Uber is going to find itself popping in and out of the court much more than it would like before too long after ending up on the wrong side of a ruling from the Employment Appeals Tribunal.
The ruling itself surrounds the relationship between the drivers and Uber, and has the potential to be a bit of a headache. The Employment Appeals Tribunal has ruled the company’s drivers should be considered and treated as employees of Uber, not independent contractors.
“The reality of the situation was that the drivers were incorporated into the Uber business of providing transportation services, subject to arrangements and controls that pointed away from their working in business on their own account in a direct contractual relationship with the passenger each time they accepted a trip,” the ruling stated.
“Having thus determined the true nature of the parties’ bargain, the ET had permissibly rejected the label of agency used in the written contractual documentation.”
We’re not exactly legal experts at Telecoms.com, but the ruling seems to say Uber controls the relationship with the customer, therefore the drivers should be considered employees acting on behalf of the company. While this seems fair enough on the surface, the implications of this decision could be quite broad. Uber will of course appeal, but the question remains, are the foundations of the gig-economy being slowly eroded?
Governments and regulators around the world will be keeping a quiet eye on the decisions here, as there is unlikely to be rousing support from policy makers for Uber. It has hardly been making friends in the public sector, and whether this decision has a ripple effect, fundamentally changing the Uber business model in other territories globally remains to be seen. If the Uber appeal is dismissed, we have a feeling it might be bad news for Uber everywhere else as well.
The contractor relationship is one which is becoming more common as the digital wave swells. The tech companies pitch it is as a way for individuals to control their own hours and increase flexibility when it comes to earning money, which is of course true, but it does also mean it does not have to adhere to a minimum wage, holiday pay or numerous other employee benefits.
Such a decision might undermine the Uber business model, but this might only be the tip of the iceberg. There will also be a host of other digital entrepreneurs and established businesses which will be keeping a steady eye on developments; any precedent set in this ruling could also destroy the fundamentals of other businesses, such as Lyft or TaskRabbit.
Uber’s acting general manager for the UK, Tom Elvidge has already stated the company will appeal on the basis taxi and private hire drivers have been self-employed for a long-time prior to the introduction of the Uber app. This is a reasonable argument, but Uber is a completely different model compared to the traditional taxi rank. We’re not too sure how well this argument will hold up.
When you consider Uber is also going to war with Transport for London over the decision not to renew the company’s license in the city, Uber’s legal team is about to get a thorough work out.
Looking a bit more positive in Japan though
The Brits might be causing a few issues, but the same cannot be said out in Japan, where Uber execs are cosying up to Softbank.
Softbank is reportedly on the verge of finalizing its investment in Uber after months of discussions and bickering. Bloomberg first reported the news, which would see $10 billion change hands as part of the deal. Upfront, Softbank and other investors will be allowed to pump $1 billion directly into Uber, with a tender offer in coming weeks to buy up to $9 billion in shares from existing investors.
As part of the agreement, venture capital firm Benchmark Capital will also drop its lawsuit against former CEO Travis Kalanick, thought there is still potential for everything to fall apart if enough sellers are not found. Any deal would also include governance changes in the business.
Finding investors to sell the shares might be a bit of an issue however. Employees who own shares have had complications getting rid to date, with many being told they would have to wait for an IPO, though it seems Uber has not been keeping track of who and where they are. The team is said to be considering taking out numerous ads in popular US newspapers to inform investors of the plans and the option to sell.