A driver for Uber uses the Google Maps application in a taxi in New Delhi, India. (Photographer: Dhiraj Singh/Bloomberg)

Uber Is At The Centre Of A Challenge To The Gig Economy

Ride-hailing giant Uber Technologies Inc. has been in the news for everything from a toxic work culture to facing challenges to its licences in the U.K. It’s also at the centre of a legal battle that may have far-reaching implications for the gig economy —preferring short-term contracts or freelance work over permanent jobs.

In 2015, two drivers approached the U.K. employment tribunal demanding that Uber grants them basic workers’ rights such as minimum wages and paid holidays. They two argued that they operate as workers and not as independent contractors.

Uber’s countered that its drivers were self-employed and worked independently with minimal supervision. In fact, in the underlying contracts, Uber considers them to be customers, not employees or workers.

Its argument didn’t succeed. The tribunal found that Uber exercised a significant degree of control over its drivers. That led the tribunal to conclude that tax-hailing company’s drivers ought to be granted status of workers — an intermediary category between the self-employed and the employee.

In the U.K., this intermediate status of ‘worker’ allows an individual rights to working time and rest breaks, Anna Birtwistle, partner at the British law firm CM-Murray, told BloombergQuint.

It allows them the national minimum wage in the U.K. which equates for an individual of age 25 or above to pound 7.50 and offers them protection from being discriminated and shields them under the whistle-blowing laws. Another key point is that these individuals gain a right to automatic enrollment in pensions programs.
Anna Birtwistle, Partner, CM-Murray

Uber challenged the tribunal’s order, but the appellate tribunal upheld it. The company then appealed to the Supreme Court, which rejected its application and asked Uber to mount its challenge before the Court of Appeal.

If the employment tribunal’s view giving Uber drivers the ‘worker’ status is upheld by the top court or if Uber does not persist in its challenge, the case will establish new employment law principles which will have a far-reaching impact.

There is no question that the Uber case is going to have an impact on how the gig economy companies, which prefer temporary positions and freelance work, engage individuals to work for them, Birtwistle said.

These companies and workers will be following the judgement and comments made by the tribunals and courts very carefully.
Anna Birtwistle, Partner, CM-Murray

Especially regarding how the contract between companies and the people they engage is put together and the kind of relationship it reflects. So, gig economies could be looking at revising standard contacts, she said.

And if they want to avoid the ‘worker’ status, they have to consider pushing out a lot of control. “They also have to consider the right of the individual to determine how and for whom they work,” Birtwistle said.

Indian Context

While Uber battles it out at the Court of Appeal in the U.K., the ride-hailing giant faces similar challenges operating in a relatively grey zone along with rival Ola. Drivers and their unions have already approached legal fora such as the Delhi and Karnataka high courts.

There are no precedents set by Indian courts guiding the rights of gig workers such as Uber and Ola drivers, experts tell BloombergQuint. Drivers rights cannot be protected since they don’t even have the rights that can be said to accrue from an employee-employer relationship, Anshul Prakash, partner at law firm Khaitan & Co, said.

If the drivers are given the status of ‘employee’ in India, they will get the benefits of social security, provident fund and coverage under state employee insurance act and will also be eligible for gratuity if they serve for five years, Veena Gopalakrishnan, employment law head at AZB & Partners told BloombergQuint. They will be protected from unreasoned or sudden termination and the employers will not be able to fire them instantly or at will. The drivers will also be eligible for leave entitlement, she said.

Currently, its purely contract driven, so the drivers get to unilaterally decide when to take leave.
Veena Gopalakrishnan, Employment Law Head, AZB & Partners

It’s this line of argument on independence of the drivers that Uber and Ola are likely to take before the courts if they want to avoid providing their drivers employment benefits, an argument that has failed to convince authorities and courts in the U.K., the U.S. and Brazil.

Based on the employment law jurisprudence, an independent contractor is distinguished from an employee primarily on the basis of lack of control, which gives these contractors freedom and flexibility to work in the manner they please and for whoever they please. An independent contractor may not be bound by exclusivity and could work for both Ola and Uber at the same time, which is something that drivers typically do in India. But these independent contractors are unable to avail the employment benefits.

The Supreme court has laid down some tests for determining relationship between an employer and employee, the most being the degree of control exercised, Prakash said.

Prescribing certain fare, regulating conduct is not something which puts someone under domain of ‘control’ by these drivers by taxi aggregators. Since there are no specific work hours prescribed, or leave period to be adhered to, they don’t have to apply to any employer to take time off.
Anshul Prakash, Partner, Khaitan & Co

It’s all about the partnership the drivers have in terms of their business with the aggregator, which is why the concept “deemed workmen” scenario has failed to really evolve in India, he said.

At the same time, India cannot have the gig economy go completely unregulated, Gopalakrishnan said. These workers will need to have rights and these rights will need to be given in legal, fair and ethical manner.

Our industrial jurisprudence, the industrial disputes act, payment of gratuity act – these legislations don’t really lend themselves to the relationship that in this scenario where people are businesses here. It’s the individual which is a businessman, the driver is running his own show here, technically.
Veena Gopalakrishnan, Employment Law Head, AZB & Partners

The U.K. has definitely taken the cue and commissioned an independent review of its employment practices in the context of the gig economy. Uber continues to aggressively fight this development in the U.K., EU and other parts of the wold, because it may lead to not just greater compliance burden but increased costs as well. In India, experts say that if the regulatory vacuum continues, the driver unions may be fighting a losing battle.