Uber: the end of the road for the gig economy model
The Supreme Court's ruling could have profound implications for other companies
The Supreme Court has dismissed Uber’s appeal against an employment tribunal ruling that its drivers must be classed as workers rather than self-employed contractors. The verdict has been a long time coming and means Uber drivers are entitled by law to a minimum wage and annual leave.
The case was first brought in 2016 by 35 Uber drivers. They argued that Uber exercised significant control over its drivers, including setting fares, imposing contract terms, monitoring trip acceptance rates, a punitive driver ratings system, as well as restricting communication between drivers and passengers.
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The Supreme Court agreed. A key passage in today’s judgement, which was unanimously against Uber, said that Uber drivers were in:
Crucially, the judgement also found that working time is not limited to passenger time in a vehicle, but is accrued whenever an Uber driver is logged into the Uber app. This is significant because Uber’s existing transportation model relies on offloading the business risk of worker ‘downtime’ onto Uber drivers themselves. The ruling means the company will in future have to pay drivers a flat rate at or above the minimum wage, rather than the current piece rate.
I drove for Uber in 2017 while I was researching my book Hired. During the induction process at Uber’s offices in London, I was told that I could not “pick and choose” the jobs I accepted. Uber even laid down rules over what it was acceptable to talk about with passengers in the back of my cab. Politics, religion and sport were out of bounds. In other words, it felt like my passengers were Uber’s customers rather than my own.
Following today’s ruling, it is expected that thousands of Uber drivers will launch a mass action lawsuit against the company which could result in Uber having to pay out eye-watering sums of money in backdated claims for holiday pay and the minimum wage (worker status is a halfway house between self-employment and employee status, and does not entitle someone to sick pay or an unfair dismissal claim). The verdict could also have wide-ranging implications for other companies operating under the ‘gig’ economy model in which workers eschew certain rights for supposed flexibility and autonomy.
But the battle by Uber drivers to win recognition as workers may not be over just yet. Uber is still putting up resistance. Jamie Heywood, Uber’s regional manager for northern and eastern Europe, has emailed those working for the company to say that the ruling “does not apply to drivers who earn on the app today”.
However, as Lord Leggatt says in the judgement, the law will not “accord Uber power to determine for itself whether or not the legislation designed to protect workers will apply to its drivers”.
In other words, for all Uber’s reluctance to accept drivers as workers and not self-employed entrepreneurs, the company’s days operating in London under its current model are probably numbered.
Uber has never made a dime and if it has to pay out ‘eye watering sums of money’ then it may well pull out of the UK or even, sooner or later, give up worldwide. Surely the investors can only take so much.
I don’t have a smartphone and I have never ordered an Uber because I like to walk and cycle. If Uber dies I will not miss it or mourn it. But I suspect a lot of the drivers will.
Not really, their market share will simply go to regular taxi firms who do abide by the rules, so surely this will create lots of extra jobs to offset those lost by Uber?
I don’t think so, not unless they can match uber for cheapness, which I don’t think they will. Especially not with the current situation. This may be a case of be careful what you wish for. But like the first commenter I don’t have a smartphone and have never used Uber, I just get the bus
But people still need to make those journeys, so some demand will still be there. I personally am deeply uncomfortable with having workers living in relative poverty and earning a pittance just to keep costs slightly lower, which is what Ubers business model was. Keep costs down by driving down wages and working conditions to almost illegal levels, undercutting those firms that paid their workers properly.
I’ve never used Uber either, but my daughter uses them a lot.
As soon as prices rise to more comparable rates, she’ll be back on (cheaper) public transport in seconds.
I used Uber all over the world and it was never about cheapness for me. It was because it simply worked, you could almost always get a car with the same app on your phone, and not driven by a local mafia operative. As one Uber driver said to me, “You get better drivers, and I get better customers” .
But I do appreciate that many young people used it because it was cheap and convenient and they felt safer with the drivers. As a result they made more journeys. Journeys that they weren’t making otherwise. Maybe they’ll simply turn to the old taxi cartels as this author supposes, but more probably many will just go back to using unreliable public transport or not making those journeys at all.
