Are Uber’s drivers ‘employees’?

The past year was a rollercoaster ride for Uber. They were marred by sexual harassment lawsuits, driver classification and their use of the controversial “Greyball” tool. Regulators and traditional rivals such as cab drivers and taxi firms have given the ride-hailing app much grief across the world by their non-stop protests. Indeed, Transport For London, England’s government body which foresees the transport system in the country, rejected Uber’s application for renewing their license because they were deemed unfit.

But none of these legal hurdles could come as close to sinking them, as the dispute over the employment status of their drivers.  Should they be considered as independent contractors or are they Uber’s ‘employees’?

The term ‘employee’ has several liabilities attached to it such as benefits, overtime pay, monthly paycheck – the whole nine yards. But Uber’s basic business model does not operate this way.

Uber tries to dodge around the ‘employee’ status of their drivers by defining them as ‘partners’ in their legal contract. On the other hand, Federal law defines employers as entities with the ‘power to control and direct the employee in job details and assignments of how the work is supposed to be performed’. And Uber clearly directs their drivers on how to perform their job, from giving them pickup locations, to penalizing them for cancelling rides.

But Uber tried arguing that it does not have any direct control over their drivers. They are free to work at will, whenever or wherever they want and can dictate their working hours at their leisure. The drivers are paid by their clientele, not Uber. In all of this, Uber’s role is merely relegated to collecting these payments and then distributing them after taking their fair share of it.

These drivers are under no obligation to work solely for Uber, indeed many of them work with similar ride hailing apps such as Lyft and also keep their day (or night) jobs. Employers typically provide their workers with the necessary tools for the job; taxi firms provide cabs to their drivers. But, Uber’s drivers have their own cars and even pay for fuel.

However, the Employment Appeal Tribunal (EAT) in the UK decided that ride fares were decided by Uber, not by the drivers. Uber drivers had to abide by a certain code of performance, and if drivers fail to abide by these rules, they end up receiving dozens of ‘tips’ by Uber to change their behavior. All of these features are characteristic of typical employers.

By these definitions and more, Uber’s drivers are considered as employees. This fundamentally challenges and dismantles Uber’s business model. Because Uber now has to provide their drivers with all the benefits which employees are legally entitled to in the UK. All of this would come at a cost however, since Uber would now have to reduce the percentage of their cut – currently set at around 70%.

While Uber enjoys their preferred relationship status with their drivers in the US (partnership), this ruling in the UK can have legal repercussions for many sharing platforms which rely on creating peer-to-peer exchanges. In other words, UK’s ruling could threaten the freelance driving industry in general, from cars, homes, writing, video editing – you name it.