No doubt you will have heard by now of the Tribunal hearing that took place on 28 October 2017, in which drivers for Uber (London only, as we understand at present) being classed as “workers” rather than just “self-employed”, and therefore should be entitled to the national minimum wage, holiday pay and other perks. Uber’s terms and conditions meant the drivers’ actions were controlled by the company, so they should have been considered workers rather than self-employed.
This, as you might imagine, has set the cat amongst the pigeons big style; our phones and emails haven’t stopped since the judgement came out. Fortunately we were able to ‘Hold the Front Page!’ of PHTM last month and include this breaking news. So now the implications have to be studied, considered, and discussed by all.
We will start with an overview from Gary Jacobs, an accountant and a director of Drivertax Ltd with over 25 years’ experience in the trade. He writes regularly for the trade press, and speaks annually at the PHTM Private Hire and Taxi Exhibition, as well as other industry seminars and user group meetings, his most recently titled talk being “HMRC and driver status – the oncoming storm”.
Gary is also a director of Driverserv, a consultancy that deals specifically with driver status working alongside the UK’s leading employment consultants, Accountax.
“UBER. A German word, indicating the highest, greatest, or most extreme example of something.”- Collins Dictionary
Welcome to today’s word quiz. The answer to the above seems to be causing a great deal of panic amongst many people, including many of my clients and colleagues in the private hire industry. I thought I would wait a little until the blogging dust has settled to put my own view of what this means to all of us in the trade. So here goes...
I must admit to having a dog in this fight. I have been dealing with employment status issues for many years and therefore none of the implications of this are new to me. As I sat and looked at this forty-page document, all I could think was what a nightmare this is to review, and how I didn’t truly understand the defence case.
I am not a solicitor, however as an accountant I am well versed in case law relating to this and to defending HMRC claims, so let’s look at what happened.
Firstly, contrary to the implications certain groups have made over social media, this is not a court case; nor is it a class action that will immediately affect thousands of drivers. It is a First-tier tribunal which, although legitimate and relevant, does not create precedent, it merely creates decisions that are considered persuasive in other judgements at the same level and above. Even if it was a formal precedent there are already opposing cases including Autoclenz, or Arctic Systems (versus HMRC). It does mean however that other drivers who already have the right to [work this way] may now choose to follow in their colleagues’ footsteps and make a make a similar case, with the argument to hand.
Most of the tribunal notes are regarding technical issues, but in general Uber were making a couple of substantive claims to show that they were not liable specifically for the employment of the drivers. They were a technology company (with an operator’s licence!) providing a link between passengers and drivers, making both parties their customers. Unfortunately, you do not have to look too far to see many similar models in the private hire industry where the operator is in effect a marketing company who for a fee introduces driver to passenger, that fee being the weekly circuit fee.
Secondly, it was stated that the contracts themselves didn’t support a relationship between the driver and Uber. However, any professional involved in status disputes nowadays knows that the current thought is that the contracts cannot be taken in isolation and tribunals tend to look at how well the contract relates to the actual working practices of the company.
There was a third issue about whether or not a Dutch company in a UK tribunal is under the appropriate jurisdiction. As we now know the courts disagreed on all counts.
The tribunal chose to look at what they deemed as the true working practice of the drivers, and used Uber’s own paperwork, called “guidance”, against them. They indicated sufficient proof that the drivers in this case were deemed as workers. Now here is the twist: the term “worker” has a specific legal definition according to tax law and it isn’t “employed”.
There is a nuance here. It does give some specific employment rights to the drivers including National Minimum Wage. holiday pay and sick pay; check out https://www.gov.uk/employment-status/worker, and good luck to those guys who will get it. However it does not at this stage mean that the whole industry is now going to be employed as drivers only.
At this stage I would also like to dispel some employment status myths and express my confusion as to why Uber didn’t make a defence based on past employment tribunal cases relating to this field. There is a test which is normally applied to these disputed cases called the ‘badges of trade’:
Mutuality of obligation - the driver must come to work and the operator is obligated to give them work. Personal service - the driver can offer another suitably qualified individual to do the job. It is important to note at this stage that the judgement did recognise an obligation of sorts regarding personal service. It was noted by the judge that log-ins to the app could not be shared and Uber could only deal with the driver who was registered.
