What we learned from the UK case rendering Uber drivers employees

The recent United Kingdom Supreme Court ruling that Uber drivers are employees, and not entrepreneurs or independent contractors, is noteworthy for many reasons. One is that the underlying Employment Tribunal judgment that it affirmed provides a deep dive into the realities of Uber driving that obliterates the many myths Uber tells about its employment arrangements—and does so in a joyful, humorous way. It is a must read.

A second reason is that the ruling points to the need for two critical items that Tanya Goldman and David Weil proposed to combat misclassification of workers as independent contractors. First, judging whether a worker is an employee or not should not be limited to the issue of who “controls” the work, an analysis that is too easily manipulated in order to get a wrong result. Rather, one should include an analysis of whether the worker has a true opportunity to be an entrepreneur—actually build a business and not just the limited freedom of choosing their hours and work location.

In addition, Uber’s response to the ruling was—predictably—that it has already changed its terms, so the ruling no longer applies. But with these changes, drivers are still denied employment status. As long as the employer-determined status quo remains—and until endless court cases and appeals are exhausted—then the workers will never really be able to secure their rights through court challenges. To change this, Goldman and Weil propose “there should be a presumption of an employment relationship the putative employer must rebut.” Let the employer prove someone is a contractor, and until the employer has done so the worker has full employment rights (right to a union, to be paid minimum wage, etc.) and access to social insurance (unemployment insurance, workers’ compensation, paid sick days, etc.).

The UK ruling finds, “Drivers are in a position of subordination and dependency in relation to Uber such that they have little or no ability to improve their economic position through professional or entrepreneurial skill…In practice, the only way in which they can increase their earnings is by working longer hours while constantly meeting Uber’s measures of performance.”

This ruling is in a string of others finding Uber drivers are employees, such as in France and in a number of U.S. states—New York, Pennsylvania, and New Jersey.

One incisive quote from the Employment Tribunal refutes the notion that Uber drivers can “grow” their business:

The notion that Uber is a mosaic of small businesses linked by a common “platform” is to our minds faintly ridiculous. In each case, the “business” consists of a man with a car seeking to make a living by driving it. These are very strange businesses because it is not possible to “grow” their businesses except if growing one’s business simply means spending more hours at the wheel.

The Tribunal penetrates Uber’s fog of rhetoric and misdirection by breaking down the realities. It answers the question: Does a driver have a contract with the customer as if running an enterprise?

The logic of Uber’s case becomes all the more difficult as it is developed. For Uber not to be considered an employer it is essential to believe that the driver has a contract with the passenger. Uber’s case, therefore, is that the driver enters into a binding agreement with a person (the rider) whose identity he does not know (and will never know) and who does not know and will never know his identity, to undertake a journey to a destination not told to him until the journey begins, by a route prescribed by a stranger (Uber) to the contract (route must be efficient as per GPS according to Uber as that will set the mileage for fare if passenger complains) from which he is not free to depart (at least not without risk), for a fee which (a) is set by a stranger (Uber) not the driver, and (b) is not known by the passenger (who is only told the total to be paid), (c) is calculated by a stranger (Uber, as a percentage of the total sum) and (d) is paid to the stranger (Uber).… Not surprisingly, Uber does not suggest that in practice drivers and passengers agree to terms. Of course they do not since (apart from any other reason) by the time any driver meets a passenger the deal has already been struck (between Uber and the passenger)…. For all of these reasons, one can only conclude that the supposed driver/passenger contract is a pure fiction which bears no relation to the real dealings and relationships between the parties.

The findings indicate that an Uber driver cannot build a customer base or increase revenues for their “business” since a driver:

  1. Cannot grow a customer base since drivers are prohibited from collecting contact information of riders;
  2. Cannot independently market one’s services since anyone contacting Uber cannot request a particular driver;
  3. Cannot take requests for riders except through Uber; and
  4. Cannot assign a rider to an associated driver using another car.