Taxis and cabs have been in service for last 100 years before Uber came. Have they been running by cartels as you would like to say.
London had cabs running for the last 40 years, have they all been mafia bosses. Needless to say according to you all cab drivers and taxi drivers are mafia and gang members. Remind you the fact Uber drivers are all those drivers. In fact Uber litterly killed the trade and killed them drivers. It was worse then slave labour. Justice has done, I hope they have to pay eye watering sums to compensate what they done.
Taxi companies paid millions in exorbitant fees to councils. Do you deny this? Now councils are repaying the favour. They are locked in a circle of mutual interest. This is not really about the drivers’ welfare, and it’s certainly not about the customers.
What on Earth are you talking about? No one is forced to work for Uber.
Uber and other similar companies provide a fantastic service for customers.
Progressives always favour expensive and over regulated black cabs. These are driven rather ironically often by people with right wing views (which they are allowed to tell you about!) They cost a fortune and are essentially only used by the well-to-do. With sat nav you don’t really need ‘the knowledge’ either.
The customer service always seems friendlier and better from Uber drivers as well.
But as above, Uber has never made money! A few minutes spent with the back of an envelope, a pen and some ball-park figures of petrol prices, mileage driven, hours worked, and the cost of hiring a Prius with taxi insurance would indicate it’s a mug’s game. I spent eight years as a motorbike courier in its ‘heyday’ and looked at Ubering as a side hustle a decade ago when Uber’s take was less than it is now, and even then the numbers didn’t stack up. Their business model is (was?) to drive their competitors out by undercutting, and then to hoik up their fares massively. (PS I’ve never used them either. I always cycle, tube, or walk now.)
I love that you know so much about the earnings potential of an uber driver although you have never used them. £900 + for a 45 hour week doesnt seen to bad to me. Yes overheads for vehicle insurance fuel etc although still a decent income and total flexibility
Doubt it. Uber will now have to charge more for the same service. If the market won’t pay more, jobs will be lost. These jobs won’t be replaced by jobs with some other firm offering equally cheap cabs yet somehow paying drivers more. They won’t be replaced at all. We’ll be be back to those dodgy illegal cabs that used to hang around night spots at 3am.
Of course there are also black cabs, but for me, a late night black cab home from the City of London is £45 if you can even find one; an Uber is £18. If you live south of the river I don’t know what you’ll do.
No Uber driver ever refused to take me south of the river. Many black cabs have.
The whole gig economy is pretty bad news for workers but in some ways it’s a product of the increasing onerous burden of employing anyone of a normal contract. I left school in 1968. At that time there was little formality in getting a job. Employers could hire and fire at will in most small companies. This meant in practice that you could go for an interview and if the employer thought you fitted their requirements start work the following day. If you failed to meet their expectations you probably wouldn’t last the week. Because of the lack of commitment required on the part of the employer they would take a chance on the most unlikely candidates. Today’s employment situation is entirely different. Employer’s are hesitant to take on people because it’s far more expensive and complicated to get rid of people even if they are hopeless in the job. If employment is to be redefined much of the legislation put in place over the last twenty years will need scraping.
Most companies still have the trial periods whereby if somebody isn’t right for the job they can be let go with minimal hassle. Protections only kick in once people have been employed for a while and proved themselves competent, which in my mind has the balance about right. People shouldn’t be losing their livelihoods on the whims of others.
It’s not just about competency, it’s about business conditions. Anybody grossly incompetent can be fired (eventually) in the UK
No company is assured of long-term survival or even short-term success, yet they eventually have to employ others on “job for life” conditions. (and the UK is relatively liberal with these compared to some EU countries.)
No wonder so many small businesses choose not to employ enough people (or any at all) and try to do it all themselves.
Everybody sees the big corporations and bemoans “the gig economy” (which is rather ironic from journalists freelancing on a platform like UnHerd) but they ignore the thousands of jobs that aren’t created by SMEs due to restrictive employment practices.
The result is sluggish employment prospects for young people in particular and a general transfer of wealth from small companies to very large ones.
Spot on..I added something along those lines higher up. The Guardian, which can always be relied on to fulminate, hand wring and *Why, Oh Why* was (maybe still is) a big fan of making everyone take a break before a year was up…every year, all the time.