The latest incarnation is the SDC test: Is the driver under supervision, direction or control? I have argued many times that an operator gives a driver a job but doesn’t tell them how to get the customer from A to B, that’s the driver’s task. Once again, the judgement recognised the wide-ranging obligations imposed on the driver as a form of control. But it was not seen as an immutable central tenant and could have been argued to a greater degree by the defence. How this relates to Uber’s working practice and why it did not form a part of the defence is personally puzzling, I do however look forward to their basis of appeal.
“The key elements required for someone to be an agency worker are:
• there is a contract (an employment contract or a contract to perform work personally) between the worker and a Temporary Work Agency (TWA);
• that worker is temporarily supplied to a hirer by the TWA; and
• when working on assignment the worker is subject to the supervision and direction of that hirer AND
• the individual in question is not in a business on their own account (where they have a business to business relationship with the hirer who is a client or customer)”
There is no way that the Uber tribunal case will not affect the way a business should set out its arrangement with self-employed subcontractors. This matter is far from over, and everyone should start to review the status of their drivers before the HMRC offer to do it for you. However, it is important to note that this is also very specific to Uber’s working practice, and each future case will be judged on its own merits. To reiterate, the courts will always look at the working relationship rather than the one laid out in the contract if they don’t look similar. Reality, over words, will determine status.
So now we can only attempt to dispel some of the panic that has set in out there, by way of “What’s going to happen to our business?” “Does this mean all my drivers have to go PAYE?” “What do we have to do??”
First and foremost, the tribunal judges took the decision they did, based on the Uber business model – and you all know how that works. If not, it’s set out very clearly in the judgement transcript.
The judges were extremely astute, and went into far more depth of detail than is normal in these employment tribunals, so we’re told. The point is that Uber’s business model came under some pretty heavy fire, particularly the bit about Uber saying their 30,000 London drivers were “expanding their business”. The only business, the judges maintained, that was being expanded in this model was Uber’s.
During the course of the judgement there were eleven points over which Uber was either criticised, or about which it was stated that they did not have a cogent argument. What that means in simple terms is that when (not if) Uber appeals this decision, they will have to come up with a convincing argument to answer to all eleven of those points. That’s a pretty tall order in anybody’s legalese.
What we can safely say to you all is this: You are running successful businesses based on an entirely different business model altogether. Proof of this?
• You more than likely have a combination of owner/drivers and drivers who drive company vehicles
• You more than likely have a heavy proportion of school/Social Services/special needs contracts, with designated drivers – by choice and specialised training - for those routes
• Your customers, especially long term customers, often specifically request certain drivers to pick them up; those drivers and customers obviously are familiar with each other by sight, if not by name
• Your customers always state a destination (or more than one on occasion), and the driver is allowed to know that destination when he is allocated the booking
• Your drivers are very often uniformed and/or corporately identified to customers
• Your fares are set as a company policy, made known to the drivers and passengers alike, and adhered to as a matter of course
• Your company does not indulge in ‘surge pricing’: putting fares up at peak commuting times and rainy weather
• You do not maintain a rating system, either for drivers or passengers
• Your drivers are not penalised if they choose to miss a pickup; they just plot off shift
• Your company is able to efficiently manage advance bookings because the destinations of your bookings are known and plotted in your dispatch system, and known to the drivers
• Your company does not have Terms and Conditions, for both driver and passenger, that absolve your company of all responsibility in case of accident, damage or injury and refer those affected to a foreign country
However, we have already begun to seek legal advice and opinions on this matter; in the meantime may we just offer this thought: Keep Calm and Carry On. Live in the day, go out and earn some money as usual, and time will tell what the outcome of this tribunal will bring. It’ll take some time, as Uber fully intends to appeal the decision – this will drag the matter on into next year and beyond.
In any event, the transcript sets out that businesses outside London will not be affected by this immediate Tribunal, as evidenced by paragraph (5): The Third Respondents (‘UBL’) hold and/or manage PHV Operators’ Licences issued by various district councils outside London. Because, as we will explain, our attention has focused on London-based drivers, UBL do not feature further in these reasons.”
We shall attempt to bring any and all developments in this case to PHTM readers as soon as they are known, as always.
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