The gig economy is innovative but has created a hotbed of litigation, particularly over worker classification – namely whether a worker is an independent contractor or an employee. For platform or app-based providers, there is a huge incentive to ensure that their workers are not classified as employees in any sense as that would drive up their costs. It would also question the legitimacy of having "employees" provide the physical assets that the platform relies on to carry out its business.
Countries across the globe, have moved aggressively to rein in app-based companies such as Uber and Lyft that depend on inexpensive and independent labour. If successful, such companies would have to change their business models significantly.
In a landmark decision published on February 19, 2021, the UK Supreme Court unanimously upheld the ruling that drivers working for ride-hailing app giant Uber Technologies Inc. are to be classified as “workers” with all attendant rights under UK employment law. Uber had been defeated at every stage of its appeal against the original Employment Tribunal decision of 2016. This decision is a major setback for Uber but could ultimately affect all gig workers in the UK, regardless of employer.
The UK Supreme Court made its decision based on five issues: (1) Uber controls how much drivers are remunerated for the work they do, as Uber sets fare prices; (2) drivers have no autonomy in respect to the contract or terms of service; (3) drivers are subject to Uber’s control, pursuant to a passenger ratings system, which can result in a driver’s service being discontinued, when delivering services; (4) drivers are subject to penalties if they decline a certain number of ride requests and therefore are subject to monitoring from Uber; and (5) Uber restricts communication between a driver and a passenger and no independent commercial relationship could be formed beyond an individual ride. In short, the reality of how the relationship between Uber and the drivers operated, was vastly different from the way it was presented in the contract and was not consistent with self-employment.
The UK Supreme Court decision means that Uber drivers are entitled to a minimum wage, paid holiday, and other legal protections. The court further ruled that Uber drivers working time is not limited to time spent driving passengers, but also “includes any period when a driver is logged into the app and ready and willing to accept trips.”
Meanwhile in the US, the California Supreme Court, decided unanimously in 2018 that workers drivers were to be considered employees unless they did their work free of a company’s direct control, the work fell outside the usual course of the company’s business, and the workers had independently chosen to go into business for themselves.
The California Supreme Court decision was codified and extended when the state’s lawmakers passed Assembly Bill 5 in 2019. The Bill requires companies to classify ride-hail drivers and other gig-economy workers as “employees”, unless companies can prove that their workers are not directed or controlled by the company during their work time, their work is not the company’s “core” business, and the worker has their own business doing that type of work.
In response to the California law, app-based companies such as Uber, Lyft, DoorDash, and Instacart spent a record $200 million campaigning for an exemption. The exemption, properly known as Proposition 22 was passed on November 4th, 2020 and effectively classified the drivers of app-based transportation and delivery companies as “independent contractors”, rather than “employees”, thereby exempting the app-based companies from providing the full suite of mandated employee benefits.
It is yet to be seen whether the UK position will be adopted in other jurisdictions, or if corporates will push for the adoption of the California model across the globe.
Ms Korir, Corporate lawyer and advocate of the High Court