Uber’s (NYSE: UBER) decision on March 17 to reclassify approximately 70,000 Uber Rides drivers in the U.K. as “workers” — a step closer to what U.S. businesses would consider employees and away from the independent contractor category — was not unexpected, but it leaves plenty of unanswered questions for the rideshare community on both sides of the Atlantic.
The decision by the global ride-hailing giant followed a February ruling by the U.K. Supreme Court upholding a lower court’s decision that said drivers were entitled to a minimum wage while working for Uber.
The minimum wage in the U.K. is the equivalent of $12.22 per hour in the U.S.
Writing for the Evening Standard in the U.K., Uber CEO Dara Khosrowshahi admitted that the decision to reclassify the workers was not an easy one for the company, which has built itself as a platform for drivers to work when they want and where they want.
“Our thinking on this issue has evolved over time, and I will be the first to admit that we’ve struggled to identify solutions that work for Uber and for those who earn on our platform,” he wrote on March 17. “Following last month’s U.K. Supreme Court ruling, we could have continued to dispute drivers’ rights to any of these protections in court. Instead, we have decided to turn the page. Beginning today, Uber drivers in the U.K. will be treated as workers.”
Interestingly, Uber Eats employees in the country are not impacted by the decision. It is also unclear what the Supreme Court ruling and Uber’s subsequent decision mean for other app-based companies in the country.
British law firm Darwin Gray said Uber’s decision could impact the entire gig economy in the U.K.
“The ramifications of this judgment extend much further than Uber, however, and will affect all businesses involved in the gig economy,” the firm wrote in a blog. “It will likely lead to significant shifts in the way the gig economy operates in the short term. In the longer term, it may lead to new legislation in this area of employment law, to enshrine more concrete definitions of the legal concepts of ‘workers’ and ‘employees.’”
As gig economy companies in the U.K. come to grips with the fallout from Uber’s decision, there is discussion about whether the new approach could impact Uber’s operations in North America. There are, however, significant differences between U.K. and U.S. employment laws, specifically the classification of employees.
In the U.K., there are three employment classifications: employee, worker and independent contractor. Workers are self-employed individuals but are entitled to certain benefits such as being paid under National Living Wage provisions, as well as earning holiday pay and pensions.
“The court also gave much-needed guidance on the distinctions between workers and self-employed contractors, emphasizing that the contractual paperwork put in place should not be the only consideration: the factual reality of how the parties’ relationship works is just as important,” the Darwin Gray blog noted. “Uber had exercised a significant amount of control over its drivers and the relationship was not even-handed. This should not have been the case if the drivers were genuinely self-employed.”
In the U.S., workers are either employees or independent contractors — there is no middle ground like in the U.K. For Uber’s part, a spokesperson told Modern Shipper the company continues to work on ways to improve drivers’ work environments.
“The U.K.’s ‘worker’ status is a unique classification that allows us to provide more benefits and protections to drivers while maintaining the No. 1 thing they want: to work flexibly without predetermined shifts,” the spokesperson said. “In the U.S., we are actively engaging with state governments on modernized laws that would allow companies like Uber to do just this.”
In a white paper issued in August, Uber shared its ideas on how to enhance the quality of “independent work.” At the time the document was published, Uber, DoorDash (NYSE: DASH) and Lyft (NASDAQ: LYFT) were involved in trying to pass Proposition 22 in California, which would exempt their drivers from the state’s more restrictive AB5 regulation. The rule passed in the November election.
AB5 is the California law enacted in the wake of the Dynamex decision that puts into law the so-called ABC test that was at the core of the Dynamex ruling in 2018. The law would have forced Uber, Lyft and DoorDash to classify many of their independent contractor drivers as employees.
In the white paper, Uber suggested contributing funds to individual drivers who could apply them toward the benefits that matter most to them. It also suggested providing occupational accident insurance and working to ensure drivers are paid fast and potential earnings are transparent among other investments.
“While digital apps and platforms have been and continue to be powerful forces for creating economic opportunity, it is clear that more should be done to improve the quality and security of platform work,” the paper said. “The current health and economic crisis has brought into sharp focus the need for everyone, regardless of their employment status, to be able to find good quality, rewarding work; be able to work in the way they choose; and have access to adequate social protections and benefits.”
What those protections and benefits should be continues to be debated. In the meantime, the future of work in the U.S. for gig workers is unlikely to be directly affected by Uber’s U.K. decision but does add another twist to the employee classification battle.
“There’s really no technical precedent value of what they did in the U.K.,” said Bill Audet, an attorney with the California-based law firm Audet & Partners. “However, would I cite it in a footnote somewhere? Sure.”
Audet has represented and continues to represent Uber drivers in arbitration claims, but he told Modern Shipper the decision would likely have little impact on Uber’s business in the U.S.
“I think it’s a great start, but [when it] comes to the U.S. and particularly California, I just know that the fact that they did it in the U.K. will not make any difference to Uber,” he said. “The company is really focused on keeping the value up of the company and in my view to the detriment of the gig drivers.”
Other legal currents within the U.S. are expected to have an impact, however. In January, the New York Supreme Court ruled in the Matter of Lowry decision that Uber drivers are employees and therefore entitled to unemployment insurance.
Writing for the National Law Review, attorney Kevin J. Smith, special counsel in the Labor and Employment and Litigation Practice Groups for law firm Sheppard Mullin, said the ruling, while limited, foreshadows future decisions involving gig economy workers.
“Courts and state labor agencies across the United States have been struggling with similar worker classification issues for gig economy workers,” he wrote.
“While the Matter of Lowry decision represents a small victory for rideshare drivers in upstate New York, the classification battle is not ending any time soon,” Smith added. “In light of this decision and the passage of Proposition 22 in California, we expect classification issues to remain at the forefront of employment and labor law concerns, particularly in the gig economy.”