Supreme Court decides that Uber drivers are workers

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Employment Law News

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Supreme Court decides that Uber drivers are workers

The Supreme Court has upheld a Tribunal’s decision that drivers working for Uber were workers and not self-employed contractors. This decision is important for employers engaging contractors as it highlights the continued willingness of the Courts and Tribunals to scrutinise the way a relationship works in practice, regardless of contractual labels.

What does the law say?

Certain important employment rights are granted to those who qualify as “workers”, even where they do not qualify as “employees”. For example, workers have the right to:

be paid in line with the National Minimum Wage;
to take paid annual leave and have rest breaks;
to be paid statutory sick pay when sick;
be auto enrolled into a pension scheme (if an eligible jobholder);
protection from discrimination;
protection if they blow the whistle; and
protection from unlawful deductions from pay.

A worker is defined as an individual who has entered into, or works under a contract of employment or any other contract where the individual performs personally any work or services for another person who is not a client or customer of that individual’s profession or business undertaking.

In the last few years, there have been a steady stream of cases (often brought against businesses operating in the gig economy) looking at whether individuals held out as self-employed contractors are, in fact, workers. When considering these cases, the Courts and Tribunals have consistently demonstrated a willingness to examine the reality of the relationship despite what the contractual documentation says.

What happened in this case?

As most people will know, Uber operates via a smartphone application (the app) by which customers order taxis and make payments for journeys. Uber’s position is that it is not in the business of providing taxi services, but merely facilitates the provision of such services by linking self-employed taxi drivers with prospective passengers. Uber say they act as the drivers’ agent via the app, but the contract is between the driver and passenger for each journey.

In 2016, a number of Uber drivers brought claims for unlawful deductions from wages (relating to a failure to pay in line with the National Minimum Wage) and for a failure to provide paid annual leave. As stated above, these are rights afforded to workers (and employees). Accordingly, the drivers had to get over the hurdle of showing that they were workers.

The Employment Tribunal held that the drivers were workers, concluding that the contractual documentation did not reflect the reality of the relationship. Rather, Uber had constructed fictions and used “twisted language” which misrepresented the way things really worked. The suggestion that Uber was acting as an agent for 30,000 separate small businesses linked by the app was said to be “faintly ridiculous”.

The reality was the other way around. Uber exercised a high degree of control over their drivers in a number of ways, which meant they could not be viewed as genuinely self-employed. The Tribunal decided that the drivers were working under a worker contract when they were:

in the territory in which they were authorised to work;
signed into the app; and
ready and willing to accept fares.

The Tribunal’s decision was upheld by both the Employment Appeal Tribunal and by a majority of the Court of Appeal. Uber appealed again to the Supreme Court arguing that the Tribunal had been wrong to disregard the clear terms of the contractual documentation. Uber maintained that the drivers were not workers but, if they were, then their working time was limited to when they were driving passengers to their destinations.

What was decided?

The Supreme Court ruled unanimously that the Uber drivers are workers.

The Court said that in the employment context, the first step is to look at the underlying purpose of the relevant employment legislation (in this case, the national minimum wage and working time legislation). The purpose of such laws is to protect individuals in a subordinate position to the organisation which controls their work. The task for the Courts and Tribunals was to determine whether a claimant fell within the definition of “worker” so as to qualify for those rights. To take the contractual documentation at face value (where the facts suggested more than one possible legal classification) would allow the employer to decide whether or not employment legislation applied.

Here, the Court said there was no factual basis for asserting that Uber acted as agents for the drivers. The correct position was that Uber contracted with the passengers and engaged drivers to carry out those bookings. The nature of the relationship between Uber and the drivers had to be inferred from the parties’ conduct.

The Court held the Tribunal had been justified in finding that the drivers were workers. Although the drivers were free to decide when and where they worked, once they were working, they were workers. In reaching this conclusion, the Court highlighted the following five key aspects of the relationship:

Of major importance was the fact that Uber dictated the remuneration paid to the drivers. Uber set the passenger fares (which, in turn, determined the drivers’ pay). The drivers were not permitted to charge higher fares. They were free to charge lower fares, but they had to absorb the full cost of any reduction.

Uber imposed the contractual terms on the drivers. The Court noted that there was “no practical possibility of [the drivers] negotiating different terms”.

