Technology

Uber loses main labor rights case as UK Supreme Courtroom guidelines its drivers are staff

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A driver uses the Uber app to drop a passenger in London.

Chris J. Ratcliffe | Bloomberg via Getty Images

LONDON – Uber lost a crucial litigation in the UK on Friday when the country’s Supreme Court upheld a ruling that its drivers are workers and not independent contractors.

The judges unanimously voted to reject Uber’s appeal against the verdict. The decision could have a huge impact on Uber’s UK business as well as the gig economy as a whole.

Uber’s shares fell over 1% in premarket trading.

Long litigation

Friday’s ruling concludes a nearly five-year legal battle between Uber and a group of former drivers who claim to be workers entitled to labor rights like minimum wage, vacation pay and rest breaks.

In 2016, a labor court ruled in favor of drivers, led by Yaseen Aslam and James Farrar, who claimed they were employed by Uber and were therefore entitled to certain occupational health and safety.

Uber insists that its drivers are self-employed and act more like an “agency” connecting them to passengers through an app. Uber would like to keep the legal classification of its drivers as independent contractors unchanged, arguing that drivers prefer this “gig” model because it is more flexible – it also benefits Uber for cost reasons.

“This decision will fundamentally reorganize the gig economy and end the widespread exploitation of workers through algorithmic and contractual tricks,” Farrar, general secretary of the App Drivers & Couriers Union, said in a statement.

“I’m delighted that workers are finally taking action as a result of this ruling, but the government urgently needs to tighten the law so that gig workers have access to sickness benefits and protection from unjustified dismissal.”

What happens next?

Uber said the ruling only applied to the 25 drivers who started legal proceedings against the company in 2016, but added that all drivers in the UK are being consulted to “understand the changes they want to see”.

“We respect the court’s ruling, which focused on a small number of drivers who used the Uber app in 2016,” said Jamie Heywood, Uber’s regional general manager for Northern and Eastern Europe, in a statement Friday.

“Since then, we’ve made some significant changes to our business that are guided by drivers every step of the way, including greater control over their earnings and new safeguards such as free insurance in the event of illness or injury.”

The Supreme Court ruling could jeopardize Uber’s business model in the UK and lead to higher costs for the company. While it’s only about drivers implicated in the 2016 fall, it sets a major precedent that could affect other Uber drivers and gig workers.

Uber must now return to the labor court to determine compensation for the affected drivers. There are roughly 1,000 similar claims against the company that have been waiting in the wings throughout the litigation.

Gig economy

The decision also has a significant impact on the UK gig economy, which is believed to employ 5.5 million people. Other companies running a similar model to Uber include Bolt and Ola.

“This ruling will undoubtedly have far-reaching implications for all gig economy operators, making it more difficult for companies that engage people through digital platforms to claim they are self-employed despite the fact that contractual documents are different,” said Helen Crossland, partner at the British law firm Seddons.

The UK case mirrors Uber’s legal battle with California regulators over the past year trying to classify drivers from Uber and other hail services like Lyft as employees in an attempt to provide them with more employment protection.

However, voters backed an election measure called Proposition 22, which exempted Uber and other gig economy platforms from reclassifying drivers as employees.

Uber calls for a “third way” to classify gig workers that offers them some protection but still allows them to work flexibly. The company shared proposals for such a model with the EU on Monday before the bloc reviewed gig economy platforms.

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Katherine Clark