Journal

Why Uber and Pimlico Plumbers have both tried to have their cake and eat it

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A look at the gig economy litigation and what it means for employment law

The so-called gig economy is slowly becoming a traditional means of employment.

With the growth of companies utilising this form of labour (Deliveroo, Uber), and five million people in the United Kingdom currently working in this capacity, the means of work has come under the spotlight of courts and tribunals, as well as having attracted the attention of the Department for Business and the Office for Budget Responsibility.

The gig economy is characterised broadly by individuals getting paid for the ‘gig’ that they carry out on behalf of a certain company. This company’s business utilises technology that facilitates and enables people to dip in and out, performing a task at will. This could be, for instance, delivering a Chinese for Deliveroo or dropping the lads off for Uber. In theory, one could do the former at seven o’clock and the latter at eight.

The utopian vision of the gig economy is that it will enable people to achieve the freedom and opportunity of self-employment. Gig economy participants are classified as ‘independent contractors’. They can accept or reject work at will and their profits are limited only by the hours they put in, since they are not constrained by an hourly wage. For the employers, this flexibility means that they do not fall subject to the onerous requirements of the Employment Rights Act 1996 (ERA).

Comparability of consideration

Briefly, before looking at Her Majesty’s Courts and Tribunals’ interpretation of the relevant employment legislation, and its examination of the nature of the relationship between these companies and their ‘workers’ in reality, it is worth noting something. The gig economy only retains its legitimacy in a non-legal sense so long as the balance in benefits accruing to the ‘worker’ and the company is maintained. As soon as there is disequilibrium between the benefits accruing to either party, the legitimacy of the gig economy in its current form must be rethought.

Aslam and Farrar v Uber

Aslam and Farrar was decided in October 2016 in the Employment Tribunal.

The claim was brought by current and former drivers for Uber ostensibly with a view to gaining classification as ‘workers’ for the purposes of the ERA, the National Minimum Wage Act 1998 (NMWA) and The Working Time Regulations 1998 (WTR) in order to obtain remuneration at the minimum wage and paid leave. Uber denied that the claimants were ‘workers’. They also pleaded jurisdictional defences but these are not worth going into here.

Under section 230(3)(a and b) of the ERA, a ‘worker’ is someone who either works under a contract of employment (not applicable in the instant case) or:

[A]ny other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual.

The key here is that the individual undertakes to perform personally the work required under the contract. Thereafter, of course, the worker accrues their relevant employment rights (paid leave, the minimum wage, freedom from discrimination, etc).

The issue for the tribunal was determining whether the nature of the claimants’ relationship with Uber constituted that of a worker and an employer in reality, notwithstanding the contents of the contract between the parties. Uber classified itself as an “agent” (para 28), acting as a “technology services provider” (36), with the driver constituting a sole trader who provides driving services to riders with whom they have a contract. According to Uber’s terms of service, Uber is merely an intermediary platform. The tribunal, though, looked and will look beyond mere words, and will assess its reflection of reality.

Worker or employee?

Citing Byrne Brothers (Formwork) Ltd v Baird & Others, the tribunal in Aslam and Farrar considered the intention of including ‘worker’ in the legislation as something separate and distinct from an ‘employee’. In order to determine who fell within this category, the tribunal looked to Recorder Underhill QC, who said:

The reason why employees are thought to need such protection is that they are in a subordinate and dependent position vis-à-vis their employers: the purpose of the regulations is to extend protection to workers who are, substantively and economically, in the same position. Thus the essence of the intended distinction must be between, on the one hand, workers whose degree of dependence is essentially the same as that of employees and, on the other hand, contractors who have a sufficiently arm’s length and independent position to be treated as being able to look after themselves in the relevant respects.

As elucidated by Elias J in James v Redcats (Brands Ltd):

…[T]he dominant purpose test is really an attempt to identify the essential nature of the contract. Is it in essence to be located in the field of dependent work relationships, or is it in essence a contract between two independent business undertakings?

Asymmetry of bargaining positions

The fundamental purpose of employee protections fought for by unions and now codified in the ERA, etc, is the redress of the asymmetry in bargaining power between workers and employers. The fact is employers have far deeper pockets than the people working for them — and have access to better lawyers — so will simply engineer contracts that define the working relationship as one thing, when in reality it is something different.

While the tribunal agreed with counsel for the respondents that there was no prohibition against being a ‘dormant’ driver and not logging into the Uber app and that such freedom was contraindicative of an employment/worker relationship, it did consider that: 1) once the app was switched on, 2) the driver was in working ‘territory’, 3) and was willing and able to accept assignments, then a ‘worker’ contract had arisen (85 and 86).

