The Supreme Court held that Uber drivers (in London) were “workers” and therefore entitled to the national minimum wage, paid holiday and whistleblowing protection. The court downgraded the importance of written documents (controlled by the ’employer’) in deciding whether someone is a worker, and emphasised that employers cannot ‘contract out’ of employment rights.
Supreme Court, 2021. Full decision: www.bailii.org/uk/cases/UKSC/2021/5.html
Summary and context
This decision of the Supreme Court is ground-breaking in putting the emphasis on the statutory purpose of protecting vulnerable workers when deciding whether they fall within employment protection legislation, and in drawing quite radical conclusions from that:
- Key factors are whether there is subordination, dependency, and control by the ’employer’ over the work or services.
- Written contracts (though relevant) are not even the starting point for deciding whether an individual is protected by employment legislation. The contractual provisions may well have been imposed on the worker, due to his vulnerability, so starting from them would be inconsistent with the statutory purpose.
- The decision gives a wide interpretation to statutory provisions which prohibit contracting-out from employment protections. These statutory provisions may even invalidate terms which indirectly seek to escape employment protection legislation.
The Supreme Court was considering the test for whether someone is a “worker”. The court’s decision should apply equally to who can claim under the Equality Act even though the decision was not directly on it, as the courts apply the same test: below Comments: Applies to Equality Act as well.
“Workers” include many people who are self-employed (ie not employees). Workers do not have the full range of employment rights – for example only an “employee” can claim unfair dismissal under the Employment Rights Act 1996. However because “workers” lack independence and are vulnerable to unfair treatment, various employment rights are extended to them, such as the right to claim under the Equality Act, national minimum wage, paid holiday and whistleblowing protection. On my page Employees, workers and beyond I discuss who can claim as a “worker” under the Equality Act, in the light of this Supreme Court decision.
Customers used Uber’s app to order a cab. Drivers could choose when they worked. Prices for journeys were set by Uber, which collected the money, took 20% and passed the rest to the driver weekly. Uber exercised various controls over drivers.
Uber argued that the documents showed it did not provide transportation services, but was an agent providing drivers with technology services and payment collection services. It said the driver contracted with each customer, and was not a “worker” as regards Uber.
Held: Uber drivers were “workers”, and accordingly could claim against Uber for the national minimum wage, paid holiday and whistleblowing protection.
Supreme Court decision
Definition of “worker”
The Supreme Court said the issue was whether the Uber drivers were a ‘limb (b)’ worker under s.230(3)(b) Employment Rights Act 1996. Did they work under a “contract … whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual”? (Note: for further background see Employees, workers and beyond>Three types of employment status.) The court said limb (b) has three elements, only the first of which was disputed in this case:
- (1) a contract whereby an individual undertakes to perform work or services for the other party (The disputed issue in this case was whether the drivers were to be regarded as working under contracts with Uber London whereby they undertook to perform services for Uber London; or whether, as Uber contended, they were to be regarded as performing services solely for and under contracts made with passengers through the agency of Uber);
- (2) an undertaking to do the work or perform the services personally (It was not disputed that drivers did undertake to do this); and
- (3) a requirement that the other party to the contract is not a client or customer of any profession or business undertaking carried on by the individual (Uber did not suggest that it was a client or customer of the drivers).
The Supreme Court held firstly that Uber’s argument failed in any event, because there was nothing in the documents or elsewhere by which a driver appointed Uber as his agent. Therefore, by accepting a booking, Uber must itself be agreeing with the passenger to carry out the booking. Uber carried out the booking through its contracts with drivers (para 49 to 56).
However the Supreme Court also addressed the wider issue. Was Uber correct in arguing that in principle the question whether an individual is a “worker” should be approached, as the starting point, by interpreting the terms of any applicable written agreements? As discussed below, the Supreme Court held that no it shouldn’t.
The Supreme Court expanded on its previous decision in:
Autoclenz Ltd v Belcher (bailii.org), Supreme Court, 2011
‘Valeters’ cleaning cars were required to sign contracts saying they were subcontractors and not employees of Autoclenz; that they were not obliged to provide services to the company, nor was the company obliged to offer work to them; and that they could provide suitably qualified substitutes to carry out the work on their behalf.
The Supreme Court held the valeters were employees (and therefore also workers). It said that in the case of an employment contract, the court or tribunal should consider what was actually agreed between the parties, “either as set out in the written terms or, if it is alleged those terms are not accurate, what is proved to be their actual agreement at the time the contract was concluded”. The relative bargaining power of the parties must be taken into account in deciding whether the terms of any written agreement in truth represent what was agreed. The true agreement will often have to be gleaned from all the circumstances of the case, of which the written agreement is only a part.
