The pressure is mounting, and gradually ride-hailing drivers are questioning the entire construction of the gig economy. Next stop is the UK, after platforms such as Uber and Lyft had a field day in California last year. In a landmark judgment, the highest court of the United Kingdom has ruled that a group of former drivers for Uber Technologies Inc. were entitled to a minimum wage and other benefits while working for the company. Although the case specifically concerns the 25 drivers who instituted a case against Uber a few years ago, the judgment has set a dangerous precedent against the entire gig economy especially in the United Kingdom, where mushrooms of cases could spring up leaning on the court’s latest judgment.
“New ways of working organised through digital platforms pose pressing questions about the employment status of the people who do the work involved. The central question on this appeal is whether an employment tribunal was entitled to find that drivers whose work is arranged through Uber’s smartphone application (“the Uber app”) work for Uber under workers’ contracts and so qualify for the national minimum wage, paid annual leave and other workers’ rights; or whether, as Uber contends, the drivers do not have these rights because they work for themselves as independent contractors, performing services,” Lord Leggatt, noted in the lead judgment.
What Do We Learn From The Court’s Judgment?
While there are so many insights to be gleaned from the judgment, the following points stand out:
From California To The UK, The Central Question Has Always Remained: Are Gig Workers Really Independent Contractors And Not Employees; And If Not, Why?
Although the UK case has been on for as far back as 2018, it fundamentally asked the same question asked by drivers in the US state of California recently. The question is as to whether drivers, based on the nature of their engagement with Uber, Lyft and others, are not employees but independent contractors.
The Californian controversy started when the state’s parliament passed a law, popularly referred to as Assembly B5, which laid out new rules for classifying a worker as an independent contractor.
Under the rules, for a Californian company to classify a worker as an independent contractor, it must prove three things (you may hear this being called the “ABC Test”). If they can’t, then the worker is treated as an employee.
- First, companies must prove that “the worker is free from the control and direction of the hiring entity in connection with the performance of the work.” In other words, companies can’t manage contractors the way they would employees. As an example, if a catering hall contracted a chef to prepare food events, but controlled how the chef prepared the food — giving them custom orders from customers, giving a strict schedule for production, and instituting standard procedures — they would likely not satisfy this part of the test.
- Second, companies must prove that “the worker performs work that is outside the usual course of the hiring entity’s business.” This means that a company like Uber has to prove that driving users from location A to location B is outside the company’s usual course of business. Uber said as much in a press release, contending that the company is actually a “technology platform for several different types of digital marketplaces.”
- Third, the companies must prove that “the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.” For example, an electrician doing contract electrical work is still a contractor. It’s unclear if ride sharing or meal delivery companies will be unable to clear this bar.
- Consequently, under the law, all of these independent contractors could earn employee status if the companies can’t satisfy the ABC test.
But the controversies surrounding the new rules have long been laid to rest in California following the success of Proposition 22. Proposition 22, conducted at the same time as the US general elections on November 3, 2020, invited eligible voters in California to vote, for or against, on whether Uber and Lyft be granted an exemption from the law.
Now, the UK case continues on the same trajectory. That is, in arriving at whether Uber drivers are employees and not independent contractors, the court followed almost the same methodology used by lawmakers in California.
It asked whether the drivers could be called employees and not independent contractors under the UK law. After a very strict interpretation of all the applicable laws, it ruled that the drivers are not employees strictly so-called, but workers.
In arriving at this conclusion, the court was assisted by the fact that drivers provide their own car, meaning that they have more control than would most employees over the physical equipment used to perform their work.
The implication of this conclusion — of calling Uber drivers workers — is, therefore, that although the drivers are not entitled to rights available to a full time employee, they are entitled to general rights available to workers under the UK laws— such rights include rights to minimum wage, annual paid leave, among others.
One fundamental element which, however, easily assisted the court in reaching the above conclusion is the element of “control”, which we would consider next.
The Element Of Control Is Uber’s Final Nail In The Coffin
At this stage, one particular element that the entire gig economy, especially the ride-hailing apps — mostly in the UK — should consider while building their products, to run away from this precedent set by the country’s supreme court, is the element of control.
If Uber had been loose around how its controlled drivers using its apps, the latest judgment would have ended up in its favour.