Once logged onto the Uber app, the drivers’ freedom to accept fares was constrained by Uber. Uber controlled the passenger information provided to the drivers and also monitored the drivers’ acceptance of fares. Uber penalised drivers for not accepting rides by automatically logging them off the app. The Court said this plainly placed the drivers in a position of subordination to Uber.

Uber exercised significant control over how the drivers delivered their services. It vetted the drivers’ vehicles. It owned and controlled the technology at the heart of the service. It operated a rating system for drivers. Any driver who failed to maintain average ratings was issued with a warning and, ultimately, could have their contract terminated. The Court said this was “a classic form of subordination that is characteristic of employment relationships”.

Uber restricted communications between drivers and passengers and took steps to prevent an ongoing relationship being established, for example, neither had access to the other’s mobile telephone number.

Together, this meant that the taxi service was tightly defined and controlled by Uber. The drivers were subordinate to Uber and had no ability act in an entrepreneurial fashion to improve their earning potential. The only way they could increase their earnings was to work more hours under the rules imposed by Uber.

Having ruled that drivers were workers, the Court also agreed with the Tribunal that their working time was not limited to the time spent driving passengers to their destinations. Instead, it included any period when they were logged onto the app in the territory in which they were authorised to work, and they were ready and willing to work. The Court noted that the existence of a right to refuse work was not fatal to a finding of worker status, provided there was at least an obligation to do some amount of work, which was the case here.

What does this mean for employers?

This decision doesn’t mean that the contractual documentation put in place with contractors will be ignored. It will be a relevant factor, but the conduct of the parties in practice will also be considered. The worker status test will then be applied to those facts. As the Court said “…it is necessary to view the facts realistically and to keep in mind the purpose of the legislation”.

Although this decision will have most impact in the gig economy sector, it would be sensible for all employers who engage self-employed contractors to audit how those relationships operate in practice to assess whether the contractual labels reflect reality. Where the hallmarks of a worker contract are present, the choice is to treat the individual as a worker and comply with applicable employment legislation or adjust the way the relationship works in practice to move it closer to a genuine contractor arrangement.

Uber BV and others v Aslam and others

If you would like to know more please contact Amanda Steadman (amandasteadman@bdbf.co.uk) or your usual BDBF contact.

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Failure to provide regular and effective equality training leaves employers on the hook for harassment claims

Employment Law News

Failure to provide regular and effective equality training leaves employers on the hook for harassment claims

In the recent case of Allay (UK) Ltd v Gehlen, the EAT upheld a decision that staff equality training had become stale after 20 months. The employer’s failure to refresh the training meant it couldn’t rely on the “reasonable steps” defence to a race harassment claim.

What does the law say?

Employers can defend claims that they are vicariously liable for the discriminatory actions of their workers where they have taken “all reasonable steps” to prevent them from doing such actions. A similar defence is available in the whistleblowing sphere, where employers can defend claims that they are vicariously liable for the detrimental actions of their workers where they have taken all reasonable steps to prevent the detrimental treatment.

In the equality sphere, the reasonable steps that employers should take will include:

having well-drafted equal opportunities and anti-harassment and bullying policies in place;
ensuring that all workers are made aware of those policies and understand them;
providing equality training to workers, with additional training for those with management responsibilities; and
dealing with complaints quickly and effectively, including taking appropriate disciplinary action.

What happened in this case?

Mr Gehlen is of Indian origin and began working for Allay (UK) Ltd (Allay) in October 2016. In August 2017, Mr Gehlen complained to a manager that another employee, Mr Pearson, had made racist remarks to him on a regular basis throughout his employment. The manager took no action apart from telling Mr Gehlen to report the matter to HR. It was also the case that some of the racist remarks had been overheard by two other employees, including another manager. Neither had escalated the matter to HR.

Mr Gehlen was dismissed on 15 September 2017 on the grounds of performance. He went on to raise a formal complaint about the harassment. Allay investigated and concluded that Mr Pearson had made the remarks in question. As a result, Mr Pearson was made to undergo equality training, however, it’s not clear whether he was disciplined.

Mr Gehlen went on to bring a claim of harassment in the Employment Tribunal. Allay sought to rely on the reasonable steps defence, pointing to the fact that it had equal opportunities and anti-bullying and harassment policies in place and had trained staff, including Mr Pearson, on these areas in early 2015 (around 20 months before Mr Gehlen had started work). That training contained one slide on harassment and also set out what employees should do if they overheard unacceptable remarks.