Applying that approach to the facts of the Autoclenz case, the employment tribunal was entitled to hold that the contractual documents did not reflect the actual understanding of the parties that the valeters would be available to work, would be offered work whenever there was work available, and were required to perform the work personally. They were therefore employees, entitled claim the national minimum wage and paid holiday.
Uber argued that despite the Autoclenz case, if there is no inconsistency between the terms of the written agreement and how the relationship operates in reality, then there is no basis for departing from the written agreement. Uber argued therefore that provision saying that Uber only acted as agent of the drivers should still have effect (para 65-67).
The Supreme Court said it is critical to understanding the Autoclenz case that the rights asserted by the claimants were not contractual rights but were created by legislation. The court was determining whether the claimants fell within the definition of a “worker” in the relevant statutory provisions so as to qualify for certain statutory rights, irrespective of what had been contractually agreed. “In short, the primary question was one of statutory interpretation, not contractual interpretation.” (para 69).
Legislative purpose: starting with contractual wording is inconsistent with protecting vulnerable workers
The Supreme Court said the modern approach to statutory interpretation is to have regard to the purpose of the statutory provision, and interpret its language so far as possible in the way which best gives effect to that purpose (para 70). The purpose of the legislation here was to protect vulnerable workers from being paid too little for the work they do, required to work excessive hours or subjected to other forms of unfair treatment. The court (at para 71) quoted with approval a previous judgment on why the legislation protects ‘limb (b)’ workers as well as employees:
“…The reason why employees are thought to need such protection is that they are in a subordinate and dependent position vis-à-vis their employers: the purpose of the Regulations is to extend protection to workers who are, substantively and economically, in the same position. Thus the essence of the intended distinction must be between, on the one hand, workers whose degree of dependence is essentially the same as that of employees and, on the other, contractors who have a sufficiently arm’s-length and independent position to be treated as being able to look after themselves in the relevant respects.”
The court reviewed various EU and UK cases which had pointed up the importance of whether the individual is in a subordinate relationship, or whether there is a hierarchical relationship, as opposed to the person being an independent provider of services. However Lady Hale had cautioned at paragraph 39 in Clyde & Co v Bates van Winkelhof (bailii.org), that subordination is not a freestanding and universal characteristic of being a worker. There the Supreme Court held that a solicitor who was a member of a limited liability partnership was a “worker” essentially because she could not market her services as a solicitor to anyone other than the LLP and was an integral part of their business. While not necessarily connoting subordination, this integration and inability gave rise to dependency on a particular relationship which may also render an individual vulnerable to exploitation. (para 72-74)
The Supreme Court said the correlative of subordination and/or dependency of employees and of workers in a similar position to employees is control exercised by the employer over their working conditions and remuneration. These features of work relations gave rise to a situation in which such relations cannot safely be left to contractual regulation and are considered to require statutory regulation. Once that is recognised, said the Supreme Court, it can immediately be seen that it would be inconsistent with the purpose of this legislation to treat the terms of a written contract as the starting point in determining whether an individual falls within the definition of a “worker”. “It is the very fact that an employer is often in a position to dictate such contract terms and that the individual performing the work has little or no ability to influence those terms that gives rise to the need for statutory protection in the first place.” That was illustrated by the facts of the present case. It was unlikely many drivers would read the terms, or understand the legal significance even if they did, and there was no practical possibility of negotiating different terms. (para 75-77)
This was why in Autoclenz the Supreme Court described the approach endorsed in that case – of looking beyond the terms of any written agreement to the parties’ “true agreement” – as “a purposive approach to the problem” (para 78).
Statutory restrictions on contracting out
That approach, said the Supreme Court, is further justified by the fact that all the relevant statutes or regulations conferring rights on workers (on minimum wage, paid holiday and whistleblowing) contain prohibitions against contracting out. The court said these provisions:
“apply to any provision in an agreement which can be seen, on an objective consideration of the facts, to have as its object excluding or limiting the operation of the legislation. It is just as inimical to the aims of the legislation to allow its protection to be limited or excluded indirectly by the terms of a contract as it is to allow that to be done in direct terms.”
