The question ‘what exactly are you?’ crossed my mind again last night. I had taken an Uber ride home from a business event and once more, the efficiency that my ride service provided was soon outweighed by my obsessive need to solve this dilemma.
‘Are you an employee or are you a contractor?’Again ‘what are you?’
The legal status of Uber drivers had troubled me for some time, and I already knew as I got out of the car, that it would continue to trouble me for rest of the evening. I also doubted that the arrival of my evening meal delivered courtesy of Deliveroo which operates a similar business model, was likely to make the problem go away.
Knowing that I had at least half an hour before dinner would arrive, I set about trying to resolve the dilemma by trusted legal analysis.
The starting point for determining employment status is to apply the well-established multifactorial legal test, which includes questions such as:
- Is there a mutuality of obligation?
- Is there a sufficient degree of control?
- Do the services have to be provided personally?
- Are they yellow and do they quack?
Okay, I know that the fourth test above isn’t one taught on the curriculum at law schools, however as many good lawyers will tell you, go with your gut feeling as the starting point. If it looks like an employment relationship and operates like an employment relationship, then guess what folks? Yes, it is probably employment.
The Uber business model relies on its workers being considered to be independent contractors rather than employees thus avoiding the additional ‘on’ costs associated with an employment relationship. Using contractors overcomes concerns regarding the national minimum wage, penalty rates and payment for waiting/being on-call etc. Any additional labour costs arising from employment status being established would be significantly damaging to Uber’s cost base and pricing structure. Hence the requirement for drivers to be contractors.
When determining if a worker is a contractor or an employee, the above tests (minus the duck one) are considered by the courts which look at how the work performed is controlled, whether the worker is obliged to do the work personally or free to contract it out, and the extent to which the worker is obliged to accept the work offered. The more freedom the worker has in respect of the above, the less likely they are to be found to be an employee.
Before considering the status of Uber workers, a basic understanding of how the model works is necessary to be able to apply the ‘tests.’ Uber drivers operate as independent contractors providing a ride service in vehicles which they own. They are offered potential fares through a partner app which informs a driver that there is a rider seeking a ride. If the driver accepts the ride offered, then the driver is engaged by Uber for the duration of the ride and receives payment of the fare from Uber (less Uber’s commission and fees) which has been collected on the driver’s behalf by Uber. Uber maintain this is a contracting arrangement.
To apply the traditional employment tests to the relationship between Uber and the driver requires careful consideration of how the relationship operates and the amount of autonomy that each driver has. Understandably Uber carefully manages the performance of its drivers for quality assurance purposes. This monitoring includes each driver’s acceptance rates, the number of times that drivers accept the fare they are offered. Drivers with low acceptance rates run the risk of being ‘deactivated’ by Uber. Deactivation can mean suspension or removal from being an Uber driver. Suspension and dismissal are terms commonly used in an employment relationship and in this arrangement the effect is comparable.
The requirement for drivers to maintain a high acceptance rate (80% of rides offered according to their website) leads one to question the obligation to accept and decline work. True contractors are free to reject contracts. Uber drivers can only reject a small percentage before the system is closed to them. Employees, on the other hand, are required to do the work that they are instructed to perform. Although the agreement between Uber and the driver does not require the driver to accept all rides offered, the consequences of a low acceptance rate undermine the ability to reject such rides.
A further indicia of the extent of control and obligation, and the undermining of genuine independence is found in the pricing structure for rides. The pricing of fares is set by Uber, not the drivers. Uber are free to make changes to its pricing structure without input from its drivers. Equally, drivers are not made aware of the fare that is to be charged or the ultimate destination of the ride when they accept it. Again, this is very different to the foundations upon which independent contracting is based. How many truly independent contractors would blindly accept work over an undisclosed duration of time for an undisclosed fee?
The arrangement made between Uber and the driver also requires the driver perform the service personally. Background checks are conducted on the driver to ensure that they are suitable to provide the service. Each driver is rated personally by the rider. Importantly, drivers are expressly prevented from allowing others to drive instead of them. Clearly, this is a requirement to provide the service personally. This again differs from traditional contracting.
So they must be employees. Right? If only it was as simple as that.There are other parts of the multifactorial test which muddy the waters. For instance, the use of the driver’s own vehicles to provide the service is akin to the use of a contractors own tools. There is no uniform obligation integrating drivers into the Uber business nor are drivers compelled to work exclusively for Uber.
Beyond the standard tests, consideration must also be given as to what the nature of the ‘employment’ would be. This requires consideration of what the parties intended and how it operates in practice. If it is employment, then is each ride simply a casual engagement for the duration of the ride or are the drivers on call when the app is turned on? It all starts to become very messy understanding the nature of the arrangement and how it sits within the existing industrial relations system.
Hopefully, greater clarity on the subject will soon prevail. The status of Uber drivers is presently being considered by the employment courts in the UK. A union-backed test case is before the London Employment Tribunal, the equivalent of Australia’s Fair Work Commission. The eveidence has been heard and a decision is expected later this year. If a ruling is made that Uber’s drivers are employees, then this is likely to have a domino effect in other jurisdictions. When a similar challenge was brought in the US, Uber reached a $130 million settlement to avoid any decision being made. It is now very much a question of awaiting this ruling.
The conclusion that I arrived at last night minutes before my meal arrived was that it felt like an employment relationship, it looked like an employment relationship, it even ‘quacked’ like an employment relationship and was probably an employment relationship. And having reached that conclusion I now reflected on why I had ordered the Kung Pao chicken and not the crispy duck.