Last Friday, the floodgates opened. Thousands of Uber drivers flocked to sue the ride-hailing company for back pay and benefits after the Supreme Court ruled that it must now classify drivers on its platform as workers. So far, the equivalent of over 20 per cent of the company’s 60,000 UK drivers have launched a claim against Uber, according to figures from lawyers organising group litigation action.
Andrew Nugent Smith, managing partner of law firm Keller Lenkner, says that drivers were approaching his team to launch claims “on an hourly basis” since the ruling on Friday. His firm, which is representing 9,000 claimants, has calculated that each driver could claim back between £10,000 and £12,000 each.
Leigh Day, the law firm that represented drivers during the long-running legal battle that ended up in the Supreme Court, is similarly optimistic. Nigel Mackay, an employment partner who is acting for 3,000 claimants, says that each worker could be entitled to up to £12,000, depending on how long they worked for Uber.
The cost to Uber could be huge. Uber declined to provide figures, but Deutsche Bank estimated that a worst-case scenario would require Uber to pay $2.5 billion in VAT back-taxes, in addition to future price hikes in the UK that could approach 30 per cent. And that’s without factoring in the cost of minimum wage and benefits for current drivers reclassified as workers. If that’s bad, Uber’s accounts paint an even gloomier picture. In its latest global filing the company admitted that it could never reach profitability and said that its losses had ballooned to $16.4 bn by December 2019.
As Uber doesn’t break down its accounting for each country it remains unclear how big an impact the Supreme Court ruling will have on its business. However, its global figures show that in 2019, 23 per cent of Uber’s $65bn global gross bookings came from London, alongside four US cities (San Francisco, Chicago, Los Angeles and New York).
In the company accounts, the UK’s Supreme Court judgment was listed under “risks”. If it were forced to reclassify drivers as employees, or quasi-workers, Uber said it would incur “significant additional expenses” and that it would require it to “fundamentally” change its business model”, a move that would have an “adverse effect” on its “financial condition”.
In practice, Uber’s entire model is based on recruiting a large supply of vehicles to meet surges in demand at no additional cost to its business. This would be upended if it paid all drivers minimum wage as soon as they logged on to the app. Uber’s algorithm would not just have to meet any surges in passenger demand, but also squeeze as many rides as possible out of every driver and cut their waiting time to make paying minimum wage worthwhile.
The knock-on effect could be higher prices for customers, or Uber taking a lower cut of the profits from each ride (on average, it takes a fee of 20 per cent). And because this decision only affects Uber and not its direct competitors, it could effectively be pricing itself out of the market – at least until similar legal claims are brought against other gig economy ride hailing firms.
Uber’s hopes of a win were already shattered by Thursday night, when the company received the judgment under embargo. And when the landmark judgment was handed down on Friday morning, Uber was prepared. On every driver’s screen, a message from the company popped up to tell them to ignore the news: as far as Uber was concerned, their rights hadn’t changed at all.
“Today we learned that our case was not successful and a small number of drivers from 2016 should have been classified as workers, but this judgment does not apply to drivers who earn on the app today,” read the note, signed by Uber general manager for Northern and Eastern Europe Jamie Heywood. “We want to do more to offer you the best of both worlds – preserving your independence, while delivering the protections and benefits you deserve.”
Uber’s efforts to downplay the significance of the Supreme Court decision has not gone unnoticed by the union behind the original challenge. “It’s hogwash,” says Steve Garelick, regional organiser at the GMB union. “If this was only about a few people why did Uber bother to fight a case over it? Surely it could have just settled with those few [drivers] and saved itself a bunch of money?” He says Uber tried to create a “hazy perception”, but that simply changing the terms on the app doesn’t exclude current drivers from being classified as workers. “If it quacks like a duck, it’s a duck,”says Garelick.
According to Mackay, Uber’s intention is to try and put people off making a claim.“It’s difficult to see why else they’re putting out that message, given that, in reality, they must know that nothing of significance has really changed since 2016,” he says. An Uber source strongly refuted claims that it misled drivers.
But the company’s messaging caused a lot of confusion from drivers seeking legal advice, says Nugent Smith. “We’ve had many, many drivers unclear as to the impact of the decision on them, especially in light of Uber’s subsequent statements. We’re having to explain to drivers that you don’t automatically get compensation for this, so you do have to bring a claim in order to get the historic minimum wage and holiday pay that you’re entitled to.”
Behind the scenes, Uber has pivoted from attack to damage control. Over the weekend, it sent a 27-question survey to all UK drivers on the platform, with the aim of presenting a plan of action backed up by the opinions of drivers in the coming weeks. Uber says such a plan will “shape the future of flexible work”. The courts may, once again, disagree. Heywood has met with several groups of drivers to find out what is on their list of priorities.
