It would not be at all controversial to claim (As Uber itself does), that Uber is “changing the logistical fabric of cities around the world”. However, a recent employment tribunal ruling is sure to change the logistical fabric of not only their business model, but that of the ‘gig economy’ at large. The gig economy has emerged as a result of technological developments combined with innovative business models, and is characterised by workers using mobile phone applications to identify customers requiring delivery service or practical jobs.
As the tale goes, Uber’s genesis was on a snowy Paris evening in 2008 when Travis Kalanick and Garrett Camp had difficulty hailing a cab. What ensued must surely be the biggest cultural phenomenon to come out of Paris since a certain Jay-Z and Kanye West collaboration. They came up with the ingenious idea to “tap a button, get a ride”. Most of us by now are familiar with the formula: the application allows a customer to request a ride, and sends the nearest Uber driver to the customer’s location. Customers can even see the driver’s picture and vehicle details, and track their arrival on the map. There’s more; Uber prides itself as being “always on, always available”, customers aren’t required to make phone calls, and can request a ride 24/7.
All of those features have contributed to Uber being available in 66 countries and 538 cities worldwide. Uber is worth a reported $66 billion, which is more than Tesco and Barclays combined. As a relatively frequent Uber user, I would attribute Uber’s popularity to its simplicity, ease of access and convenience as opposed to other taxi services. Uber is very customer oriented, affording you an opportunity to rate drivers (and vice versa) removing commonly held negative experiences of dirty cabs, late cars and poor customer service.
That said, Uber’s recent success has not come without its pitfalls, naturally for its competitors. The average number of private hire cars rose 11% between November 2015 to June 2016 to 18,453, compared to 11,259 for black cabs over the same period of time. The mayor of London Sadiq Khan has announced plans to bolster the black cab industry such as giving them access to 20 bus lanes and to quadruple the number of officials enforcing private hire regulation.
From the perspective of customers, there has been a certain stigma attached to Uber drivers, mainly because they are not screened and vetted to the extent that traditional taxi drivers are. There is a freelance nature to their job, and in some cities allegations of sexual assault have been commonplace against Uber drivers.
Uber drivers themselves, on further examination, can be said to get the shorter end of the stick in certain respects. Although Uber has always contended that its drivers are in fact self-employed, it is hard to agree on consideration. They are interviewed and recruited by the company, and Uber puts them through a disciplinary procedure and instructs them on how to do their jobs. Due to the tribunal finding that Uber drivers are not self-employed, Uber and its drivers will no longer be allowed to continue their one-sided dalliance. They are now in viewed by the law as the de facto and de jure employers of the drivers, and must be treated accordingly.
The ruling in Aslam, Farrar and others v Uber Employment Tribunal meant that Uber lost its right to classify its 40,000 UK drivers as self-employed (subject to a pending appeal). This means it is now open to claims to all of the aforementioned drivers, who are now entitled to holiday pay, pensions and the right to be paid the living wage. The reasoning of the tribunal was that the measure of autonomy of a person in the way they do their job is a definitive way of establishing whether they are self-employed. Uber drivers aren’t afforded the opportunity to negotiate with passengers, and “they are offered and accept trips strictly on Uber’s terms”.
The essence of the judgement can be seen in the quip “Uber does not simply sell software; it sells rides”. The judges firmly pull any when dissecting Uber’s arguments of being a technology firm not a transport business. They accused Uber of “resorting in its documentation to fictions, twisted language and even brand new terminology”.
It’s interesting to note the political context in which this tribunal ruling has taken place. The government has been concerned with the growth of the gig economy with regards to lost tax revenues. The autumn statement recently noted the importance of the tax system “keep[ing] pace” with technological advancements, which change the way people live and work. Technological advancements are what drive the gig economy and have changed the orthodox perception of employment in this country, (namely the tradition of people being employed by employers rather than self-employed) especially for the 860,000 people who classify themselves as self-employed since 2010. According to Citizen’s Advice, 460,000 people could be falsely classified as self-employed, costing up to £314 million in lost tax and employer national insurance contributions. Although we have an independent judiciary, it is interesting to note the potential benefits the government could recoup from the increase in tax revenues, at the expense of Uber.
It is important not to overstate the significance of the ruling, however. It is subject to appeal and could potentially go all the way to the Supreme Court, due to the importance of the case and the precedents it could set. There will be no pay-outs to drivers for now, but if the company is eventually forced to accept the ruling, it will have to take steps to redraft contracts with drivers and alter its business model as a whole.
But what does this mean for the rest of the gig economy? Uber is not alone in following this business model; City Sprint and Addison Lee function on a similar basis, connecting customers with workers by the use of an application. Both are also facing action from cycle couriers who seek to be classified as workers, which would entitle them to employment rights, such as holiday pay and pensions.
Furthermore, many small businesses in their infancy have attempted to follow Uber’s model. The consequence of the recent developments is that they will now owe a lot more to their workers than they previously contemplated. This may ultimately hurt innovation in the market.
The ideas that hatched in Paris 8 years ago will have to travel that much further before reaching your smartphones and wallets. This undoubtedly enriches the treasury and employers, but one wonders if perhaps it is the customer that is hit hardest by these developments.