That way everyone stayed as *casuals* with very limited and few rights instead of becoming by default, *staff* with all the rights they have.
This stuff is widespread across the media industry, where broadcast TV pass the dirty work of ensuring people *stay* freelance, and not staff, on to production companies.
Many in the media, who go on about Uber, or Facebook or Google use similar working practices..very (very) low fees for written work and photographs, with copyright theft and imposed draconian T&Cs around further use and re-use. So sometimes I do have a wee smile reading journalists piling into the gig economy.
But your point about employing people and all the problems that brings is spot on, and that has generated the perception in businesses that casual contracts beat employment contracts into a cocked hat.
I ran a Mom and Pop digital business with 30 in it at our tops and we found it incredibley difficult to discipline effectively even very poor staff doing very egregious things because of all the Poundshop employment lawyers ready to bash someone along to an industrial tribunal if they feel it can generate a fee.
As it happens we never lost a case but by the end of it all we always had consultants and advisors taking fees and it consumed masses and masses of time and energy.
Of course digital tech disruptors basically all have the same model whether Uber, Deliveroo, Air BnB and on and on, when you boil it down, and they do need controlling for sure.
But I sometimes feel the discussion in this country about *Business* never differentiates enough between small businesses (which is up to 50 people, and even medium businesses, up to 250, and these international giant corporations.
The laws, rules and what have you, brought in by pro forma lefties because *it’s a disgrace* oftehn just leave those guys with their lawyers and lobbyists , beating the system, while it’s small businesses that get hit with the sledgehammer.
It’s really annoying being able to see both sides of an argument. I am reduced to cheering for Uber’s upcoming demise on the basis that George Osborne knew the founders and was a big fan of the idea.
TFL and Sadiq Khan have blocked Uber’s similar competitors and start-ups too.
Uber’s system , which they invested heavily in upfront, solved the supply/demand conundrum that the taxi cartels never wanted to address and created a new space in the market. It allowed otherwise idle private cars and drivers to supplement their income and make use of their vehicles.
The taxi companies had reluctantly started to adopt Uber’s innovations, the better mapping, better communication, better security, customer & driver ID and ratings, the surge pricing to “flatten the curve” etc but it all got too hard and wherever they found a weak or corrupt city admin, preferred to use lawfare instead and pretend it was about justice.
Councils loved it because they were making a mint off incredible taxi licence fees and they wanted that back. Badly.
Some Uber drivers will benefit from these changes, some Uber drivers will have a source of revenue cut off, and customers will probably lose out.
But who cares about customers?
While you was enjoying all the cheap and best service, have you ever questioned yourself why are they so cheap? U think Uber was paying those drivers from their pockets.
My friend it was done on spoiles of drivers suffering.
We were not even allowed to accept tips. My friend how you did not question your self that how could Uber offer £45 fare to £18.
People like me immigrated to UK knowing you will get Justice if you want it. It proved and it has been done in Uber case.
As long as you were free to quit you were being paid fairly. If not, you would quit and find another job. And another person would voluntarily take an Uber job.
… and when your employer told you that you were fired because they had found someone cheaper, you just shrugged and said, well, that’s fair, I was obviously being paid too much, and so you went out and got yourself another job? Or did you say, hang on, you can’t do that, I have rights?
It wasn’t always cheap – often it was more expensive than taxis. (Don’t you understand surge pricing?) Not always cheaper – but it was always better. I didn’t just question myself – I questioned the drivers. And they all preferred working through Uber.
Immigrants aren’t just drivers, they are riders too. Don’t you care about them?
You can get tips – it is on the app. Why didn’t you get another job if you hated the work?
The reason Uber can work cheaper then taxi companies is because of the billions of investment money poring-in. This investment money makes it possible for them to work way under market prices, it does not matter to Uber if they have heavy losses, like 5 billion a year, because they know at one day they will have the whole market to themselves. And then they can charge customers whatever they like..
They get this insane amounts of investment money because investors know that when regular taxi companies are all pushed out of the market by Uber, Uber fairs will go up (because they are the only player on the market) and money will start poring in.
edit: this fragment from Dutch TV show ZML explains Ubers (and other Big Tech) way of working. English subtitles included.
