The Definition Of ‘Worker’ After Uber

23 January 2017

What Does It Mean For Your Auto Enrolment Compliance?

Summary

  • An Employment Tribunal recently ruled that Uber drivers are ‘workers’ for the purposes of the Employment Rights Act 1996, the National Minimum Wage Act 1998 and the Working Time Regulations 1998.
  • The decision was reached despite complex contractual documentation between Uber and its drivers to the contrary.
  • The same definition of ‘worker’ is contained in the Pensions Act 2008, which means that the Uber drivers (and similar workers in the ‘gig economy’) may need to be automatically enrolled into a qualifying pension scheme with minimum employee and employer contributions.

Aslam V Uber BV

An Employment Tribunal recently ruled that Uber drivers are ‘workers’ for the purpose of the Employment Rights Act 1996, the National Minimum Wage Act 1998 and the Working Time Regulations 1998. As such, drivers are entitled to the minimum wage and paid leave.

The Tribunal reached this decision despite Uber’s contention that Uber is simply a technology platform that puts drivers in touch with passengers, it is not a provider of taxi services and its contractual documentation with drivers reinforces its purported business model.

The Tribunal held that the reality is that Uber is in the business of providing taxi services and engaged the drivers as workers for this purpose. Uber interviews and recruits drivers, controls passenger information and intended destination, sets the default route, fixes the fares, imposes numerous conditions on the drivers, controls the drivers in the performance of their duties, handles complaints by passengers and reserves the power to amend the drivers’ terms unilaterally.

‘Worker’ v ‘independent contractor’

The ‘worker’ definition is taken from the Employment Rights Act 1996 (ERA) and is used in other legislation too, such as the Minimum Wage Act and Working Time Regulations.

The definition has been considered by the Tribunals and Courts, which have laid down some questions as an aid to identifying a worker:

  • Personal service: Did the individual undertake under the contract to personally perform work or services?
  • Business undertaking: Was the status of the ‘employer’ under the contract that of a customer of a business undertaking carried on by the individual?
  • The test to determine whether the individual is ‘carrying on a business undertaking’ and whether the ‘employer’ was a ‘customer’ of that business is similar to the test to determine whether a contract was a contract of service or a contract for service. Relevant factors could include: the degree of control exercised by the ‘employer’, the exclusivity of the arrangement, its typical duration, the method of payment, which party supplied the equipment used and the level of risk undertaken by the worker. The fact that HMRC might regard an individual as self-employed is relevant, but not conclusive.
  • Mutuality of obligation: Is this present? It should be considered an essential element for the individual to fall within the category of worker.

Pensions Act 2008

The Pensions Act 2008 uses the same definition of ‘worker’ as the ERA and so a natural conclusion from the Uber case is that Uber will need to automatically enrol its drivers into a qualifying pension scheme, if they meet the definition of ‘eligible employee’, and contribute in respect of them. Indeed, it has already been suggested that Uber could face a £12m pensions bill from the case.

In support of this, extracts from Pensions Regulator guidance and seminar presentations on determining worker status are consistent with the views of the Tribunal and Courts -

  • An individual considered by HMRC as self-employed for tax purposes, may still be classed as a ‘worker’, if they work under a personal contract of services.
  • Individuals are likely to be considered as workers if most, or all, of the following statements are true:
    • The employer relies on the individual’s expertise and expects them to perform the work themselves.
    • There is an element of subordination between the employer and individual (e.g. the individual reports to the employer’s managers).
    • The contractual provisions state that the contract is not a contract for services between the employer and the individual’s own business (although as demonstrated by the Uber case, the terms of the contract are not conclusive).
    • The contract provides for employee benefits such as holiday pay, sick pay, notice, fees, expenses etc.
    • There is a mutual obligation set down in the contract to provide or do the work.
    • The individual does not incur any financial risk in carrying out the work.
    • The employer provides tools, equipment and other requirements to the individual to carry out the work.

    The guidance from the Pensions Regulator also makes it clear that it is up to the employer to decide who their workers are.

    What happens now?

    This is a ‘first instance’ decision and Uber has stated its intention to appeal. However, the case has potentially much wider implications for the so called ‘gig economy’ (where, instead of a salary, workers get paid for the ‘gigs’ they do, such as deliveries or taxi journeys).

    In the meantime, employers who are concerned that they may not have properly fulfilled their automatic enrolment duties, because they may have contracted with individuals who provide services to them on an independent contractor basis and these individuals may now have to be treated as their workers, should contact their usual JLT consultant. They will be happy to work with you on determining the implications of the Uber case on pensions and wider reward.

For more information contact John Wilson on +44 (0) 131 456 6850 or at john_wilson@jltgroup.com