Most interestingly the tribunal — referring to Uber’s complex documentation, which they opined to have contained, “fictions, twisted language and even brand new terminology” — was minded to quote Queen Gertrude (“The lady doth protest too much, methinks” (87)). This highlighted the fact that the tribunal will not be persuaded by grand legal machinations and highfalutin language. The tribunal will not be swayed by the charming implorations of a strong bargaining position.

Self-employed by name…

Paragraph 90 of the judgment in Aslam and Farrar contains reference to one of the most important issues in this area of the gig economy.

The tribunal asserted:

The notion that Uber in London is a mosaic of 30,000 small businesses linked by a common ‘platform’ is to our minds faintly ridiculous.

The tribunal went further and rejected the respondent’s case that Uber assisted drivers to grow their business: “no driver is in a position to do anything of the kind, unless growing their business simply means spending more hours at the wheel.”

In addition, the bench noted that Uber dictated that drivers must accept at least 80% of trip requests (51), that drivers who reject three trips in a row will be forcibly ejected from the app for 10 minutes (52), that drivers are expected to follow the route dictated by the app’s mapping software (54), and that they have no leeway to negotiate and strike a bargain with riders.

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These issues speak directly to the arguments that generally comprise the contemporary punditry and debate surrounding the gig economy outside of law courts. The tribunal’s point belies the insistence of gig economy proponents that participation in it builds opportunity and freedom that one would not otherwise be able to attain. Though the argument is that Uber drivers retain independence over their business and the freedom to expand it, the reality, it seems, is different.

The reality is that an Uber driver, for instance, is just as committed to offer his services to Uber solely, just as as a worker would be, and thereafter his options for expansion or promotion are restricted. His potential advantages — flexibility and growth-room — seem to be non-existent outside of pretty theory.

As the tribunal noted: “Uber runs a transportation business. The drivers provide the skilled labour through which the organisation delivers its services and earns its profits.” Therefore, in insisting that its drivers are independent contractors, Uber are providing de jure flexibility, but receiving de facto personal service (with its attendant financial advantages) and are disproportionately and unfairly gaining benefit through avoiding their responsibilities under English employment legislation.

In addition, and linked to the above point, the Uber drivers were obligated to be available for rides as and when they were ready. This was in pursuance of Uber’s aim of being a convenient ‘taxi’ service offering cars as soon as they were required. As such, drivers spend time idle and waiting, and effectively not earning any money. This is in conjunction with being subject to the impositions upon them (100).

Words v actions

The fact of the matter is that the tribunal did not believe Uber’s documentation and representations as to the position concerning its drivers. It deemed that the situation in reality did not provide enough flexibility to the drivers to enable them to be considered ‘independent contractors’. They wanted to keep their drivers at arm’s length in terms of looking after them, but at the same time exert employer-level control over them (92).

The tribunal found that Uber drivers were ‘working’ for the purposes of the WTR at the very least from the moment a trip began to when it ended and that time spent working may at most include time spent travelling to or waiting for a ride, so long as that travel/wait was undertaken within the driver’s ‘territory’ (121 to 124). In addition, the tribunal deemed that Uber drivers undertake ‘unmeasured work’ for the purposes of the NMWA, meaning that they are to be beneficiaries of the minimum wage.

It must be borne in mind that Uber will appeal the tribunal decision and the specificities of the drivers’ position in law still need determining. This decision is by no means conclusive.

Pimlico Plumbers v Gary Smith

Similarly, Pimlico Plumbers, which was decided earlier this year and is the highest judicial decision in relation to the gig economy so far, was decided in favour of the claimant (the respondent on appeal). This was inter alia because the terms of the contract did not reflect the actual working relationship between the claimant and Pimlico Plumbers.

Indeed, the litany of gig economy litigation appearing from the courts and tribunals can most aptly be summed up thus far as the relevant companies trying to both have their cake and eat it.

The wider picture

While the decisions in Aslam and Farrar and Pimlico Plumbers are indicative of the courts’ views of enterprises that function within the gig economy and which have come to define it, it is worth zooming out to look at the broader picture in order to better determine whether the decision seems to herald a welcome trajectory, or whether it appears misguided.

The tribunal in Aslam and Farrar did concede that it was possible to create a business model in which the drivers were legally self-employed, but that in the instant case Uber had failed to properly encapsulate this business model (97). This was due to the fact that the symmetry in benefits accruing to both parties (or the comparability of their relevant consideration), as mentioned at the start of this piece, was non-existent.