If city governments are really concerned about Uber getting a monopoly, they wouldn’t be blocking competitor start-ups as well. But they are. Because they’re addicted to the anachronistic and exorbitant licence fees, and screw the customer.
“Uber’s system , which they invested heavily in upfront”
No they borrowed heavily up front and coontinue to do so
Reasons to be cheerful…
Uber gives drivers and customers flexibility and an extra option.
As a driver, you don’t have to be employed or work full time. Meaning you can juggle it with 1 or two other jobs and/or hobbies, and you have an extra income stream.
As a customer, it gives you an affordable option for personal or public transport. It is on-demand, unlike public transport, more affordable than taxis, and it is not that much more expensive than using your own transport.
The subsequent effect would be expensive Uber rides, fewer Ubers available (fewer people employed), Uber’s growth capped, and regression to a more expensive and less on-demand form of transport.
Whew ! That was close. Black cab lobby nearly lost out , but their friends in high places came good in the end . Immigrants looking for a start in employment can go look elsewhere. South of the river ? Nah. Sorry , mush.
Uber didn’t do their homework very well did they? As for the taxi industry they are protected by the tax department. Which is not fair either. I believe Employment Laws are made up as they go along. There are so many independent contractor titles and one tax file number. It was totally confusing after trying to sort things out with the tax department. 5 months have gone by since I spoke and wrote a letter to the tax department and the Employment Minister. I smell a rat. I’ll give them another few months before I find a lawyer. As for the Uk Supreme Court great result and to 2016 Uber Drivers!
All laws are made up as we go along, it’s how democracy works. If a law is found to be nit working, or having loopholes or negative consequences then it can be amended or repealed. This is one such instance where Uber found a loophole to disregard their obligations to their employees so it has now been thankfully amended
It’s strange that these wranglings went so far after a City-Sprint cycle courier took similar legal action against her employer only a short time previously. Although in the case of Uber, perhaps there was more at stake (i.e., financial losses) making things drag out.
I am a bit cynical, but wonder if Uber didn’t lobby the right people at the right time. I know that the black cabs are not by any means all owner drivers. A lot are ‘owned’ by big garages, funded, by big money.
A lot of minicab drivers are self-employed, for tax reasons, so won’t get sick pay (maybe statutory sick pay) or paid holidays.
Why is Sadiq Khan being allowed to ‘win’ something. He is usually slated from all sides of the press. The current govt doesn’t like the way he operates. Now they agree with him?
Just doesn’t seem right.
Uber will have last laugh, if they can hang on, when driverless cars get going….
You have just about as much chance of hailing a Unicorn as a self-driving car in your lifetime.
Driverless cars will likely remain dumb for years to come. But haven’t you seen how they’re also dumbing down the roads too and removing drivers’ decisions?
Roundabouts replaced with signalled junctions, 20 mph urban limits, some 50 mph motorway limits, Smart motorways, average speed checks… The list goes on. Is this safetyism or tax payers funding the preparation for dumb road robots?
The convenience of Uber is great. Their predatory practices are not. And the fact that their business model is fatally flawed for both the shareholders of the company and the drivers, is why it does not matter that they go down.
A business should be required to accept both the upside and the downside of being in business. Yes, it’s great to make a profit, but that should never be at the cost of the employee or the taxpayer or the environment. So, businesses that make billions in profit to distribute to the shareholders are praised by the financial press, but if their employees get so under-paid that they rely on benefits or food stamps or food banks just to survive, then they must be forced to change their practices or be closed down altogether.
Uber might work okay as a part-time gig for someone who has another job, but, like being an “independent contractor” to Amazon or one of the delivery companies, if what you’re getting paid does not cover the cost of replacing your vehicle when it wears out, then the contract is unethical and probably unlawful too.
Uber drivers become workers. Prices go up to match. Less work, fewer drivers. Yet the remaining drivers are better off? Wait until they realise that they lose their self-employed status, and need to pay more tax. Who wins? The Treasury. That’s why the gig economy will die, because, ultimately, it’s all about tax.
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