Uber’s tribunal ruling: The implications for UK sharing economy

Following today’s news that Uber drivers in the UK are now entitled to basic employment rights, we’ve spoken to members of the country’s tech community to find out just how the landmark ruling may affect employees working across the sharing economy.

Whether for or against the decision, here’s what some pundits had to say.

A legal perspective

Hannah Ford, a lawyer at Stevens & Bolton LLP, commented on the news and the negative implications the ruling would have for other technology firms.

“Today’s decision should send shivers down the spines of technology businesses who have failed to factor in ‘worker rights’ costs such as holiday pay, national minimum wage and sick pay.

“UK Employment Tribunals are used to hearing respondents bleat that the Claimant himself sought the freedom of self-employed status, then, when it no longer suited him, flitted to ask for workers’ rights. That sort of ‘cake and eat it’ argument is rarely persuasive. The Tribunal will always seek to determine what the reality of the situation is now, and whether the various tests of worker status have been met.”

Ultimately, however, Ford said other businesses should not discard their current model just yet as Uber would be appealing the decision.

Limited options, additional cost

Sean Nesbitt, partner in the employment team at international law firm Taylor Wessing, also spoke about the ruling and the associated financial costs: “First, it is economically significant to Uber. With 40,000 drivers, statutory holiday pay rights which go with worker status could be as much as £13.88m per annum. That is about 10 times Uber’s after-tax profit of £1.42m. Add statutory auto-enrolment pension contributions at 3% (£3.45m) and there are ongoing annual costs of some £17.33m, not including sick pay. This takes no account of the minimum wage elements or back-pay aspects to the driver’s claim.”

If the judgement was upheld, Nesbitt added, Uber’s options would be limited. The ride-sharing giant could either decide to pass on the cost to drivers by taking its commission above 20%, swallow them or pass them on to consumers.

Additinally, Nesbitt commented on the fact that despite the tribunal’s ruling only directly applying to the 19 claimants in the case, it could potentially affect more than 100,000 UK workers in related industries.

“Uber has a large and growing number of drivers, and there are a growing number of similar cases regarding the status of ‘workers’ from other courier companies,” added the partner.

The impact on growth

Donna Obstfeld, HR specialist and managing director of consultancy firm Dohr, discussed how stringent regulation around employment law was a challenge faced by most small business and how this ruling would force them to re-consider their financial models.

“We are often asked by our clients what alternatives there are to having someone working as an employee, especially for new or small businesses, the thought of having employees and all the implications of employment law is enough to prevent them growing their business. The use of contractors, freelancers and gig workers has made business growth possible,” she said.

Obstfeld went on to say that, as employment law becomes increasingly constraining for businesses, owners will seek new and innovative ways of working. Until it is tested in the courts and deemed to be illegal, they will take their chances and that is what happened in this instance.

“In short, with our clients we apply the duck test: If it quacks like a duck, waddles like a duck and looks like a duck, then it is a DUCK, no matter whether you call it a hen, a bird a chicken or a goose! In this case the courts have decided that Uber has workers who are DUCKS and nothing else,” added Obstfeld.

#Uber

The ruling also resulted in a flurry of activity on Twitter.

@yessi_kbello @TechCityNews Are they employees? Uber is a platform. Are freelancers on Odesk, Cleaners on Hassle employees?

— Karin Nielsen (@GrowYourSaaS) October 28, 2016

Twitter user Paul Bailey also commented on how the ruling may impact companies in the sharing economy and whether it would result in a direct transformation of their business models.