The Tribunal rejected Allay’s defence on the basis that the 2015 training had become stale and ceased to be effective. This was demonstrated by the fact that the remarks had been made at all, and also by the fact that the two managers (and the other employee) had failed to react appropriately. All of this was contrary to the training they had received and demonstrated a clear need for it to be refreshed. It would have been a reasonable step to deliver such further training and this had not been done.

Allay appealed to the Employment Appeal Tribunal (EAT), arguing that the statutory defence only required reasonable steps to be taken and the effectiveness of those steps was not relevant.

What was decided?

The EAT rejected Allay’s appeal and upheld the Tribunal’s decision. In doing so, the EAT offered some useful guidance on how the reasonable steps defence works in practice.

The EAT said that Tribunals should begin by looking at the steps that had already been taken. Tribunals should assess how effective those steps were likely to be at the time they were taken. Here, the EAT noted that Tribunal should have made more detailed findings about the effectiveness of Allay’s internal policies and the 2015 training. Despite some obvious flaws, the Tribunal had accepted these as adequate and shifted their focus onto the question of whether the training had ceased to be effective over time. Ultimately, this oversight did not undermine the Tribunal’s reasoning, but employers should expect Tribunals to scrutinise the content of policies and training much more closely in future in order to assess their quality and effectiveness.

When moving on to whether it would have been reasonable to have taken further steps, Tribunals should take into account when the existing steps ceased to be effective, as well as the cost and practicality of taking such further steps. It may also consider the likely effectiveness of any such further steps – although it may still be reasonable to take a further step even if it wouldn’t prevent the discriminatory behaviour.

The EAT made some interesting observations on how training should be assessed:

The length and depth of the training is important: the EAT said that “brief and superficial” training is unlikely to have a substantial effect in preventing harassment or have long lasting consequences. By contrast, “thoughtful and forcefully presented” training is more likely to be effective, and last longer.
When training needs to be refreshed: the EAT said that if it becomes clear that harassment is still occurring and/or that staff didn’t understand the training, the employer will be on notice of the need to take further steps i.e. to improve and refresh the training. However, it conceded that if the training was of a good standard and the employer was unaware of the continuing harassment then the reasonable steps defence might still succeed.

In this case, the fact of the racist remarks and the managers’ failures meant there was sufficient evidence to conclude that the 2015 training was no longer effective. Allay was deemed to have knowledge of the continued harassment (via the two managers) and this should have alerted them to the fact that more training was needed.

What are the learning points for employers?

The fundamental learning point for employers is to make sure that equality and whistleblowing policies and training are of a high quality and updated regularly.

In terms of frequency, we would recommend that policies are updated and circulated to staff each year. Ideally, training should also be rolled out annually, and at any point that it becomes clear that the training has ceased to be effective (e.g. following an incident of harassment). However, the better quality the training, the longer the shelf life, meaning longer training intervals may be appropriate.

As far as the format of training is concerned, the “gold standard” is to provide bespoke, face-to-face training in small groups, either in person or virtually. This allows the training to be tailored to the particular industry, business and type of worker. It also promotes engagement and allows the trainer to check that understanding is secure. Together, this will help demonstrate the effectiveness of the training at the time it was delivered and that it had a longer shelf life.

However, training in this format will not always be feasible, for example, because of cost or the way that staff are organised (although geographical limitations will be less persuasive in the age of Zoom). What other options are available to train staff and check continued understanding? As a minimum, employers should ensure that policies are kept up to date and read by staff on a regular basis, perhaps with a signed acknowledgement from workers confirming that this has been done.

This can be supplemented by more cost-effective online training – either on a bespoke or generic basis. As a starting point, Acas offers free online training on bullying and harassment and equality and diversity. Again, workers should acknowledge that they have viewed such training and their learning should be tested via quizzes with a minimum pass mark. However, additional training is still likely to be needed for managers and anyone with special responsibility for equality or whistleblowing matters, such as members of HR or investigation teams.

If you would like to discuss how BDBF can help you deliver effective equality and whistleblowing training to your staff please contact Amanda Steadman (amandasteadman@bdbf.co.uk) or your usual BDBF contact.