The EAT rejected an appeal by the taxi-hailing platform, which has argued that it is a technology platform rather than a provider of transport services and that its drivers are self-employed contractors able to use the Uber smartphone app to offer their services to passengers.
Employment law expert Stuart Neilson of Pinsent Masons, the law firm behind Out-Law.com, said that the decision would not be a surprise to most employment lawyers and commentators.
"The EAT has supported the approach that the employment tribunal took, and in particular has held that it is permissible to go behind the contractual documentation – which set up the arrangement as one of self-employment – to look at the reality of the situation," he said.
"It looks like Uber may appeal this decision to the Supreme Court where another case, involving Pimlico Plumbers, is due to be heard. The Pimlico Plumbers case also deals with those working in the 'gig economy', and it looks like we may get a final answer on the status of these individuals. The likelihood, however, is that both the plumbers and the Uber drivers will be found to be 'workers' and thus entitled to National Minimum Wage and paid holidays," he said.
"What does appear to be clear is that the existing law suggests that those working in the so called 'gig economy' are likely to be given some minimal rights as workers where they are offered work on an ad hoc basis through some form of IT platform or app – particularly where the provider wants to have control over the branding of the service and the quality of that service," he said..
Uber operates by providing an app to registered customers through which they can book a taxi. It then allocates a driver to the customer from the pool of available drivers who are logged into the system. The app calculates a route for the driver then, once the journey is completed, calculates the fare. The customer pays Uber by credit or debit card. Cars used belong to the driver, who is paid weekly by Uber less a 'service fee' of 25%.
The documentation between Uber and its drivers describes the latter as 'partners' or 'independent contractors', and requires them to fund their own private hire licences and expenses and to treat themselves as self-employed for tax purposes. In its ruling of October 2016, the employment tribunal found that the terms of this documentation "did not correspond with the reality of [Uber's] relationship with the drivers", meaning that it was free to disregard them. Rather, the drivers had the status of workers, based on the nature of the relationship, it ruled.
Her Honour Judge Eady, sitting as sole EAT judge, said that the employment tribunal was entitled to come to the conclusions that it did.
"The [employment tribunal] was not bound by the label used by the parties … [it] was concerned to discover the true nature of the relationships involved. Its findings led it to conclude that the reality of the relationship between [Uber] and Uber drivers was not one of agent and principal; specifically, it rejected the argument that the drivers were the principals in separate contracts with passengers as and when they agreed to take a trip," she said.
"It rejected that case because it found the drivers were integrated into the Uber business of providing transportation services … and because it found the arrangements inconsistent with the drivers acting as separate businesses on their own account," she said.
"Having rejected that characterisation of the relevant relationships, on its findings as to the factual reality of the situation, the employment tribunal was entitled to conclude there was a contact between [Uber] and the drivers whereby the drivers personally undertook work for [Uber] as part of its business of providing transportation services to passengers in the London area," she said.
Additionally, the judge "[did] not consider it was wrong to hold that a driver would be a worker engaged on working time when in the territory, with the app switched on, and ready and willing to accept trips", based on the facts as established by the employment tribunal.
The ruling does not give the drivers rights as employees, or mean that they would be liable for tax as employees. 'Worker' is an intermediate status between employees and the genuinely self-employed, running their own businesses. Although workers have certain minimum rights, in particular rights to the National Minimum Wage and paid holiday leave, they do not have the same redundancy or unfair dismissal rights as employees.
An independent review, commissioned by the government, recommended in July that employment laws be updated to better reflect modern working practices, including by making it clearer whether people in work qualify for full employment rights. Among his recommendations, Matthew Taylor called for the creation of a new category of 'dependent contractor' to reflect the rise of 'gig economy' business models, and to distinguish those individuals from the genuinely self-employed.
"It remains to be seen whether the government will bring forward any further legislation in this area," Stuart Neilson said.