From drivers to workers: The impact of Uber’s ruling on the gig economy

Uber has decided to legally transition its 70,000 UK drivers into ‘workers,’ making them eligible for a minimum hourly wage, holiday pay, and employer pension contributions.

Talking about Uber’s move, the company’s regional general manager for northern and eastern Europe Jamie Heywood said: “This is an important day for drivers in the UK.”

Writing in the Evening Standard, Uber CEO Dara Khosrowshahi explained that the company decided that “the status quo of independent work is simply not good enough.

A growing number of people are choosing this type of work because of the flexibility it provides [but] it is increasingly clear to us that flexibility alone is insufficient and that it should not come at the expense of social protections.”

This U-turn from Uber came a month after the UK supreme court upheld a ruling against the ride-hailing company and its arguments that its drivers were independent self-employed ‘partners’ benefiting from flexible working arrangements.

In addition, the supreme court considered the realities of the working relationship between Uber and its drivers.

It “rejected Uber’s argument that it was simply a technology platform acting as a ‘booking agent’ for drivers by putting them in touch with passengers,” explains Fieldfisher partner and employment lawyer Nick Thorpe.

The court sought to protect vulnerable workers, “finding that the Uber drivers were in a relationship of subordination and dependency to Uber,” he added.

‘Worker’ designation

Unique in UK employment law, the worker designation is a middle ground between freelancers and full employees that is designed for casual or irregular work.

According to the UK Government’s website, a ‘worker’ is eligible for national minimum wage, statutory minimum paid holiday, the right to not work more than 48 hours on average per week.

Workers are not entitled to minimum notice periods, protection against unfair dismissal, time for emergencies, or statutory redundancy pay, which so called ‘employees’ would be.

It is important to note that the benefits offered to Uber drivers as workers are not quite as comprehensive as what the supreme court called for.

Thorpe notes the court ruled that Uber drivers are working from “when they log onto the app and are ready and willing to accept booking”, and therefore this on-stand-by time and when they are actually transporting a user on a trip should all count as paid, working time.

However, the App drivers and courier’s union responded to Uber’s announcement by noting that “Uber committing only to these entitlements to accrue from time of trip acceptance to drop off. This means that Uber drivers will be still short-changed to the tune of 40-50%.”

Although not required by the supreme court, it is interesting to note that Uber has decided that this ‘worker’ designation only applies to their drivers and not to couriers working for their Uber Eats food delivery division.

Uber did not respond to UNLEASH’s requests for comment.

Balancing flexibility with workers’ rights

Although this middle ground worker status is not yet available in the US or the European Union (EU), there are ongoing discussions about updating employment law frameworks to better balance flexible working and social protections. For instance, the EU’s European Commission recently began a consultation into the gig economy.

Khosrowshahi writes that Uber is calling for the US and the EU to amend their employment law that would “guarantee benefits and protection for independent workers without removing the flexibility that makes this type of work so attractive to them in the first place.”

“We think the UK is far ahead of the US when it comes to the ‘worker’ designation, and we’ve been advocating for drivers in the US to be able to maintain their independence while also receiving new benefits,” wrote Julie Wood, a spokesperson for Lyft, another ride-hailing company.

Lyft does not currently operate outside of the US and Canada.

A Deliveroo spokesperson stated: “Deliveroo has always said that we want to offer riders full flexibility and more security.

“This uncertainty is precisely why we have called for a change to the law to ensure that riders can benefit from the flexibility they want while receiving the benefits they deserve.”

Implications for the gig economy

Ultimately, Uber itself acknowledged that this move is likely to have a wider impact on the ride hailing and the broader global gig economy.

Heywood noted in a statement: “Uber is just one part of a larger private-hire industry, so we hope that all other operators will join us in improving the quality of work for these important workers who are an essential part of our everyday lives.”

Thorpe notes that the Uber case will have significant implications not only for Uber, but for other “atypical working arrangements” operating in the flexible, gig economy.

The supreme court has demonstrated its interest in “getting to the specifics” of working relationships between gig workers and their employers.

However, MBO Partners UK business development director Mark Stringer thinks Uber’s move needs to be treated as a specific case; “this case just drives the point home that businesses need to utilize the gig economy in the correct manner with the correct assessment process in place.”

Gig working remains in demand

Stringer also notes that although the classification of workers is a “hot topic,” “we shouldn’t forget that the flexible use of highly skilled resources will continue to be in demand”.

Frankly, the gig economy isn’t going anywhere, despite this ruling.

Flexibility continues to be of benefit to huge swathes of the workforce. As a result, freelance marketplace Voices.com CEO David Ciccarelli notes that he does not believe companies are keen to convert their freelance outsourcing to employees.

Instead, he believes that the future of work is both remote and freelance. This view is backed up by Voices.com’s 2021 annual report, which found that 43% of businesses surveyed were planning to use more freelancers in the next five years, and 24% planned to use the same amount of freelancers.

HR tech expert and Society for Human Resource Management Foundation board member Edie Goldberg agrees:

“Most ride-share drivers and others in the gig economy engage in this work because they want personal control of when and how they work.”

Despite this positive trend, the debate about the legal status and protections of gig workers is far from over. Uber is likely to be back in the courts again as further legal challenges are planned linked with its failure to offer quite what the supreme court ordered.

Also, as Deliveroo gears up for a $9bn IPO, a spotlight is shining on the treatment of its riders, as well as their low wages, following an investigation by the Bureau of Investigative Journalism. Watch this space.