Uber tried to assert too much control over its drivers, negating the perceived flexibility of the role, while at the same time rejecting the legal responsibilities and benefiting financially as a result. Simultaneously, the claimants in either case were subject to the requirements of self-employed individuals, such as the claimant in Pimlico Plumbers having to buy his own equipment (32), while being at the same time subject to worker-level constrictions and limitation of growth.

Indeed the second claimant in Aslam and Farrar told the BBC that his net earnings after expenses in August 2015 amounted to £5.03 per hour. This is of course below the minimum wage and far below the living wage. In a relationship that exhibits all the legal hallmarks of that of a worker and an employer, in which the worker bears the risk but is impeded from recouping the proportionate reward, that is unacceptable. It is a microcosmic example of socialisation of risk/loss, and privatisation of gain.

The difficulty here in terms of the spirit of employment law is that it must seek to facilitate enterprise and entrepreneurship. It must seek not to stifle the potential of the free market and its participants, but it must also protect labour and ensure it is not exploited. While the idea behind the gig economy is sound in theory — it promotes enterprise and affords people the opportunity to control their income, their hours, and to achieve whatever their motivation and their work allows them — the reality of it does not accord with its theoretical aim.

Uber has exploded into a global entity. It has become the status quo where once it was the upsetting insurgent flipping the tables of traditional employment. Its new position as a behemoth brings with it an asymmetry in bargaining power between the company and its drivers. It brings with it an impetus on the part of the company to ensure that the standards for which it is known are maintained, and with that comes a need to seek greater control over the drivers. It also brings with it greater profit margins. As such, it is the right time for the courts to step in and determine where Uber’s business model, the reason for its incredible success, stands in the eyes of English employment protections.

If they do not, it is the natural path of the free market when left to its own devices to abuse and exploit labour. In a post-recession, automation-poised, qualification-saturated economy of constricted choice for workers and near infinite choice for employers, the courts must ensure that labour is not abused as a result of necessity. That is one of the fundamental purposes of employment law: to even out the relationship between employer and employee, renter and owner, worker and boss.

What next for the gig economy?

One hopes that the idea of the gig economy does not die, since it is suitable for a changing, more flexible, more mobile, more global economy. One hopes simply that it is better implemented.

This means that companies that adopt this model draw more fairly the balance between freedom/responsibility for the worker, and abdication of legal obligations/sacrifice of consistent service standards and greater profits for the company.

Companies must accept that if they adopt a ‘gig’ model, they necessarily abandon an element of control, they necessarily empower their ‘workers’, and they necessarily occupy a bargaining position of less power than that of employers. That is the trade-off for companies: fewer overheads, less bureaucracy, less admin, thinner profit margins, less control.

William Richardson is a paralegal. He completed his law with business degree at Brighton University and then a master of laws degree at UCL.

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14 Comments

Anonymous

Did not read…..

SingaporeSwing

Brexit will stop this exploitation.

Anonymous

Good review of recent jurisprudence – thank you!

Anonymous

Another interesting angle is the competition one.

If the Uber drivers, Pimlico plumbers etc are indeed independent undertakings and the platform selling their services is a mere agent then there’s a real risk that the platform amounts to a cartel. This is because the platform effectively fixes the price of independent businesses in place of the competition which should exist between them.

Anonymous

I don’t believe that competition is a concern here, it would more likely fall into a form of franchise.

The law surrounding Cartels is complex but in summary they are formed when groups of companies come together to fix prices, to the disadvantage of the consumer.

By your reckoning every cab-firm would be a cartel as they have very similar ways of operating.

Anonymous

If competition is no concern, why;

https://www.google.co.uk/amp/www.rte.ie/amp/835292/

Anonymous

@ anon 12:13

We are referring to competition law, not general competition.

The article you reference makes no reference to competition law whatsoever, it does however make reference to the fact that Such a ruling would subject the company to stricter rules on licensing, insurance and safety. This would reduce their ability to compete.

The two concepts are very different!

In case you are uncertain, check out this and the other related videos in the series: http://www.youtube.com/watch?v=JO2R4Yort-g

Anonymous

this is a pathetically written article, it hurts to read

Will Richardson

Wow! Thanks, buddy!

Anonymous

unnecessary use of the word ‘thereafter’- pet peeve, sorry pal

Anonymous

Couldn’t most of these arguments be applied to supposedly self-employed barristers, especially junior ones, and their chambers? Fixed fees determined by chambers, no control over what work is accepted, customers interact with the chambers rather than individual barristers…

Anonymous

Indeed, just look at winkelhoff!

Hmmmmmmm

No.

Anonymous

Legal Cheek is such a pile of rubbish.

Make yourself useful and go into liquidation.

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