More particularly, the court noted that since Uber:
- Controlled the remuneration paid to drivers for the work they do and the drivers have no say in it (other than by choosing when and how much to work);
- Controlled the contractual terms on which drivers perform their services;
- Controlled the choice of a driver about whether to accept requests for rides once a driver has logged onto the Uber app;
- Controlled the driver’s rate of acceptance (and cancellation) of trip requests;
- Controlled the types and quality of car that may be used by the drivers;
- Controlled communication between passenger and driver to the minimum necessary to perform the particular trip and took active steps to prevent drivers from establishing any relationship with a passenger capable of extending beyond an individual ride;
then it could not be said that Uber’s drivers enjoyed an independent contractor status. Consequently, the court ruled that they are workers.
It Is Interesting To Note That By Comparing Uber’s Case With Other Gig Economy Models, The Court May Have Narrowed The Battle Down To Uber And Its Competitors And Not The Entire Gig Economy Generally
This is one part of the judgment that leaves hope for other gig economy models, which are not Uber or its type of ride-hailing. For those others, the court emphasized the element of choice or freedom as the single most powerful element that defines whether the relationship they maintain with their users is that of an “employee” or an “independent contractor”.
“It is instructive to compare Uber’s method of operation and relationship with drivers with digital platforms that operate as booking agents for suppliers of, for example, hotel or other accommodation. There are some similarities,” the court said. “For example, a platform through which customers can book accommodation is likely to have standard written contract terms that govern its relationships with suppliers and with customers. It will typically handle the collection of payment and deduct a service fee which it fixes. It may require suppliers to comply with certain rules and standards in relation to the accommodation offered. It may handle complaints and reserve the right to determine whether a customer or supplier should compensate the other if a complaint is upheld.”
However, the court noted that such platforms differ from Uber in how they operate in several fundamental ways.
“Customers are offered a choice among a variety of different hotels or other types of accommodation (as the case may be), each with its own distinctive characteristics and location. Suppliers are also responsible for defining and delivering whatever level of service in terms of comfort and facilities etc they choose to offer…They are properly regarded as carrying on businesses which are independent of the platform and as performing their services for the customers who purchase those services and not for the platform,” the court said.
Finally, We Learn That The Fate Of Uber And The Entire Gig Economy Is Almost Always Jurisdictional
This point is noteworthy because what may be classified as “employee” in the UK, may not be so in Brazil, India or even across the states of the United States. It then behooves players in the entire gig economy ecosystem to evaluate their models in light of existing national and local laws applicable to their territories of operations. This will assist them in adapting their products to fulfil existing legislations as well as help them to innovate ahead of potentially bad legislations.
Find out how the gig economy might be interpreted in Africa’s leading economies — Nigeria and South Africa — in light of national labour laws here.
UK’s Uber And African Ride-hailing Startups — What Is The Likely Fallout Of The Supreme Court’s Judgment?
There are already signs on the wall that UK court’s latest judgment may be replicated in Africa. At least, governments of all major African countries and cities housing the continent’s gig economy ecosystems have spent the past few years caressing and testing their power to make laws which will severely touch tech startups wherever they may be located in the world.
Lagos, Africa’s most valuable startup ecosystem, recently introduced a set of new regulations which took off from August 27, 2020. The regulations, among other things, state that each e-hailing company must pay N8 million ($20.5k) per 1,000 cars as fresh licensing and renewal fees; that the companies will have comprehensive insurance for each driver while the driver is working with them; that a flat fee of N20 ($0.052) per trip, called a Road Improvement Fund, will be levied per trip.
Under South Africa’s National Land Transport Amendment Bill, which has been passed in parliament and sent to South Africa’s president for assent, drivers on car-hailing platforms like Uber and Bolt who do not have operating licenses — not driving licenses — may incur a fine as much as R100 000 ($6000) for those platforms (Uber, Bolt and others), which would definitely be levied against the affected drivers directly or indirectly.
In Ghana, from Uber to Bolt to Yango, drivers who rely on ride-hailing to sustain their livelihoods would start paying a mandatory GHC 60 ($11) annual fee, in addition to their cars undergoing roadworthy tests every six months. Ghana’s Driver and Vehicle Licensing Authority (DVLA), which imposed the GH¢60 ($11) annual fee noted that the guidelines will cover the current ride-hailing platforms like Uber, Bolt, and Yango and will also cover companies who intend to operate ride-hailing platforms in Ghana in the future.
Therefore, it is only a matter of time before African governments’ regulatory attention reaches across to this spectrum. It is also noteworthy that judgments of English courts (UK by implication) are highly persuasive to most courts of former British colonies, a majority of which are in Africa.
The Bottom Line
As startups practicing in this sector, the “control” of gig workers is everything. InDriver is leading by example and may survive the new tests being rolled out across multiple jurisdictions. Its only challenge may be that it is Russian.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer
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