The court pointed, as an example, to provisions in Uber’s documents saying that the driver’s provision of transportation services created a relationship between driver and passenger to which Uber was not a party, and that Uber should not be deemed to direct or control drivers. These provisions might be ineffective anyway as it was for the courts to decide the legal effect of a contract. However even apart from that, the provisions could fall foul of the statutory prohibitions on contracting-out and be void (para 81-82).
Also the statutory provisions against contracting-out provided one rationale for the conclusion in the Autoclenz case above. The findings of the employment tribunal in Autoclenz justified the inference that various terms of the written agreements, for example that valeters were not obliged to provide services to the company and could provide suitably qualified substitutes to carry out the work, had all been inserted with the object of excluding the operation of employment legislation. Those provisions in the agreements were therefore void (para 86).
How to apply the definition of “worker”
The Supreme Court adopted the approach in the Carmichael case where the House of Lords had upheld a tribunal decision based on (a) the language of the correspondence; (b) the way in which the relationship had operated; and (c) evidence of the parties as to their understanding of it. In the Carmichael case there was no formal written agreement, but in the light of the Autoclenz case the Supreme Court said that approach is appropriate even if there is a formal written agreement, and even if the agreement contains a clause stating that the document is intended to record the entire agreement of the parties. (para 83-85)
This does not mean that the terms of any written agreement should be ignored, but there is no absolute rule that terms set out in a contractual document represent the parties’ true agreement just because an individual has signed it. “Furthermore, as discussed, any terms which purport to classify the parties’ legal relationship or to exclude or limit statutory protections by preventing the contract from being interpreted as a contract of employment or other worker’s contract are of no effect and must be disregarded.” (para 85)
In determining whether an individual is a “worker”, there was no substitute for applying the words of the statute to the facts of the individual case. However:
“At the same time, in applying the statutory language, it is necessary both to view the facts realistically and to keep in mind the purpose of the legislation. As noted earlier, the vulnerabilities of workers which create the need for statutory protection are subordination to and dependence upon another person in relation to the work done. As also discussed, a touchstone of such subordination and dependence is (as has long been recognised in employment law) the degree of control exercised by the putative employer over the work or services performed by the individual concerned. The greater the extent of such control, the stronger the case for classifying the individual as a “worker” who is employed under a “worker’s contract”.
Applying this to the Uber case
The Supreme Court held that the findings of the employment tribunal justified its conclusion that – although free to choose when and where they worked – at times when they were working the drivers worked for and under contracts with Uber. (Note: That was the only issue in this case. It was undisputed (above) that Uber was not a client or customer of a business carried on by the driver, and that the drivers undertook to do work personally.) The Supreme Court said five aspects of the tribunal’s findings were worth emphasising:
- Of major importance, where a ride is booked through the Uber app, it was Uber that sets the fare and drivers were not permitted to charge more than the fare calculated by the Uber app. It was therefore Uber which dictated how much drivers were paid for the work they did (para 94).
- The contract terms on which drivers performed their services were imposed by Uber and drivers had no say in them (para 95).
- Uber could decide whether to accept a request for a ride, but once a driver had logged onto the Uber app the driver’s choice about whether to accept requests was constrained by Uber. One way this was done was by controlling what information the driver could see; the driver saw a passenger’s rating, but notably was not told of their destination until the pick-up. The other form of control was by imposing what amounted to a penalty if too many trip requests were declined or cancelled, by automatically logging the driver off the Uber app for ten minutes, preventing the driver from working during that time (para 96-97).
- Uber exercised significant control over the way in which drivers delivered their services. For example passengers were asked to rate the driver on a scale of 1 to 5 after each trip. Any driver who failed to maintain a required average rating would receive a series of warnings and, if their average rating did not improve, eventually have their relationship with Uber terminated. This was not like the system common on digital platforms where customers can see ratings to help them choose which product or service to buy. Under such a system the supplier’s incentive to gain high ratings is simply the ordinary commercial incentive of satisfying customers in the hope of attracting future business. In Uber’s case the “ratings are not disclosed to passengers to inform their choice of driver: passengers are not offered a choice of driver with, for example, a higher price charged for the services of a driver who is more highly rated. Rather, the ratings are used by Uber purely as an internal tool for managing performance and as a basis for making termination decisions where customer feedback shows that drivers are not meeting the performance levels set by Uber. This is a classic form of subordination that is characteristic of employment relationships.” (para 98-99)
- Uber restricted communications 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 (para 100).
