28 Oct 2016

Uber ruling throws a shadow over gig economy

The gig economy could find its economic model unsustainable after a ruling against taxi app Uber.

Prathan Chorruangsak

The 'gig economy' has taken a hit with the news that Uber drivers in the UK have won an employment tribunal case, which ruled they are workers rather than self-employed. The ruling means they are entitled to holiday pay, paid rest breaks and the National Minimum Wage. 

The claim revolved around the level of control exerted over the drivers by Uber. Uber claimed that the drivers were self-employed, choosing when and where they worked. It argued that many of the drivers wanted to be self-employed, so they could be their own boss and work completely flexibly. However, drivers can be suspended for not accepting enough rides or for low passenger ratings following a drive, leading to arguments about the nature of the relationship.'

Uber faced similar claims across the USA and lost a case in California in 2015, leading the company to try to settle numerous other claims across the US earlier in the year. By contrast, the Florida Department of Economic opportunity previously ruled US Uber drivers were independent contractors, meaning the drivers were not eligible for unemployment insurance.

Kathryn Dooks, Employment Partner at Kemp Little LLP, said: 'The outcome of the English employment tribunal case could have a significant impact on the business models of companies like Uber, Deliveroo and other apps which match service providers to customers. For this reason, the decision is certain to be appealed by Uber. In the meantime, Uber can expect a large number of claims from its drivers following this test case and other apps can expect similar claims. The courier firm City Sprint is already facing a hearing on the same point in November. No doubt many such businesses will be reviewing their working practices to see whether they can avoid the implications of the decision. But these attempts may be futile in the longer term as the government has announced an independent review of the law in this area, to be conducted by Tony Blair’s former policy chief, Matthew Taylor, which seems to signal a more interventionist approach.'

Jamie Lester, Partner at leading Lincoln's Inn law firm Hunters incorporating May, May & Merrimans said 'This is a decision which will no doubt be the subject of appeal and potential further appeal, given the huge ramifications to Uber’s current business model which might now be unsustainable.'