In screenshots seen by WIRED, drivers were asked to use a sliding scale from ‘very important’ to ‘not at all important’ to answer questions such as “How important is earning income on the app?” or “How important is having more flexible working hours and avoiding set shifts?”. Uber asked drivers to choose between “I would value being able to access new benefits and protections such as pension contributions, knowing that this could mean I lose control of when and where I drive”, or “I value the ability to work flexibly and determine when and where I drive”. It did not ask drivers whether they want Uber to recognise them as workers.
What happens next could provide the blueprint for how Uber responds to a far bigger battle: the survival of its business model in Europe.
On Wednesday, the European Commission published the first stage consultation on how to improve working conditions in the gig economy. The report said the gig economy gave work to 11 per cent of the EU’s workforce at least once – but that a surge of demand for gig work during the pandemic was putting “pressure on earnings and working conditions”. The report also claims that the algorithms used by gig economy companies “may be concealing the degree of the legal and economic dependency of the people working through platforms”.
Proposals could be made by the end of this year, and would provide the first set of rules for the EU as a whole. Until now, individual countries have had to rule on workers’ rights, creating a patchwork of legal regulations that classify some gig workers as employees while others are still contractors, despite working for the same company.
The Commission has now entered into a six-week consultation period with unions and gig economy companies. Neither Uber nor its competitors have a confirmed seat at the table, meaning that they won’t have a say in the framework that will govern their operations in Europe.
Uber tried to elbow its way into these negotiations earlier this month, when Dara Khosrowshahi, Uber’s CEO, presented a white paper called “A Better Deal” to EU policymakers and offered himself up for Zoom meetings to discuss the company’s point of view. In it, the ride-hailing giant lobbied to provide workers with flexible arrangements and additional benefits. Uber argued that the current legal ambiguity on the status of independent workers makes it difficult for the company to provide access to flexible work, benefits and social protections to independent workers.
But the drivers who won the original case argue that even when the law is clear, Uber tries to circumvent it. Last week’s Supreme Court victory was bittersweet because most of the original 25 claimants no longer work for Uber, and had expected that the judgment would result in more immediate, far-reaching changes. James Farrar, one of the co-claimants on the case, says Uber is “in denial” by not immediately recognising all drivers as workers. “Somebody should send in an army of grief counsellors and psychologists to them, because I think they just haven’t accepted it. There’s just nowhere to turn for them on this. The ruling couldn’t be clearer.”
It’s wrong that the onus is on drivers to solve this situation, Farrar says, and that no authority has come forward to exact justice for the remainder of drivers, Farrar says. Outside of the Uber case, the government is committed to establishing a single enforcement body to provide a clearer route for workers to raise a complaint and get support. But that body does not yet exist. And in the meantime, Uber is reportedly lobbying to ensure that if it has to recognise drivers as workers, that every other ride-hailing company does too.“We have always been absolutely clear that employers must take their employment responsibilities seriously and cannot simply opt out of them,” a government spokesperson says.
At the time of the judgment, legal experts suggested that HMRC could wade in to determine what taxes Uber owes and whether it’s in breach of payment of minimum wage to its current drivers. So far, no action has been taken. An HMRC spokesperson refused to comment due to taxpayer confidentiality. “HMRC’s role is to collect the right amount of tax due under UK law and we carefully scrutinise businesses,” the spokesperson says. “We make sure large businesses, like all other taxpayers, pay all the taxes due under UK law.”
Transport for London (TfL), Uber’s old sparring partner, may also play a pivotal role. The Supreme Court judges were not convinced that Uber’s business model complies with the laws that govern private hire bookings in London. In the judgment, they argued that the only way that Uber could comply with the Private Hire Vehicles (London) Act 1998 was to also provide the actual transportation and that providing it through a platform, as Uber does, would be illegal.
Technically, this puts TfL in a position to reconsider whether Uber – and any other ride-hailing operator – should continue operating in London at all. A TfL spokesperson says the organisation is “considering the Supreme Court’s judgment and any impacts on the provision of transport services in London”. On Wednesday, the lead claimants in the Supreme Court case urged London mayor Sadiq Khan to insist that Uber comply with the ruling as a condition of its London license, which is due to expire in March 2022. If he does, Uber’s fate will once again rest in the hands of the courts.
Uber’s future is, for the first time, out of its hands. After 12 years of moving fast and breaking things, the slow progress of the courts and the looming spectre of regulation are finally catching up with it. If the Supreme Court ruling lays down a marker, then what comes next will define not just Uber’s future, but the future of the entire gig economy. Faced with a deluge of lawsuits and legislators keen to get a grip on the gig economy, Uber must make a choice: fight in the courts or accept its fate.
Natasha Bernal is WIRED’s business editor. She tweets from @TashaBernal
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