U.K. Employment Appellate Tribunal Rules On Employment Status Of Uber Drivers

In October last year, the UK Employment Tribunal decided an important case concerning the employment status of Uber drivers in the City of London. It held that Uber drivers were “workers” within the meaning of Section 230(3)(b) of the UK Employment Rights Act of 1996. This finding was important, because the exact status of Uber drivers has been a matter of legal dispute in multiple jurisdictions, including an ongoing litigation before the Delhi High Court. Uber has argued that its drivers are independent entrepreneurs, and that it is merely a platform designed to facilitate them in finding customers. Consequently, it has no obligations towards the drivers under labour law (which regulates the relationship between employers and workers).

Drivers have argued, on the other hand, that they are, effectively, working for Uber as its employees, and that consequently, Uber is liable to comply with various obligations under statutory labour regimes (which could extend to obligations of minimum wages, overtime pay, no arbitrary firing, and so on). The broader issue, of course, pertains to the interface between the “gig” or “sharing” economy, and the labour rights. The UK Employment Tribunal's decision was important in that it brought the gig economy within the ambit of the labour law regime.

Uber appealed the decision to the Employment Appeal Tribunal. In a judgment delivered earlier this month, Judge Eady QC dismissed the appeal and upheld the findings of the Employment Tribunal.

The Employment Tribunal's judgment had rested upon the following prongs:

• first, that in the domain of employment law, the inequality of bargaining power between the parties required a Tribunal to go beyond the express, documentary terms of the relationship, and examine the actual circumstances; and
• secondly, the actuality of the equation between Uber and its drivers demonstrated a level of control exercised by the former that was incompatible with a simple agency relationship between the parties.

For example, Uber interviewed and recruited drivers, Uber controlled key information with respect to passenger details, which it did not share with the drivers, drivers had minimal control over the route, minimal or no control over the fares, Uber retained the power to “log them off” its platform if their ratings fell below a certain grade, and that Uber would frequently issue “advice” or “recommendations” to drivers about how to conduct themselves while offering rides and using the platform (see para 91 for a summary of the findings). Consequently, it held:

In its arguments before the Appeal Tribunal, the core of Uber's case was that the Employment Tribunal had ignored the express terms of the contractual relationship between Uber and its drivers, and had impermissibly gone beyond the terms of the documentation to examine the “reality of the relationship”: “the written agreements made clear that the drivers provided transportation services to passengers; Uber was simply the agent.” (paragraph 83) Uber also contested the Tribunal's factual findings, arguing that there was no “obligation” on drivers to accept trips, and that drivers were at perfect liberty to accept work from other platforms even while they were on the Uber platform (paragraph 85).

Summing up what was at issue, Eady QC began her analysis by observing that:

“he question at the heart of the current appeal is whether there was any contract between the drivers and ULL [i.e., Uber] and, if so, whether that was a contract whereby the drivers provided services to ULL or whether ULL provided a service (as agent) to the drivers as and when they undertook driving services for passengers.”

Eady QC then proceeded to examine the first issue: to what extent was the written documentation between Uber drivers and Uber – where the drivers acknowledged that Uber was acting as their “agent” – dispositive of the issue? While the default position in contract law was that “implied terms” could not be read into contracts that were otherwise clear, she observed that – based on precedent – significantly different considerations had to be applied in the domain of “employment contracts” (as opposed to normal commercial contracts). This was because, as a structural issue, the employment relationship was characterised – if not defined – by an inequality of bargaining power between the employer and the worker. Furthermore, “recognition of the imbalance of power between the parties in the employment context has informed the introduction of the statutory rights (such as minimum wage and working time protections) that the Claimants seek to exercise in this case…” (paragraph 98).

The crucial point to note here is, of course, that inequality of bargaining power can exist outside employment relationships as well.

In fact, Uber relied upon a recent UK Supreme Court decision, which had held that inequality in bargaining power was an explanation for the existence of one-sided terms in a contract; however, it was not a reason from departing from those terms. The crucial insight of Eady QC (although it is not expressed in so many words), however, was that in employment relationships, this inequality was structural, or institutional, and for that reason, it was just and fair to shape one's interpretive approach to employment contracts keeping in mind this reality.

