In a recent landmark ruling, on the 19 February 2021, the UK Supreme Court has ruled that Uber drivers are ‘workers’, and not ‘independent contractors’. The judgement in the case of Uber BV and others v. Aslam and others, marks a paradigm shift in the treatment of individuals working in the gig economy. These individuals, under the status of ‘workers’, shall be entitled to basic worker rights such as the minimum wage and holiday pay.
Background of the Case
The claim that Uber drivers are ‘workers’ for the purpose of employment legislation, was raised in 2016, before the Employment Tribunal, by private hire vehicle drivers performing driving services booked through the Uber application. On the contrary, Uber claims that these drivers are ‘independent contractors’, and therefore, self-employed. Consequently, they are not entitled to any paid holidays, as it would amount to a huge bill, given the number of drivers involved. Nor are they entitled to any minimum wages, as monitoring the working hours and minimum wage would not be feasible.
The Employment Tribunal held that Uber drivers are ‘workers’ as they very well satisfy the test of being ‘workers’ under section 230(3) of the Employment Rights Act, 1996. They cannot be termed as self-employed, due to the amount of control exerted by Uber, when the drivers are working for them. The appeals made by Uber were dismissed by Employment Appeal Tribunal, and the Court of Appeals. Uber then challenged this decision before the Supreme Court.
Uber argued before the Supreme Court that it merely provides a technology service through the Uber App, which helps connect the Uber driver with the passenger, as well as acts as a payment collection agent for the drivers. It also relied upon the terms of the written agreement, and contended that as soon as the driver is connected with the passenger, a contract is created between them, and Uber no longer remains a party to the transaction.
Analysis of the Court
The Court observed that it was necessary to understand the purpose of the employment legislation, and stated that “that purpose is to give protection to vulnerable individuals who have little or no say over their pay and working conditions because they are in a subordinate and dependent position in relation to a person or organisation which exercises control over their work.” The term ‘worker’ is defined by section 230(3) of the Employment Rights Act 1996 to mean:
“an individual who has entered into or works under (or, where the employment has ceased, worked under) –
(a) a contract of employment, or
(b) any other contract,.…whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual;”
Thus, the test for whether an individual is a ‘worker’ within the meaning of this section or not Consists of three elements as mentioned in clause (b) of the definition. They are: (1) a contract whereby an individual undertakes to perform work or services; (2) an undertaking to do the work or perform services personally; and (3) a requirement that the other party to the contract is not a client or customer of any profession or business undertaking carried on by the individual.
The Court, by citing the observation made in Bates van Winkelhof v Clyde & Co LLP, highlighted how employment law distinguishes between those employed under a contract of employment, those who are self-employed (i.e. undertaking work for their clients or customers), and those who are self-employed but perform their services as a part of a profession or business undertaking carried on by someone else. The last category formed the middle ground, which may not be entitled to the statutory right against unfair dismissal; however, is entitled to other statutory rights.
The Court appreciated the finding of the Tribunal that the drivers are free to choose when, how much, and where to work. However, the following aspects highlighting the extent of control exerted by Uber were emphasised upon:
- The remuneration (fare) to be received by the drivers is set by Uber. The drivers are not permitted to accept any fare higher than that, unlike regular taxi drivers.
- The contract terms are defined and imposed by Uber, and the drivers have to perform their services on those terms.
- Once logged in to the Uber app, the drivers’ acceptance of the ride is also regulated by Uber. Firstly, the driver is shown limited information about the passenger, and secondly, the driver is not made aware of the destination unless the trip starts, allowing him no opportunity to decline the trip on that basis. Also, the rate of cancellation or declining of trips is monitored, and a penalty is imposed to this end.
- Uber exercises significant control over how the drivers would deliver their services. The route to be taken is fixed by Uber, and it also imposes financial penalties in cases of a complaint. Strict conditions such as maintenance of average rating, termination of relationship with Uber if the ratings are not improved, are imposed on Uber drivers.
- The communication between the driver and the passengers is restricted by Uber to the necessary minimum, and it must not extend beyond the particular trip. This means that they have no option of improving their economical position by using their professional or entrepreneurial skills. Uber further controls the collection of fares, payment to drivers, as well as managing complaints.
Analysis in the Indian Context
In India, despite the scepticism towards the gig economy, the same is on the rise, especially thriving due to the pandemic. This covers services provided by Uber drivers, courier delivery, food delivery, etc. The advent of gig economy poses difficult challenges upon the country’s labour market, such as adequate labour protection. With respect to the challenges faced by the workers, the market remains largely unregulated given its novel and dynamic structure, lack of job security and social security by way of pension, gratuity, absence of scope for upskilling, and lack of legal protection.
The primary issue with the gig economy is the attempt of companies in pushing to defend a controversial business model, where they treat their workers as independent contractors rather than employees who would otherwise be entitled to traditional benefits and protections such as workers’ compensation, unemployment insurance, family leave, sick leave, or the right to unionize. Companies are using terms as ‘driver-partner’, ‘delivery-partner’, etc., to evade their responsibilities towards them.
