Last reviewed 9 December 2016

In this article, Kathy Daniels, BSc, FCIPD, SFHEA, Employment Law Author and Lecturer, looks at the recent Uber ruling and explores what this tells us about employment status.

The “gig economy” is one of the fastest growing sectors in the UK. It is characterised by short-term contracts and independent workers. Although working as an independent worker is certainly beneficial for some individuals, such as those who do not want to have to commit to regular work, it is not favoured by everyone. The lack of certainty about income and the lack of employment rights are particular areas of concern. This is why the recent ruling about the employment status of taxi drivers working for Uber is so important. Does this signal the start of a change, with more certainty being possible for such individuals?

In the “Uber” case, the employer argued that all of the drivers were self-employed. It noted that they choose when to work, and if they do not log on to the Uber app, which is the way that they signal to Uber that they are available to take on journeys, there is no penalty. Uber argued that this approach to working was not typical of employment.

However, the individuals argued that they were subject to considerable control from Uber. Although they can choose when to work, once they have logged on to the app they must take 80% of journeys that are allocated to them, and they are logged out of the system for 10 minutes if they refuse four journeys in a row. They are paid by Uber, rather than taking a fare from the passenger.

In making its ruling, the employment tribunal decided that it did not make sense to say that there are 30,000–40,000 self-employed individuals working for Uber. It also noted that Uber referred to the drivers as “our drivers” and that it had promoted its business as creating jobs for large number of individuals. The employment tribunal has decided that the Uber drivers are workers.

This ruling is significant because workers have more rights than those who are self-employed (although considerably less rights than employees). For example, workers are entitled to the protection of the Working Time Regulations 1998 which means, among other things, that they are entitled to 28 days’ paid holiday each year. They are also entitled to be paid at least the National Minimum/Living Wage each hour.

The ruling is likely to be appealed because it is a costly ruling for Uber (there are likely to be claims for unpaid annual leave and for underpayment of the National Minimum/Living Wage). In addition, this is a ruling that has sent concerns throughout the “gig economy”. If the Uber individuals are workers, then is it likely that other individuals working in the gig economy are also workers, or even employees? This is already being explored, with individuals from a number of courier firms bringing claims relating to employment status to the employment tribunal.

So, what does the employment tribunal consider when determining employment status? Employment status is defined in the Employment Rights Act 1996, but this is not hugely helpful in determining who an employee might be. So, over the years a number of tests have been developed to determine employment status. Today, the employment tribunal applies two tests — the mutual obligations and the multiple test.

The multiple test asks three questions to determine employment status.

  1. Is the individual under the control of the employer?

  2. Does the individual have to provide work personally?

  3. Are all terms of work consistent with employment?

If the answer to those three questions is “yes” then the individual is seen to be an employee. Of course, it is important to take a holistic view to answering these questions. “Under the control” is a difficult question to answer. All employees are expected to take some personal responsibility for their work, and it is likely that more senior employees will be seen to be less under the control of the employer, and more focused on making their own decisions. In addition, just because there is one term that is inconsistent with employment does not mean that the individual would not be deemed to be an employee at all. What is required is to answer all these questions and then consider what picture they paint of the employment status of the individual.

The mutual obligations test asks whether the employer is obliged to provide work and the individual is obliged to do any work that is offered. This is seen as the irreducible minimum which must be in place for there to be employment status. This is partly why the Uber drivers were not able to argue that they were employees — because there is no obligation on Uber to provide a minimum amount of work and no obligation on them to do a minimum amount of work.

Although these tests help us to identify whether we have an employee, they do not answer the question about a worker. If the tests show that the individual is not an employee, how do we then decide if the individual is a worker or self-employed?

To be self-employed, the individual must be in business on his or her own account and be treating the employer as a customer. There will be other signs that are indicative of this arrangement, such as the individual invoicing for work that is done.

A worker will be someone who is neither an employee nor self-employed, so someone who falls in between the two definitions. Although this is rather vague, and many argue that it is not satisfactory to have such a vague definition, it is an important distinction because of the rights that a worker has. As already noted, the rights extend to working time protection and the National Minimum/Living Wage. It is only the employee who has the right to such things as a statutory redundancy payment or to make an unfair dismissal claim.

When you are taking on people to work in your business, question what working arrangements you want. Ensure that you put in place working arrangements that give you, and the individuals working for you, the appropriate protection.