Within this framework, Eady QC then observed:

“In determining that question in the employment context, it will be relevant to consider the nature of the obligations between the parties, but the absence of a general obligation to work cannot be fatal to those cases where it is accepted that there are gaps between particular engagements or assignments (see per Elias J (as he then was) in James v Redcats, at paragraph 82, distinguishing Mingeley v Pennock [2004] ICR 727 CA). Other factors that may be helpful are likely to include the degree of integration into the business undertaken by another (see Hospital Medical Group Ltd v Westwood [2013] ICR 415 CA, in particular per Maurice Kay LJ at paragraph 19) and the degree of true independence in the provision of the service (see Allonby v Accrington and Rossendale College C-256/01, [2004] ICR 1328 ECJ at paragraph 71). Seeking to provide any more specific definition to the statutory test would, however, be futile: the legislative language allows for the flexibility required in this field and respect has to be given to the nuanced assessment carried out by an ET at first instance.” (paragraph 102)

[Readers will note that the integration and independence tests have often been used by the Indian Supreme Court in determining whether or not an employment relationship exists.]

Or, in other words, “the issue at the heart of the appeal can be simply put: when the drivers are working, who are they working for?” (paragraph 103)

Reviewing the findings of the Employment Tribunal (which, under principles of review, were entitled to a great degree of deference), Eady QC noted that the Tribunal's assessment that there was no “agency” relationship between Uber and “independent entrepreneurs” (the drivers) rested upon the fact that “the drivers could not grow their “businesses”, they had no ability to negotiate terms with passengers (save to agree a fare reduction) and had to accept work on Uber's terms.” (paragraph 107) In response, Uber argued that neither one-sided bargains, nor the existence of control, were necessarily incompatible with the agency relationship. Disagreeing, Eady QC held that:

“[The Tribunal] rejected that case because it found the drivers were integratedinto the Uber business of providing transportation services, marketed as such (paragraphs 87 to 89), and because it found the arrangements inconsistent with the drivers acting as separate businesses on their own account, given that they were excluded from establishing a business relationship with passengers (drivers could neither obtain passengers' contact details nor provide their own), worked on the understanding that Uber would indemnify them for bad debts and were subjected to various controls by ULL (paragraphs 90 to 92). Having found that Uber drivers did not operate businesses on their own account and, as such, enter into contracts with passengers, the ET was entitled to reject the label of agency and the characterisation of the relationship in the written documentation.” (paragraph 109)

What seemed to specifically grate with Eady QC about Uber's claim to having established an agency relationship was the fact that “the purported ‘principal' [i.e., the driver] is prevented from building up a business relationship with the end user of the service, [for this reason] an ET is entitled to question whether that is the right way to characterise the relationship.” (paragraph 110) Similarly, “where control lies can be important in the employment field, not least as it can found vicarious liability on the part of the putative employer. Again, the ET was not bound to start from the assumption that this was a relationship of agent/principal; it was entitled to look at all factors to determine whether this was a case in which the Claimants as Uber drivers were entering into contracts with passengers as part of their own business undertakings. Seeing that they were subjected to control on the part of ULL was an indication that they were not.” (paragraph 111)

Uber then objected that there was no “obligation” on drivers to accept trips (part of its arguments pertained to a factual contest on the question of whether drivers who accepted less than 80 percent of their trips were subjected to disciplinary measures – Uber argued that this was taken from its US terms and conditions). To this, Eady QC replied that while there was no “specific” obligation, nor were drivers entirely at liberty to reject ride requests:

