Uber Loses U.K. Court Fight Over London Business Model

(Bloomberg) --

Uber Technologies Inc. and its London rivals will have to overhaul their business models in the city after losing a bid to challenge part of a landmark ruling which led its drivers to be re-classified as workers.

U.K. judges ruled that the tech firm should enter into a direct contract with passengers when providing car journeys and therefore assume more responsibility for each trip booked on their app. Uber had sought clarity over comments made in a portion of a Supreme Court court ruling given earlier this year. 

Uber and others “will need to amend the basis on which they provide their services,” after the court concluded that “in order to operate lawfully, an operator must undertake a contractual obligation to passengers,” the judges said Monday. They also said London's transport regulator will need to reconsider its current guidance to reflect the ruling.

The ruling shows that the battle over worker rights in the U.K. gig economy didn't end after the nation's top court ruled earlier this year that Uber must treat its drivers as “workers,” giving them access to vacation pay, rest breaks and minimum wage while they're using the app.

The U.K. isn't the only key market where Uber and its rivals like Deliveroo and Bolt Technology OU are grappling over the future of their operating models. The European Union is gearing up to announce proposals that would push for gig workers to be considered employees rather than self-employed and could cost the sector as much as 4.5 billion euros ($5.1 billion) more a year.

Read more: Uber Loses U.K. Ruling on Drivers in Blow to Gig Economy

The labor group that led the Supreme Court case, which forced Uber to reclassify its drivers as workers, said Monday's decision will help prevent Uber and others from dumping risk on its drivers. The ruling will also give better protections for riders.

“If the obligation must be undertaken by the operator, the operator will have a powerful incentive to ensure that the drivers it uses are reliable and, if something does go wrong, a remedy against the operator is likely to be worthwhile,” the judges said in their judgment.

Uber said it will comply with the ruling, but that the judgment applies to every private hire operator in London, not just it. While the ruling directly impacts the U.K. capital, it has implications for other U.K. cities and the guidance each city transport regulator gives private-hire vehicle operators.

“Every private hire operator in London will be impacted by this decision, and should comply with the Supreme Court verdict in full,” said an Uber spokesman. All operators in London will also be required to account for value-added tax going forward, he said.

While Uber has now reclassified all its U.K. drivers as workers and has since formally recognized the GMB labor union, giving drivers increased powers to collectively bargain, others in the industry have been slow to react to the ruling.

Monday's decision “will fundamentally restructure the private hire industry in London,” the App Drivers and Couriers Union said in a statement.

A spokesperson for Transport for London, which remained neutral during the case, said “all operators will need to carefully consider the court's judgment and take steps to ensure that they comply with it, including considering whether any changes to their way of working are required.”

©2021 Bloomberg L.P.