Uber’s UK concessions change game for gig economy

Uber’s move to reclassify its UK drivers as workers is a significant victory — if still a partial one — in the running battle to secure more rights for those who earn their living in the gig economy.

Just last month, the ride-hailing company said a ruling by the UK’s Supreme Court, which backed 35 drivers who had challenged their self-employed status, applied only to this small group, arguing it had made significant changes to its business model since the case had been brought.

This week, it said all its UK drivers would from now on receive holiday pay, a workplace pension and a minimum earnings guarantee, and that it was “proud to be making these changes”.

“It is a big concession in principle,” said Nigel Mackay, a partner at law firm Leigh Day, which is representing more than 4,000 Uber drivers in claims for back pay against the company. Uber had framed the UK as an exceptional case, but drivers in many other countries would now be asking why they could not enjoy similar rights, he added.

James Farrar and Yaseen Aslam, the drivers who led the action in the Supreme Court, have not won all they wanted. They said on Wednesday that they would be “back in court soon” to contest Uber’s view that it need only guarantee drivers the minimum wage for time spent assigned to a trip, and not for time spent on the app waiting for requests to come through.

[Uber’s about-face] proves what we’ve said all along — you can have workers’ rights and flexibility

Yet Uber has thrown down the gauntlet to its competitors and the wider gig economy — albeit on its own terms — by showing that it is possible to offer workers basic rights and protections without upending its business model or suffering unduly financially.

Analysts at BTIG estimate Uber’s extra costs in paying for holidays and pensions would “amount to a high single-digit hit to the UK rideshare take-rate”, amounting to a $260m, or 2 percentage point, drag on total revenue.

In a filing with the US Securities and Exchange Commission, the company said the changes in the UK — with paid holiday based on 12.07 per cent of drivers’ earnings, and Uber’s contribution to pensions equivalent to 3 per cent of earnings — did not alter the company’s outlook for 2021.

Alex Marshall, president of the IWGB independent workers’ union, said Uber’s about-face “proves what we’ve said all along — you can have workers’ rights and flexibility”. He added: “This will send shockwaves across the gig economy.”

Lawyers and unions say the Supreme Court ruling, and Uber’s response, will put pressure on other companies who rely on a self-employed workforce to revisit their own practices — with the fast-growing delivery sector likely to face especially close scrutiny.

Mick Rix, national officer at the GMB union, said Amazon’s network of delivery partners, the logistics group DHL and DPD’s franchise model were among the most vulnerable to claims.

Deliveroo, the food delivery company planning an initial public offering in London next month, has so far succeeded in arguing in UK courts that its riders are not workers, because they are able to ask other riders to take on deliveries for them.

Uber argues that this “right of substitution” — which is not possible when carrying passengers, but common in food delivery and other courier businesses — means it does not need to offer worker rights to couriers in its Uber Eats business, who remain self-employed.

But Darren Newman, a consultant in employment law, said the Supreme Court’s ruling suggested that companies would no longer be able to rely on such clauses to avoid their responsibilities, if they were inserted into contracts deliberately in order to get around the law.

DPD and Amazon declined to comment, while DHL did not respond when approached by the FT.

Deliveroo seized on the fact that Uber’s new terms fell short of the Supreme Court’s full edict. “This uncertainty is precisely why we have called for a change to the law to ensure that riders can benefit from the flexibility they want while receiving the benefits they deserve,” Deliveroo said.

Deliveroo suggests in filings related to its planned initial public offering that it faces less regulatory risk in the UK, where it has “defended our model successfully”, than in other European countries such as Italy.

It does allude, however, to a broader threat from the Supreme Court case in its IPO registration document, saying “ongoing success in defending our [independent contractor] model cannot be guaranteed”.

Jitse Groen, chief executive of Just Eat Takeaway.com, which operates the UK’s largest online food ordering service, told the FT last week that he believed his rivals would be “looking at a price hike of 30-50 per cent in labour costs” if they adopted an employment model for their couriers, as Just Eat has begun to in the UK in recent months.

Protracted legal wrangling most likely lies ahead to determine the extent of workers’ rights — including where Uber’s offer is concerned.

One crucial issue is the question of working time. Uber says it could not guarantee drivers the minimum wage for all the time they spent on the app unless it set rigid shifts or cut its workforce drastically — and it would have no way of knowing if drivers were also working with its rivals.

Unions say drivers have to resort to “multi-apping” because Uber hires too many of them and they cannot win enough trips to make a living unless they work through several apps at once.

Lindsay Judge, research director at the Resolution Foundation think-tank, said the ongoing uncertainty around working hours, and other elements of Uber’s offer, showed that “the weakness of our enforcement system puts the onus on drivers to seek clarity through the courts” and that it was crucial for the government to step in and set out fresh labour market rules.

“We are very, very happy that workers at Uber will be protected in this way,” Kwasi Kwarteng, the business secretary, told BBC’s Radio 4’s Today programme on Wednesday. “I’ve always maintained that workers’ rights, workers’ protections should be maintained if not strengthened.”

Yet so far, ministers appear content to rely on the courts. A spokesperson for the government said it continued to “consider options to improve clarity around employment status”, and would bring forward a much-delayed employment bill once parliamentary time allowed.

Additional reporting by Jim Pickard and Josephine Cumbo

Letter in response to this article:

The Uber ruling and one economist’s warning / From Peter Verstage, Onchan, Isle of Man