“The difficulty in deconstructing the ET's reasoning in this way is that the overall sense of the findings is lost. An ET is entitled to expect its Judgment to be read as a whole. Doing so, it is apparent that the finding that there was no absolute requirement to accept a trip was nuanced by the finding that a driver's account status would be lost if there was a failure to accept at least 80% of trips (ET paragraph 51). Uber objects that paragraph 51 cannot constitute a finding of fact by the ET and says the warning has been taken out of its (US) context. That presents a difficulty in that there is no specific challenge to paragraph 51 in the Notice of Appeal and the expectation there recorded has been relied on by the Claimants in oral argument before me. It would, moreover seem consistent with the ET's finding that the “Welcome Packet” given to drivers as part of the onboarding process informed them (as part of “WHAT UBER LOOKS FOR”) that “Going on-duty means you are willing and able to accept trip requests” (ET paragraph 48). Similarly, while the ET did not find a driver was unable to cancel a job once accepted, it did record the warning given to those who did – that (absent good cause) this amounted to a breach of the agreement between driver and Uber (ET paragraph 53). Adopting a ‘whole Judgment' approach to the reasoning, I do not see its findings as inconsistent and Uber has not met the high burden of showing that they were perverse.” (paragraph 115)

This finding also helped Eady QC to deal with Uber's contention that during the time they were not on a trip, drivers could not be said to be “working for” Uber, given that they were equally free to accept rides from other platforms that they might have signed up for. For this reason:

“There might be no requirement for a driver to stay in the territory or have the app switched on (in either event ULL will not offer them trips), but it cannot be said that no obligation arises at those times when they do. It is that obligation the ET characterised as “being available” (or, as Uber's onboarding “Welcome Packet” puts it: “Going on-duty”), an obligation it found essential to Uber's business.” (paragraph 121) Eady QC did not, however, that this would have to be decided on a case-to-case basis, because “if, however, it is genuinely the case that drivers are able to also hold themselves out as at the disposal of other PHV operators when waiting for a trip, the same analysis would not apply.” (paragraph 126)

The appeal, consequently, was dismissed.

A reading of Eady QC's judgment demonstrates that there were three elements that lay at the heart of her finding that Uber drivers were its “workers”, and not independent entrepreneurs using Uber as an agent to facilitate their personal cab business.

There were independence, integration, and control, assessed within a general framework that understood that the inequality of economic power between the parties. On the facts, both the Employment Tribunal and Eady QC found that Uber drivers were not, in any genuine way, working “independently”; that they were sufficiently integrated into Uber's structure and business model; and that Uber exercised a significant degree of control over them (the individual components of these three elements have been discussed above). For this reason, the agency relationship was a mischaracterisation.

Eady QC's assessment speaks directly to the ongoing political debate over the sharing economy. Proponents of the sharing economy argue that it is a tool of empowerment; services like Uber are platforms that facilitate individual entrepreneurs to run their businesses by effectively making the activity of finding consumers a costless one. The sharing economy, therefore, promotes autonomy, individual choice, and decision-making, and for precisely this reason, it would be perverse to bring it within the domain of labour law, which is predicated on a formal, structured and hierarchical relationship between employers and employees – and designed to obviate the ill-effects of that relationship.

Critics of the sharing economy, however, argue that platforms constitute hierarchical relationships of their own; and it is precisely because, in reality, they act to entrench corporate control and diminish individual autonomy or choice, that they must be brought within the labour law regime, with its attendant protections.

The detailed and careful analyses of both the Employment Tribunal and Eady QC support (at least to an extent), the critics of the sharing economy, given that they explicitly deal with the issues of independence, integration, and control. For this reason, they are important judicial interventions into the ongoing debate.

To what extent will Eady QC's judgment be relevant for India? To start with, India does not have an equivalent of Section 230(3)(b), which represents a legislative halfway house between a “full employment relationship”, and independent contractors. That said, however, Indian courts have regularly used principles of independence and control to determine whether an employment relationship exists (see the summary of cases here). To that extent, Eady QC's judgment will be an important shot in the arm for Indian labour lawyers seeking to bring the gig economy into the labour law regime.

This article was first published on The Public Sphere.

Gautam Bhatia practices law in Delhi, and is the author of ‘Offend, Shock, and Disturb'. He blogs about the Indian Constitution at indconlawphil.wordpress.com.

The views expressed here are those of the author's and do not necessarily represent the views of BloombergQuint or its editorial team.