmark employment case that could potentially affect tens of thousands of workers in the nations’ so called ‘gig economy’. Since the establishment of the global, ride-hailing taxi app, Uber’s UK workers were officially classed as self-employed. Why? Arguing that it was a tech firm, rather than a transport firm, Uber suggested that its drivers were working on an irregular basis and therefore were individual contractors offered the flexibility and freedom of working, when and where they want. The workers’ downside – Uber was not obliged to provide the statutory employment rights that full-time workers might expect.

After two Uber drivers raised an employment tribunal, arguing that they did in-fact work as employees for the taxi company rather than for themselves, it became apparent that they weren’t alone. One of the workers mentioned he was under “tremendous pressure” to work long hours and that there were significant “repercussions” if he were to cancel on accepted jobs. He also revealed that, for some months, his average hourly rate was around £5 an hour, significantly under the minimum of £7.20, the legal requirement employers are obliged to pay their employees.

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The end result? A “monumental win” for the GMB Union, the body that backed the workers. So, what does this landmark win mean for Uber and the wider market? Well, Uber will be legally obliged to amend its current contracts and provide its workers with statutory sick pay, holiday pay, pension contribution and all other legal requirements. If ignored or under-maintained, Uber could be at risk of breaching various UK employment laws, including the newly instituted Modern Slavery Act 2015.

Employment experts said that other firms with large self-employed workforces could now face similar action. “This judgment is likely to have massive implications, as we see an increasing number of start-up businesses effectively adopting Uber’s model,” said Tim Goodwin of law firm Winckworth Sherwood. “The effect of this judgment is that those kinds of business may owe a lot more to their workers, such as paid holiday and minimum wage, than they had bargained for.”

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Following this ruling, many organisations in the UK may be at risk of breaching UK employment laws, through unknowingly misclassifying their employees/workers. To ensure that you know the difference between workers (self-employed) and employees, we have created a table that can be used to differentiate between the two:

 

Factor

Self-employed

Employee

Personal service

Will provide own services, but may also sub-contract work to others, or bring in outside assistance.

Only provides his personal services.

Mutuality of obligation

Is free to accepts or turn down work if he desires. The engager is under no obligation to offer any work, or further work.

The employer is obliged to offer work, and the employee is obliged to do as the employer requests.

Right of control

Likely to be in control of most aspects of the work done.

An employer may control "what", "how", "where" and "when" work is done.
However, a highly skilled employee may also exercise "what" and "how" also as the employment demands.

Right of substitution

May sub-contract work, or bring in assistance. Depends on nature of work; an individual may be engaged because of their personal reputation or skill and so no substitute will be acceptable.

It is rare for an employee to have the right to appoint a substitute.

Provision of own equipment

Will normally supply all small tools and bring in or hire in plant.

May sometimes supply own small tools or equipment: employer will provide all plant and machinery.

Financial risk/ablity to profit

Will quote on a job-by-job basis. Is able to make more profit by more efficient working, or may incur loss if overruns on time, or if required to rectify defects in own time.

Paid whatever work is done, benefits from the National Minimum Wage and statutory holiday entitlement. An employee will bear little risk unless exceptionally work directly relates to a bonus or commission scheme. Or, if poor work affects appraisal for promotion or other benefits.

Opportunity to profit

Can profit if work is performed efficiently, or from re-charging and making a profit on materials.

May only profit under a bonus or incentive scheme. However, may benefit from tips, or payments from third parties.

Length of engagement

Generally a fixed-term or short-term contract.

Contract will generally be open ended after probation period (if any).

Part and parcel of the organisation

May become "a fixture" in that his work brings him to the company regularly, but acquires no additional responsibilities or privileges as a result.

Is capable of being promoted, or manages other staff. Part of works pension, or SAYE scheme.

Employee type benefits

Unlikely to be entitled to any type of benefits. May be invited to functions with other external suppliers.

Part of pension scheme, enjoy canteen or sports club facilities, car parking, attends staff functions.

Right to terminate contract

If other party is in breach.

Would normally give notice under specified contract term.

Personal factors

May be engaged because of skills, reputation etc.

Personal factors may be the reason for appointment.

Mutual intention

The intention of the parties should be stated in written contract. This may not be persuasive if in reality the parties behave differently.

If the parties intend the relationship to be one of employment it is difficult for the courts to say otherwise. In most cases the parties will have agreed written terms of employment and the employee will have enforceable rights under employment law.

 

If you have any queries on the matter, or would like to speak to a professional, feel free to contact Datum RPO, or alternatively, request a free audit. 

Topics: Industry Legislation