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Move fast and break things, says a Silicon Valley aphorism. In Uber’s case, one of those things turned out to be UK labor law. The UK Supreme Court on Friday dismissed an appeal by the taxi booking app against a lower court ruling that its drivers should be classified as “workers” rather than self-employed. This entitles them to vacation pay, sick pay and minimum wage. The decision affects not only the business model of the company, but also the economy of odd jobs in general.
This is by no means the first case Uber has lost. In California, courts have also supported the idea that drivers using the service should be classified as employed by the company rather than independent contractors – although this was weakened by a referendum. In the UK, the question was how much control the company has over drivers. Lord George Legatt, who drafted the Supreme Court’s unanimous decision, said “the question. . . It is not whether the control system operated by Uber is in its business interests, but whether it places drivers in a position of subordination to Uber. This is clearly the case.
The judgment, however, is based on specific facts about Uber’s relationship with its employees. The court said Uber sets maximum fares, drivers have no say in their contracts, and the enforcement imposes penalties if drivers cancel too many requests. This level of control meant that drivers could not increase their income by using “professional or entrepreneurial skills,” the court found, meaning they were working for Uber and not for themselves.
It remains to be seen how Uber reacts and whether it can change the platform to reduce this control, allowing drivers to be truly independent. If so, it will mean that the taxi booking app will be less able to guarantee uniform service. The alternative would be to increase prices to cover the additional costs of complying with the law. Either way, the company’s business model in the UK – London is one of its few profitable markets in the world – will have to change.
The principles underlying the judgment should also be of concern to other small economy firms and their investors. Start-ups that want to control their workers and guarantee a particular type of service will have to pay them sick pay, paid vacation and the minimum wage in return. This will increase costs and reduce returns. The days of taking advantage of the ambiguity of UK labor law may come to an end.
Ultimately, however, the judgment is an indictment not of UK labor law but of its enforcement. It took the drivers five years to get justice. In addition to the harm done to workers, potential Uber competitors who played by the rules may have struggled in the meantime – penalized by unfair competition. The impact of the decision can also be fragmentary: workers in other companies will have to make their own case and cite the decision as a precedent. In the short term, many will not enjoy all of their legal rights.
Britain needs to take a broader look at how it regulates the labor market as new forms of work proliferate – delivery drivers have been one of the few professions to see their ranks swell during the pandemic. It should also take a more proactive approach to enforce existing laws; all courts have agreed with the Supreme Court’s interpretation, but no body has proactively sought to apply it. The post of Director of Labor Market Enforcement recently created by the government will soon be vacant. The government must act quickly to address it.
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