Gigs and The Law: The Fall of the Gig Economy?

[Note on the author: Dan Grozdanovic is a Business Intelligence Associate at Enyo Law LLP. Dan was a student on the City, University of London Writing for Business short course in October 2017. This blog was created as part of a homework/in-class exercise on that course.]

Uber.

A powerhouse of convenience for millennials immersed in an ever-prevalent culture of demand for more affordable services delivered through the app-medium. Like many other millennials, I was distraught when Transport for London decided not to renew its licence to operate in the city for my own selfish reasons: having to resort to the dark ages of hailing expensive black cabs, or worse, taking public transport in the early hours with my fellow passengers spreading their three-course McDonald’s meal over the backseats of a double-decker bus.

We expect cheap cab fares to be a 21st century consumer right (a human right if you ask others) but we often forget about the employment rights of fellow millennials – it is estimated that approximately 50% of the Gig Economy’s workers are under the age of 35 – providing these services, or ‘gigs’.

The Gig Economy and employment law

The so-called Gig Economy is predicated on people being paid for individual tasks such as deliveries or car journeys, thereby granting flexibility not found in more traditional workplaces, and empowering those who want an alternative work life and income-stream. It allows facilitators such as Uber to provide work to those that want it on flexible terms, while saving costs by not hiring them as employees (in the technical legal sense) and instead hiring them as self-employed contractors, resulting in cheaper services for the consumer. Uber’s (now former) business model, for instance, propagates the notion that its app-platform connects 30,000 small businesses; i.e. each driver has their own business and is self-employed.

As with zero-hour contracts, the companies do not guarantee pay but merely offer a medium through which work can be conducted, resulting in payment. While there are differences between these two labour markets, the result is the same: workers are unsure as to how much they will earn and companies save costs through the nature of their relationship with their staff.

Rooted at the heart of our labour laws is the balancing of the bargaining power between the employer and the worker; the general rule is: the greater the flexibility (as detailed above), the weaker the protection of employment rights. However, the balancing of the bargaining power between the provider and the worker within the Gig Economy is obviously askew if the latter is denied this flexibility, and recent court rulings have questioned its sustainability because of a legal shift in the way Uber’s drivers, for example, are categorised. It would be harsh of me to single out Uber as the main offender in this exploitation of workers. Addison Lee, Deliveroo and Pimlico Plumbers have also either recently suffered courtroom defeats or are awaiting trial.

The Uber appeal

On 10 November 2017, Uber lost its Employment Tribunal appeal against a 2016 judgment delivered in favour of drivers James Farrar and Yaseen Aslam, who claimed on behalf of a group of 19 Uber drivers that they were employed as workers by the company and were not self-employed. Farrar alleged he was under pressure to work long hours, often earning under the national living wage, and had no control over who he could pick up, facing harsh ramifications if he cancelled a ride. It is clear the balance of bargaining power had shifted from the falsely labelled ‘self-employed’ driver to the almighty employer – Uber.

These app-based businesses are not just intermediaries, providing work to the ‘self-employed.’ It is common-sense that when a company controls who the driver can sell their business to, that person is not afforded the flexibility presented by self-employment, or indeed the philosophical foundations of the Gig Economy.

Criticising Uber’s defence as ‘ridiculous’ and ‘absurd’ in parts, the Tribunal agreed that Uber’s drivers were ‘workers’, who are entitled to different and greater employment rights to the self-employed. These include: paid annual leave, rest breaks, entitlement to the national minimum wage, discrimination protection and pension scheme benefits.

The result of the appeal therefore means that approximately 460,000 self-employed people in the UK, 40,000 of which are Uber drivers, could be wrongly categorised and £314 million in tax and national insurance contributions could have been lost to false categorisation. While Uber has the option to appeal the Tribunal’s decisions in the Supreme Court, the Tribunal’s decision is a great step in the right direction in protecting the people who make our lives easier.

Pricier times ahead

As consumers, however, should we be so quick to defend these workers if it means costs for services increase? The natural consequence of re-classification is companies placing some of the burden of the cost of holiday pay, for example, back onto the consumer. App-based businesses thrive on ‘stacking them high and selling them cheap’ and consumers of the 21st century have become reliant on cost-effective offerings. This therefore begs the question as to whether the Gig Economy is sustainable without the exploitation of those who are willing to work for these businesses and enjoy ‘flexibility’.

According to the recently published Taylor Review of Modern Working Practices which was commissioned by the government to identify beneficial changes to the Gig Economy with the mantra ‘fair and decent work’, a new category of worker is likely to emerge namely the ‘dependent contractor’. At present however, only time will tell what protection these individuals will be afforded.

So while my Prius carriage, complete with driver, is currently an affordable luxury, is it worth living in a society where workers are exploited and could be poorer over time? Probably not.