Uber’s “gig economy” contract labor model not legal, U.K. Court rules.

British Court Again Rules Uber Must Give Drivers Benefits. Is Its Contract Labor Model in Trouble?

British Court Again Rules Uber Must Give Drivers Benefits. Is Its Contract Labor Model in Trouble?

Future Tense
The Citizen's Guide to the Future
Nov. 10 2017 1:54 PM

British Court Upholds Ruling That Uber Must Give Drivers Benefits

BRITAINUSBUSINESSLABOURTRANSPORTCOURTUBER
Former Uber drivers James Farrar (L) and Yaseen Aslam (R) argued that the company owed them benefits.

TOLGA AKMEN/AFP/Getty Images

A British employment tribunal, which adjudicates labor disputes, delivered another blow to Uber on Friday by rebuffing the company’s appeal of a 2016 ruling that it must treat drivers as workers rather than contractors.

The original case, from October 2016, involved James Farrar and Yaseen Aslam, two of Uber’s 50,000 drivers in the U.K., who were arguing for worker benefits like holiday pay, paid breaks, and a default minimum wage. The country’s labor system has three main tiers: contractors, workers, and employees. Aslam and Farrar were seeking to be classified as workers, which would give them fewer benefits than employees but more than contractors.

Advertisement

In light of Friday’s ruling, Farrar said, “We have done everything we can, now it is time for the mayor of London, Transport for London and the transport secretary to step up and use their leverage to defend worker rights rather than turn a blind eye to sweatshop conditions.”

Uber apparently plans to appeal this week’s decision as well, so the case could go all the way up to the United Kingdom’s Supreme Court. If the highest court also rules in favor of the drivers’ rights, it could ruin the ride-sharing business’s British branch and would have broader implications for Europe’s growing gig economy. And this isn't the company's only problem in the U.K. Uber also lost its London operating license in September after an examination of its background check practices, though it can continue to conduct business in the city while the decision is under appeal.

Uber’s business model is built around contract labor. By relying on contractors, the company saves up to 30 percent on costs, according to Quartz, which helps it to keep its prices low. Losing this legal battle wouldn’t just cap Uber’s savings in the future; drivers would also be allowed to date their claims from as far back as 2014.

Tom Elvidge, the company’s acting manager in the U.K., justified the employment practices as a measure to give drivers more agency. “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,” he said.

Uber’s contractor-based financial model has been causing the company trouble in other countries as well. New York regulators in October ruled that two former drivers were entitled to unemployment benefits, and another two drivers in Nigeria brought a class-action lawsuit against Uber over the independent contractor designation just this week. Plus, Uber is still dealing with a similar class-action lawsuit, from drivers in California and Massachusetts, that has been playing out for four years now. The company had agreed to pay $100 million to settle the suit in April 2016 to compensate the drivers, who in turn agreed to remain contractors. Yet a judge ruled four months later that the sum was inadequate.

It’s not just Uber that’s facing pressure from its contractors. A Grubhub food delivery person sued the company in 2015 for overtime, expenses, and back wages that he did not receive due to his contractor classification. Lyft is also paying a $27 million settlement to its California drivers for a deal to retain its contractor system, similar to the one that Uber made in 2016.

Uber has of late said it's been trying to be more accommodating to its drivers. Apart from letting drivers work on their own schedules, allowing for Uber to be a source of supplemental income, the company also rolled out new policies in August dictating that drivers cannot be penalized for declining trips and must be notified if the trip will likely take 45 minutes or longer. Other policies regarding arrival times and destinations are also meant to make the “gig” more appealing.

Yet Uber and other gig-economy companies will likely have to keep playing legal whack-a-mole until they change this model, unless the company can somehow convince its contractors that the purported flexibility is worth the dearth of benefits.

Future Tense is a partnership of SlateNew America, and Arizona State University.