The Supreme Court concluded:
“Taking these factors together, it can be seen that the transportation service performed by drivers and offered to passengers through the Uber app is very tightly defined and controlled by Uber. Furthermore, it is designed and organised in such a way as to provide a standardised service to passengers in which drivers are perceived as substantially interchangeable and from which Uber, rather than individual drivers, obtains the benefit of customer loyalty and goodwill. From the drivers’ point of view, the same factors – in particular, the inability to offer a distinctive service or to set their own prices and Uber’s control over all aspects of their interaction with passengers – mean that they have little or no ability to improve their economic position through professional or entrepreneurial skill. In practice the only way in which they can increase their earnings is by working longer hours while constantly meeting Uber’s measures of performance.”
The Supreme Court contrasted digital platforms acting as booking agents for hotels and accommodation. Like Uber there may be standardised written terms for example, and the agent collects payment and deducts a service fee. However:
- The accommodation offered is not a standardised product defined by the platform. Customers have a choice of a variety of different hotels etc, each with its own distinctive characteristics and location. Suppliers define and deliver whatever level of service in terms of comfort and facilities etc they choose to offer.
- Apart from the service fee, it is, crucially, the supplier and not the platform which sets the price.
- Any ratings are published to assist customers in choosing among different suppliers; they are not used as a system of internal performance measurement and control by the platform over suppliers.
- The platform does not restrict communication between the supplier and the customer or seek to prevent them from dealing directly with each other on a future occasion.
The result of these features is that suppliers of accommodation available for booking through the platform are in competition with each other to attract business through the price and quality of the service they supply. 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 (para 103-104).
The Supreme Court also considered what counted as “working time” for the purpose of the Working Time (including paid holiday) and minimum wage regulations (para 132-138).
Comments: Applies to Equality Act as well
Though this was not an Equality Act case, the Supreme Court decision should apply equally in deciding who falls within the Equality Act. The Supreme Court pointed out at paragraph 112 that it has held the definition of a “worker” to have substantially the same effect as the definition of “employee” in the Equality Act: see Pimlico Plumbers Ltd v Smith.
Also on contracting out (below), I see no reason why the Supreme Court’s comments should not apply to the Equality Act too.
I discuss who can claim as a “worker” under the Equality Act – in the light of this Supreme Court decision – at Employees, workers and beyond.
Comments: Not starting with the written contract
We knew before, from the Autoclenz case (above), that the written agreement is not necessarily taken to set out the true agreement. However the Supreme Court decisively knocked on the head Uber’s argument that, despite Autoclenz, if there is no inconsistency between the terms of the written agreement and how the relationship operates in reality, then there is no basis for departing from the written agreement.
The Supreme Court stressed that in deciding who is a “worker” the court is applying employment statutes whose purpose is to protect vulnerable individuals, where employers have power to impose contractual terms. It would be inconsistent with the purpose of the statutes to treat those contractual terms as the starting point in determining whether the person is protected by the statute.
The strong approach taken on this by the Supreme Court may well lead companies to review their contracts and relationships with individuals.
Comments: Statutory prohibitions on contracting-out
The Supreme Court considered how various statutory provisions banning contracting-out could invalidate contractual provisions whose object is to take an individual outside of employment protections: see above Statutory restrictions on contracting out. The court interpreted these statutory provisions widely, saying they could invalidate contractual provisions which indirectly seek to limit or exclude employment protection.
The court did not mention the Equality Act as it was not relevant to the case. However s.144 Equality Act has a substantially similar provision which prohibits contracting-out. I see no reason why the Supreme Court’s comments should not apply to that too. Various contractual provisions seeking to avoid the individual being a “worker”, as discussed by the Supreme Court, therefore seem likely to be void when deciding whether an individual is protected by the Equality Act.
A particular issue is how this applies to the right to appoint a substitute:
Comments: Contracting out and the ability to appoint substitute
Could s.144 EqA apply to invalidate a right to substitute someone else to do the work, if the purpose is to exclude the Equality Act, even though the term is genuine? See Employees, workers and beyond>Right of substitution: Contracting out. If the individual has a genuine and sufficiently wide contractual right to substitute someone else to do the work, that is generally seen as inconsistent with being a “worker”.
- End of the Road for Uber? (rangeofreasonableresponses.com), 21 Feb 2021
- Uber and beyond: what next for platforms? (internationalemploymentlawyer.com), 24 Feb 2021
- Uber to pay drivers a minimum wage, holiday pay and pensions (bbc.co.uk), 16 March 2021 – but only from accepting a trip request to drop-off
- Uber drivers’ claim: Leigh Day – for Uber drivers to join claim for compensation.