Does the Uber decision diminish the importance of the employment contract?


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It has never been more important to ensure that your contracts and policies are reviewed and updated, and to reassess what you need and what is now surplus to requirements.

While the pandemic has led to many embracing agile working as an effective solution to the constraints placed on office life, and is likely to have a lasting impact on working practices, it's not the only thing affecting the world of work.

The Uber decision

The Supreme Court's long-awaited decision in the Uber case, where it was held that Uber drivers are "workers" for the purpose of rights under the Employment Rights Act 1996, the Working Time Regulations 1998 and the National Minimum Wage Act 1998, has succeeded in challenging the importance of the written terms of a contract.  Where it may previously have been the defining factor in determining the relationship existing between the parties, this is no longer the case.

Uber argued that it is a technology platform which facilitates the provision of private hire vehicle services.  It claims that these services are provided by the drivers under a contract which is concluded between the driver and the passenger for each individual journey, with Uber acting as agent.  However, the Supreme Court agreed with the Court of Appeal, the Employment Appeal Tribunal, and the Employment Tribunal in concluding that as long as the drivers have turned on the app, are ready and willing to accept fares and are in the territory in which they are authorised to drive they will be considered to be workers.

In determining whether or not the drivers were workers rather than independent contractors (as argued by Uber) the Supreme Court focused on five factors identified at first instance by the Employment Tribunal which justified its conclusion that the drivers were working for and under contracts with Uber.  In analysing the relationship existing between the parties it was relevant that Uber dictates how much the drivers are paid for what they do (by setting the fare which the drivers are not permitted to change), as well as the contract terms (which are imposed by Uber and in which the drivers have no say).  

Uber also constrains the drivers' freedom to choose when to work once logged in to the app by monitoring the driver's rate of acceptance (and cancellation) of trip requests, and imposing what amounts to a penalty if too many trip requests are declined or cancelled by automatically logging the driver off the Uber app for ten minutes, preventing them from working until they are allowed to log back in.  Uber also controls the way in which the service is delivered via use of a rating system which results in warnings, and eventual termination of their relationship with Uber, if their rating does not improve.  Finally Uber restricts the drivers' ability to communicate with passengers, restricting it to the minimum necessary to perform the particular trip. 

In coming to its decision, the Supreme Court emphasised that the determination of "worker" status under the relevant legislation is a question of statutory interpretation, not contractual interpretation, and that the written agreement between the parties should not be the starting point.  In this case the purpose of the legislation was to give protection to vulnerable individuals who are in a subordinate and dependent position in relation to the person or organisation who exercises control over their work.

The decision in Uber reinforces the message that the use of apps and technology to facilitate new ways of working cannot be used to avoid honouring workers' rights.  The past few years have seen a growing number of cases individuals have been found to be workers, not independent contractors, and this trend looks set to continue.

Are contracts a thing of the past?

So are contracts as we know them now redundant?  The Supreme Court did not go that far.  On the facts of the Uber case the Tribunal was entitled to look at the reality of the working arrangements to find that the drivers were not independent contractors.  The degree of control between Uber and the drivers was sufficient to conclude that although the drivers were free to choose when and where they worked, it was the case that, at times when they were working drivers, they were in fact workers for and under contracts with Uber and this was demonstrated by the degree of control exercised by Uber.

In coming to its decision the Supreme Court made it clear that it was not saying that the terms of any written agreement should be ignored.  The conduct of the parties and other evidence can show that the written terms are understood and agreed to be a record of the parties' rights and obligations towards each other.  However, "there is no legal presumption that a contractual document contains the whole of the parties' agreement and no absolute rule that terms set out in a contractual document represent the parties' true agreement just because an individual has signed it".  

What Uber shows us (in addition to the need for more clarity in the definition of employment status first called for in the Taylor Review) is the importance of putting in place agreements that accurately reflect the reality of the working relationship and preserve existing statutory protections.  While contracts are not a thing of the past, they certainly need to be drafted with care to ensure they work effectively.

Keep abreast of change

The world of work is changing fast, due in part to the catalyst of the current pandemic, but also as a result of different modes of work which challenge traditional norms.  While the decision in Uber reinforces that it's not the contract alone which will be looked at in order to define the relationship between the parties, it is important to keep it simple and get it right.

Click here to find more information on the ways in which we can help you make your contracts and policies Future of Work proof.

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