After looking at these criteria, the UK Supreme Court concluded Uber controls the work:

First,…it is Uber that sets the fare and drivers are not permitted to charge more than the fare calculated by the Uber app…. Second, the contract terms on which drivers perform their services are imposed by Uber and drivers have no say in them. Third, …the driver’s choice about whether to accept requests for rides is constrained by Uber…by monitoring the driver’s rate of acceptance (and cancellation) of trip requests and imposing…a penalty if too many trip requests are declined or cancelled. Fourth, Uber also exercises significant control over the way in which drivers deliver their services…the use of a ratings system…. A fifth significant factor is that Uber restricts communications between passenger and driver to the minimum necessary to perform the particular trip and takes active steps to prevent drivers from establishing any relationship with a passenger capable of extending beyond an individual ride.

Therefore, the court concluded, drivers “have little or no ability to improve their economic position through professional or entrepreneurial skill. In practice the only way in which they can increase their earnings is by working longer hours while constantly meeting Uber’s measures of performance.”

Anyone reading the UK judgment would then find it laughable to conclude, as the U.S. National Labor Relations Board Trump-appointed General Counsel Peter Robb did, that Uber drivers are independent contractors. (The recently fired Robb concluded that Uber drivers have significant entrepreneurial opportunity by virtue of their “near complete control of their cars and work schedules” and their freedom to “choose log-in locations and to work for competitors.”) As we wrote in our 2019 report, Uber Drivers Are Not Entrepreneurs, “a full rendering of the realities of driving for Uber (or the competing on-demand transportation service company Lyft) eliminates any commonsense understanding of such work as self-employment or as running an independent business.”

This case demonstrates, however, how difficult it is to hold a willful bully such as Uber accountable. The UK case started with a hearing in December 2015, the initial ruling by the Employment Tribunal was in October 2016, and the case was finally resolved by the UK Supreme Court in February 2021. During the five years of litigation, Uber was able to maintain its system, which relies on misclassifying drivers as contractors rather than being employees with rights, protections, and access to social insurance systems.

Even more problematic is that the court ruling apparently settles nothing. As reported in The Guardian,

Uber’s general manager for northern and eastern Europe, Jamie Heywood, said that as a result of the court’s decision “a small number of drivers from 2016 can be classified as workers, but this judgment does not apply to drivers who earn on the app today.”

He said Uber had made significant changes to its business in recent years, including giving drivers more control over their earnings and bringing in new protections including free insurance in case of sickness or injury.

Thus, Uber maintains that it can readily continue on its merry path simply claiming it has a different system now and then force drivers to go through the whole litigation process again. This echoes what Uber did after the passage of California’s AB5 legislation, which established criteria for employee classification that overwhelmingly indicated drivers are to be considered employees. Uber’s response was to say that the legislation did not cover its operations (claiming to be a technology platform, not a transportation service) and, for good stead, tweaked its system to provide drivers slightly more control. The bottom line was that drivers did not benefit from the new law and the state was forced to challenge Uber in court. Of course, Uber (and other digital platform companies) spent $184 million to pass Proposition 22, which nullified the legislation at its core, allowing companies like Uber to continue misclassifying their workers as independent contractors.

The bottom line is that in order to hold accountable companies that are willing to pursue misclassification schemes, we need legislation that incorporates a strong criteria for determining whether someone is an independent contractor and the Goldman-Weil proposal that “there should be a presumption of an employment relationship the putative employer must rebut.”

This alters the default status: Workers are provided the status of a W-2 (employee) relationship unless the employer can prove otherwise. If there is litigation, then the workers enjoy W-2 employee protections and rights and the legal cat-and-mouse game that willful misclassifying bullies play will not work.

As Goldman and Weil say, “A rebuttable presumption will help re-balance the power dynamics between workers and employers by helping them access workplace protections and rightfully place the burden of proof on the only entity—or entities—in the fissured workplace who might have access to the necessary evidence to establish the existence or lack of an employment relationship.”