The court ruling on Uber is bad news for both drivers and customers
Uber revolutionised the cab and private hire trade in big cities. Previously if you wanted to get around London you had the choice of either hailing a massively expensive black cab or ringing a minicab firm and hoping you got an answer other than ‘it’ll be 45 minutes’. Even if you did apparently get lucky you would usually wait for ages, ring again and be told ‘it’s just round the corner’. When it finally arrived, the driver wouldn’t know how to get to your destination and would have to have it pointed out in a well-thumbed copy of the A-Z.
The Uber app enables you to book a car, get a named driver, see a price, see where your driver is and follow his or her route on your phone. No cash changes hands, you can rate the service you get, and make any complaints and receive reimbursement without long phone conversations. It is safe and reliable. It is the 21st century.
But the benefits are not just for the passenger. Uber gives a transparent offer to drivers. If they accept the basic conditions of service to passengers, they receive a fee per journey which allows them to make an hourly rate after expenses and a fee to Uber which is a reasonable return on their time. The fee is set by dynamic pricing, so if there is a shortage of cars the price rises, incentivising more drivers to offer their services.
Drivers are free to turn the app on and off, which gives them the ability to choose the time and location of their work, and fits in with lifestyles very different from that of the 9 to 5 office worker. They can work for a minicab firm as well as using the app. Around a quarter of drivers work part-time to supplement incomes from another job or running a small business. Or they may be attending college, working during the day as delivery drivers, or have family responsibilities which restrict their work options.
The most thorough academic examination of Uber workers, led by economists at the Oxford Martin School found that the flexibility to choose their own hours is highly valued by Uber drivers. The researchers found that 80% of respondents rated this flexibility more highly than holiday pay or a guaranteed minimum wage. And respondents reported higher average levels of life satisfaction than other workers.
Classical liberals would argue that a voluntary arrangement which suits customers, Uber and their workers is a good thing. And it’s not even as if a pre-existing business was trying to avoid its obligations by casualising its existing workforce – the business didn’t exist prior to the app.
But the context is the legal status of different types of employment. In the UK you can be an ‘employee’ with an ever-growing raft of employment rights, a ‘worker’ with rather fewer rights, or ‘self-employed’. These statuses have different implications for tax purposes.
Uber drivers have previously been considered self-employed. The Supreme Court, ending a six-year-old case brought by two Uber drivers, applied tests drawn from previous judgments to determine status. For instance, because Uber drivers accept a given price (rather than setting their own price, as self-employed people often do), have to accept controls over the way their work, may face penalties for poor ratings, and are actively discouraged from making private deals with passengers, they were judged to be ‘workers’ rather than self-employed. In a memorable phrase, the relationship between Uber and its drivers is apparently one of ‘subordination and dependency’, according to Lord Leggart.
The judgment entitles drivers to benefits such as paid leave, the minimum wage for periods when they are waiting for business with the app switched on, and probably pension auto-enrolment.
Uber is now faced with paying compensation to the two drivers. But GMB union officials (who helped bring the case) believe that tens of thousands of drivers will also be entitled to an average of £12,000 each.
Uber may be able to settle these claims without going bust. But will it want to continue working in Britain, where it has faced continuous opposition from unions, black cab drivers and politicians such as the London mayor, Sadiq Khan? If it does, there are predictable consequences. It will have to cut back on the number of drivers, presumably concentrating on those prepared to work more or less full time. Those who have benefited from the ability to work occasionally will lose that opportunity.
This will have costs to both customers and workers. It will mean more limited availability of drivers at certain times, which will distract from the usefulness of the app to customers. Uber will certainly have to charge people more, while also taking a bigger slice of the price to cover benefits to the driver. There will be lower usage of Uber cabs, and possibly some increased danger as late-night partygoers hitch dubious lifts or walk home.
The judgment has of course wider implications for other app-based businesses such as Deliveroo. We can expect similar cases to be brought and similar verdicts reached.
We cannot dispute the legal basis of the Supreme Court’s findings. Nevertheless, it seems unsatisfactory that such important decisions about employment regulation are taken by judges rather than by Parliament, something which happens far too frequently. And it is worrying that, at a time when job opportunities for many are going to be very limited, we are closing off forms of employment which benefit those for whom flexibility is important, in the name of giving some of them unsought benefits which they may not value as highly.