Section 2(s) of the Industrial Disputes Act, 1947 (‘ID Act’), defines who can be regarded as a ‘workman’, as follows:
“workman means any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied,…”
Before considering whether gig economy workers are ‘workman’, it is important to consider the definition of an industry. Under section 2(j) of the ID Act, “industry refers to any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft, or industrial occupation or avocation of workmen”. Further, the triple test established in the case of Bangalore Water Supply vs. R. Rajjapa, i.e., ‘industry’ is an undertaking: “(i) involved in a systemic activity;(ii) organised by the co-operation between the employer and the employees; and (iii) the activity is undertaken for the production or distribution of goods/services, for the satisfaction of human wants.” Therefore, applying this definition and the triple test, Uber, for instance, qualifies as an industry as it is involved in a systemic activity where it facilitates in connecting the drivers and passengers through the Uber App, which is carried on by the cooperation of the drivers, to provide service of transportation.
Further, the Uber drivers are employed in an industry, engaged in a skilled job for hire, and the terms of their employment are strictly dictated by the written agreement. Furthermore, in the case of Dharangadhara Chemical Works vs. State of Saurashtra, it was held that the primary test for the determination of the employer-employee relationship is the test of control and supervision/subordination. This means that if the employer controls and supervises the type and manner of the work that will be undertaken by the worker, there exists an employer-employee relationship. The extent of control exercised by Uber and the level of subordination and dependence of the Uber drivers, has been well established in the recent decision of the UK Supreme Court in Uber BV. Therefore, this judgement from a common law jurisdiction is of acute importance for India, and such gig workers must be given the status and benefits of a workman. A similar decision had also come from the California Labour Commission, which held that the Uber drivers are not independent contractors, but employees. The decision was upheld by the Court of Appeals.
This decision was based on a three-pronged test, called the “ABC test” codified by California’s AB 5 to determine whether a worker should be classified as an employee or independent contractor. Under this test, workers must be free from the control and direction of the hiring entity and must perform tasks that are outside the usual course of the hiring entity’s business to be deemed independent contractors.
Uber, without exception, contended that its main business is not driving passengers, but it is a technology platform. The Court rejected this claim on the same grounds as the UK Supreme Court to assert that Uber exercises significant control on the drivers, and that the drivers are performing services for the passengers in the usual course of business of Uber.
Code on Social Security, 2020
The Code on Social Security, 2020 (‘the Code’) has been recently enacted, which formally recognizes and defines a “gig worker” as “a person who performs work or participates in a work arrangement and earns from such activities outside of traditional employer-employee relationship.” This marks a significant step towards the welfare of gig workers. While the Code does not provide any specific social security for gig workers, it prescribes that the Central and State Governments will notify schemes for such workers, related to life and disability cover, health and maternity, provident fund, employment injury benefit, housing, etc. It also mandates the registration of such workers.
It is pertinent to note here, that while the enactment of the Code has defined ‘gig workers’ as a distinct category, it presently only provides the Central and State Governments the right to notify schemes in favour of gig workers, that are to be funded through a combination of Central Government, State Governments, and Aggregators. This clearly does not provide a tangible benefit to gig workers as of now. Also, this does not entitle gig workers to benefits under other labour and employment legislations in operation in India. On the contrary, the effect of the decision of the UK Supreme Court is that it includes Uber drivers into the category of ‘workman’, which therefore, entitles them statutory rights not only under the Employment Rights Act, 1996, but also under other employment legislations such as, National Minimum Wage Act, 1998 and the Working Time Regulations, 1998.
Had the legislature provided for an explanation under the definition of ‘workman’ under the ID Act, to provide the meaning of gig workers and include them within the meaning of ‘workman’, it would have had a similar effect as that of the UK Supreme Court decision. For instance, if ‘gig workers’ were included within the meaning of ‘workman’, any dispute between them and their employer would have been dealt with under the ID Act, as for other workman. As well as, they would be entitled to other benefits under different employment legislations such as Worker’s Compensation Act, 1923, The Trade Unions Act, 1926, Payment of Wages Act, 1936, etc.
While Uber is determined to not treat its drivers as employees, it has faced numerous legal proceedings across the world. However, varied stances have been taken by courts across the world regarding the qualification of Uber drivers as employees or independent contractors. However, the nature of employment of gig workers is indeed hybrid. It is this non-traditional nature of employment, that allows companies to exploit them, and do away with their responsibilities towards them. Consequently, such individuals are deprived of employment benefits and social security under various labour law legislations. The UK Supreme Court ruling has a much wider scope and impact on the rights of Uber drivers as ‘workers’. On the other hand, the solution provided under the Code has a more confined effect. However, considering the present scheme of protection of gig workers, a further relevant issue that requires attention in future is the provision of mechanisms for settling disputes between such workers and their employers. As the gig economy is on the ascent, it is extremely vital that schemes for protection of the rights of gig workers are introduced at the earliest.
– Paridhi Rastogi