The Uber decision: a straw in the wind

You can read the decision of the Employment Tribunal in Uber here. What I want to flesh out is what, at least as it seems to me, the Decision does and doesn't do.

The Decision will not fix our malfunctioning labour market (see here for my primer). That malfunction stems from two systemic flaws in our law. First, in our tax law - which imposes on relationships that are economically equivalent substantially different burdens to tax. Second, in our employment law - which imposes on relationships that deliver to the engager of labour the same end result substantially different employee protection burdens.

As I've written elsewhere, we should be concerned about these flaws. Businesses worth billions of dollars are constructed to exploit the arbitrage opportunities they create. These arbitrageurs can drive out 'good' business actors. And the arbitrages can deliver to shareholders and customers unearned subsidies borne by taxpayers and workers. These are very material failures in capitalism, they're not news to Government, and it's pretty abysmal that Government has failed to respond.

The flaws cannot be resolved separately. They must be resolved together. Government is constantly (albeit tentatively) reviewing the tax flaw. Separately it is currently reviewing the employment law flaw. But there is no review that examines them together. And whatever the quality of those separate reviews their separate outcomes will not, because they cannot, resolve the malfunction. Wearing a monocle will address certain consequences of myopia but you'll still be lousy at football.

The Uber Decision demonstrates a muscular judicial response to the employment law flaw. Such a response will be familiar to those of you who have read me on how judges have responded to tax avoidance. It should be applauded. But the Uber decision is fact specific - it has no direct read across to any other engager of labour. And, unlike in the tax avoidance sphere, rule arbitrage in the employment sphere has yet to draw any meaningful response from our legislators.

As to Uber itself, the consequences of the Decision must be examined through two lenses. One which looks backwards: what does the decision mean for the past? And one which looks forward: what does it mean for the future?

As to the past, the Decision is fact heavy and this, to a lawyer, makes a successful appeal unlikely. It's not perfect: it majors, and compellingly, on the true factual characterisation of the relationship between Uber's UK entity and drivers. But its analysis of the legal consequences of that factual characterisation is thin. (Indeed, it is largely to be found in a single paragraph, 94). However, this on its own is unlikely to enable the Employment Appeal Tribunal to overturn the finding that the driver is a worker. The Decision could, however, be more vulnerable on the question when the driver is a worker - at all moments when the Uber app is turned on, or only when the driver has a passenger?

If you assume the Decision survives the inevitable appeals, it will (at least until Uber changes its arrangements) deliver some employment law benefits to the affected workers. The most meaningful of these is likely, in practice, to be holiday pay. But it could also land Uber with a very substantial bill for unpaid NICs.

"Could" because the Decision only concludes that drivers are 'workers.' It does not examine whether they are also 'employees', a subset of workers. If they are found, in what would have to be separate proceedings before a specialist tax tribunal, to be employees then, assuming the 40,000 drivers engaged by Uber earned an average of £600 per week, Uber would accrue a NICs bill of over £13m for every month it has operated - or continues to operate - these arrangements.

Will HMRC take the case? There's ample reason to think it should: watch this space.

As to the future, even the Employment Tribunal recognises that Uber may adapt its arrangements to seek to avoid these tax and employment law consequences going forward.

I would expect these adaptations to look, in practice, like Uber reducing the control that it exercises over drivers. I do not understand Uber to be contemplating engaging drivers as "workers" going forward. So the gain for drivers is likely only to be temporary.

Of modest and temporary effect, and Uber specific. The Decision is little more than straw in the wind.

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