Elaine McIlroy: Uber issues are tip of employment iceberg

Elaine McIlroy, partner at Weightmans (Scotland) LLP

Considerably less attention has been paid to the significant problems awaiting Uber Technologies, the American creator and operator of the app which effectively turns any motorist with a decent car and no criminal record into a taxi driver to be summoned by a few clicks on a smartphone.

Very little publicity has been given here to a huge class action suit that has been taken against Uber by a large group of individuals in California – with a similar action also under way in Boston.

The California case is going to trial by jury next June, central to which is the issue of whether a driver who works for Uber is an employee or an independent freelance contractor. It follows a decision by the California Labor Commission that an Uber driver is an employee and entitled to expenses and to keep tips.

The state of Oregon has also issued an advisory opinion that Uber drivers are employees. Those two states’ decisions alone have effectively put Uber’s modus operandi on the line.

Uber is challenging all these findings as the implications for the company are huge – it has around 150,000 drivers in California alone, and having to pay minimum wage, reimburse petrol and other expenses and allow meal breaks would totally alter its business model, at the very least.

Not just Uber would suffer – the process of starting new technology companies with no employees and only contracting individuals has become known as “uberification” and is becoming widespread in the US in particular. In this so-called “gig economy”, a whole host of “uberified” internet companies such as Airbnb, Etsy and Taskrabbit might have to start looking over their shoulders should Uber lose its cases.

Uber operates in more than 300 cities in 50-plus countries and a recent estimate of its worth was in the tens of billions of dollars. It therefore has deep pockets and is prepared for the legal fights it will face in many countries, especially if it loses the case in its own home state of California.

Although the laws in the UK are different from the US, some of the underlying principles are similar. For example, Uber’s control of its drivers was relevant in the US and it would be a relevant factor for the UK courts if a similar case was raised here. The extent to which Uber controls when, where and how the work is done would be a relevant indication of “employee-type” control in the UK. Uber’s model will undoubtedly be tested in the UK too.

It is self-evident in British employment law that employees are afforded the most protections, and self-employed individuals have the least. “Workers” – where there is an element of personal service needed – fit somewhere in the middle and have some employment law rights such as the right to paid holidays.

The GMB claims that some of Uber’s drivers in the UK are working more than the European directive permitted hours, that some are not receiving the national minimum wage – soon to be the living wage – and are not assured of annual leave or rest breaks which, says the union, poses a risk to all road users.

There are also some cases of drivers who have been taken off Uber’s list after complaining about wages and working conditions – should the company be found to be in breach of UK employment law, would they be eligible for compensation?

The issue which might just swing the day is taxation – can any government afford to allow an internet company to arrive with a business model in which their drivers and not the company itself are responsible for their tax and national insurance?

Given the long history of cases over employment status, Uber’s business model will undoubtedly end up in the courts here and a long battle will ensue, possibly all the way to the Supreme Court because of the enormity of what is at stake.

In some ways the employment law issue in the UK is the tip of the legal iceberg for Uber, but one thing is certain – given the interest in Uber which has been stirred up, we can be assured its court cases will receive plenty publicity.

• Elaine McIlroy is a partner specialising in employment law at Weightmans (Scotland) LLP