What Uber's defeat in court means for drivers and customers in the long-run

Uber will have to pay drivers minimum wage and provide sick pay

Ride hailing giant Uber has lost its appeal against what employment lawyers and trade unions have been calling a landmark ruling, ordering it to treat its drivers as fully-fledged employees of the company, and not self-employed.

But what does the ruling actually mean and should we, as customers, care?

What does Friday’s ruling actually mean?

In a London court on Friday, Judge Jennifer Eady QC threw out Uber’s arguments against a previous tribunal’s findings that its drivers must be classed as workers and afforded the corresponding rights under UK and EU law.

That means that the California-based company will have to pay drivers a minimum wage in the UK, provide sick pay and holiday pay.

The case was brought by two drivers -- Mr Farrar and Mr Aslam – who won the first round of the tribunal in October 2016, but Uber appealed that decision at the time claiming that it would deprive drivers of the “personal flexibility they value”.

What does the ruling mean for drivers in the long run?

Mareike Mohlmann, an assistant professor of information systems management at Warwick Business School, said that the ruling – if implemented – could change a lot for drivers.

“This decision is likely to result in advantages, some drivers might receive a higher salary once being officially employed by Uber since they might now get compensated for sick leave or holiday pay. It might be easier for them to have a voice when organising in workers' associations, and thus this decision is likely to increase drivers’ work satisfaction,” she says.

But she also says that there could be drawbacks in that it could decrease drivers’ autonomy.

“Currently, Uber drivers are self-employed and work as freelancers. Thus, for instance, they can choose their working hours as they please, or use the car not only for business but also for private purposes,” she explains.

"Due to this flexibility to work whenever it fits into their schedule, many Uber drivers are not driving full-time, but using Uber as a source to generate income in addition to their main job. The decision might limit access to jobs for some of the current Uber drivers, in particular those that work for Uber on a part-time basis, since Uber might hire less employees that are employed in full-time positions in future."

How has Uber reacted?

Uber immediately issued a statement condemning the decision and said that it intends to appeal. It said that there are up to two further potential stages in the appeals process: the Court of Appeal and the Supreme Court.

“Almost all taxi and private hire drivers have been self-employed for decades, long before our app existed. The main reason why drivers use Uber is because they value the freedom to choose if, when and where they drive and so we intend to appeal,” said Tom Elvidge, Uber acting general manager for the UK.

“The tribunal relies on the assertion that drivers are required to take 80 per cent of trips sent to them when logged into the app. As drivers who use Uber know, this has never been the case in the UK.

“Over the last year we have made a number of changes to our app to give drivers even more control. We’ve also invested in things like access to illness and injury cover and we’ll keep introducing changes to make driving with Uber even better,” he said.

The company also pointed out that, more than 50,000 people in the UK drive with Uber and neither of the two people who brought the appeal currently drives on the Uber app.

It said that in 2016, drivers using the Uber app in the UK made average fares, after the company’s service fee, of £15 per hour.

“Even after costs, the average driver took home well over the National Living Wage.”

So what implications does it have for customers? And will Uber become more expensive?

If Uber’s subsequent appeals fail, and the ruling is enacted, it would certainly drive up costs for Uber and it’s not unthinkable that those would be passed on to the customer – though it would take some time to determine just how pricey trips might become.

Carolyn Brown, employment partner at audit, tax and consulting services company RSM said that costs could also be driven up as a consequence of Uber’s exposure to tax and National Insurance Contribution liabilities.

“As it stands, Uber would not be obliged to pay employer NIC in respect of their drivers if they are self-employed. If they are workers though, they may be exposed to a significant NIC liability. There may also be a substantial VAT liability,” she said.

Could the ruling set a precedent for other cases and countries?

Crowley Woodford, employment partner at law firm Ashurst, said that beyond Uber the, said that this case could have implications far beyond Uber itself.

“Uber's business model for its workforce has again been found to be fatally flawed,” he said.

“This decision has re-opened a can of worms which will have a ripple effect on the financial viability of the gig economy in its current form and beyond that into mainstream industries."

Tim Goodwin, associate at law firm Winckworth Sherwood, agrees.

“This is a hugely significant decision for Uber, and also the gig economy more generally,” he said.

“Increasingly, we are seeing that courts and tribunals are reluctant to allow businesses to have their cake and eat it, by exercising enormous control over their workforce whilst also denying them basic rights like paid holiday, sick leave and protection from discrimination,” he added.

Internationally, the ruling if implemented could have consequences too. It could set a precedent for other countries, where the gig economy and worker’s right are also being scrutinised. The UK, however, is one of Uber’s biggest international markets, so any final decision here would likely be particularly noteworthy for the business.

And finally, does this have anything to do with the Uber London licencing ban?

Not directly.

On 22 September Transport for London announced that it was scrapping Uber’s licence to operate in its current form in London. There were several reasons cited for the decision, but most centred around public safety and security – background checks on drivers and Uber's alleged use of secret software known as "greyball", which the company built to avoid regulators.

The process around this particular case also started almost a year before TfL made its decision.

Undoubtedly, though, Friday’s decision is likely to deal a sharp blow to Uber at a time when it’s already bruised.

Uber is battling a slew of legal cases and challenges in several US states and has been forced to quit countries including Denmark and Hungary.

There no doubt that it could have done without Friday's decision.