The gig economy has been growing exponentially, and with it, concerns over workers’ rights. Today’s Uber ruling to grant drivers workers rights may be the watershed the industry has been waiting for.
According to the Office for National Statistics, the number of self-employed has risen from 224,000 to 4.76 million and growing. With so many freelancers in this nascent, unregulated industry, businesses within the sharing economy have been under pressure to treat their “employees” fairly. Media reports, however, show an increased number of cases where these companies still pay their self-employed staff less than the minimum wage– or worse, treat them poorly in other ways.
What policies should these gig economy businesses put in place to be fair to their freelancers? Can the legal definition of self-employment help businesse make sure they do not cross the line where they can be prosecuted for foul practices?
The Uber case
As a pioneer of the gig economy, Uber may set the bar for employee rights. The employment tribunal has released its long awaited judgment regarding the status of Uber drivers, declaring them as workers.
Uber has always claimed that their drivers are independent contractors who are self-employed. As a tech company who simply charges a commission for each ride, Uber asserts it provides drivers with the phone app which allows drivers to connect to customers themselves.
However, in a test case brought by a group of drivers with the support of the GMB union, the drivers argued that Uber has failed to provide them with their basic employment rights.
Peninsula’s Alan Price believes this has huge implications for Uber itself, with its estimated 40,000 drivers in the UK alone. “As workers, Uber will have to ensure that their drivers are receiving employment rights including sick pay, paid holiday, working time and rest breaks and the National Minimum Wage or National Living Wage. A further hearing will be scheduled in the tribunal to calculate the holiday and pay that the drivers will receive,” he explained.
An industry-wide impact
Now that Uber drivers are seen as workers by law, this decision could change the way other gig economy businesses operate, and even impact their margins and business model.
“There is already a related claim supported by a different union in the pipeline against the courier firm City Sprint. Not only could this decision lead to an influx of tribunal claims, but it can lead to large financial penalties for businesses who have not given staff their correct legal rights,” Price warned.
Guglielmo Meardi, of Warwick Business School, is a professor of industrial relations and Director of the Industrial Relations Research Unit. According to him, the Uber ruling may be the best thing to happen to the gig economy, demystify the rhetoric around the sectore being inherently liberating, and stimulate the debate on the opportunities, limits, challenges and ways of addressing the new forms of work that do not fit into the traditional label. “The Uber case underlines the difficulties in applying the law to workers, jobs and activities that do not conform to the more traditional subordinated or self-employment relationships. Over recent years self-employment has increased, but often coming with very bad conditions, prompting fears that it was being used to bypass employment legislation,” he said.
“Other recent cases, such as Hermes and the new government’s pressure on rogue employers, are likely to lead to proposals to clarify and tighten legislation. In the Uber case, the additional difficulty was that the most direct comparators, taxi drivers, are themselves mostly self-employed. However, they have considerable collective resources in terms of licencing, regulations, associations and access to industrial action.”
A disaster for UK plc
Today’s Uber ruling to grant drivers workers rights is a disaster for UK plc according to Dave Chaplin, CEO and founder of Contractor Calculator, an online portal for the self employed.
“This is the most high-profile court case concerning employment in recent years and today’s ruling is a disaster for Uber who will now be faced with compensating its drivers retrospectively,” Chaplin said.
In what he sees as a disaster for the UK’s business landscape, the ruling is certain to open the floodgates for more workers to challenge their employers in pursuit of their rights from companies which operate a similar business model to Uber, he added.
It will also arm HMRC with the ammunition to attack what he calls “genuine freelancers” under the rules of IR35. “I would urge all self employed contractors to seriously consider their IR35 position.”
In a recent survey conducted by Contractor Calculator, the majority of self-employed freelancers categorically said they do not want any rights at all. 88 per cent do not want parental leave rights, 82 per cent do not want sick pay, 85 per cent shun holiday rights and pay, 75 per cent do not want to be forced into pension auto-enrolment of a pension, 80 per cent do not want extra rights to help with grievances or disciplinary matters and 94 per cent do not want any restrictions on hours worked and are happy to manage their own affairs. While these figures appear counter-intuitive, Chaplin believes it’s very much in line with how most freelancers build their careers.
Are freelancers vulnerable to exploitation?
“The government needs to understand that media reports associated with self-employed couriers and drivers who are part of the gig economy do not paint the full picture of self-employment. There are thousands upon thousands of the self-employed working on a business-to-business basis who are very happy with the way they work and the last thing they want is further legislative burdens,” he explained.
Chaplin believes that the government’s knee-jerk legislation only adds more and more red tape to what is the UK’s freest sector. “It is important that we protect low paid workers, but I would appeal to the Government not to ruin the freelance sector in the process,” he added.
“78 per cent of the freelance workforce have chosen to work this way, they want to be responsible for themselves and their businesses and they do not want rights. They should be allowed to get on with it.”
Warwick Business School’s Meardi counters Chaplain’s assertion, believing that contractors and freelancers are most at risk of being taken for a ride.
“With emerging platforms like Uber, nominally self-employed workers are more at risk of exploitation, hence the need for stepping in with more protection, especially in a country like the UK where overall employment and transport regulations are looser and the potential for exploitation, bigger.”
A step closer?
Last week, three UK-based gig economy start-ups, DAD app, Doctor Care Anywhere, and Paw Squad, announced a new collaborative platform to help businesses in this space and consumers looking for complementary services build on their knowledge. “Advice economy” is a newer term used to describe the growing collection of ‘gig’ based businesses that connect consumers seeking advice with experienced individuals using technology. From home repairs to veterinarian house calls, these start-ups occupy a unique space within the sharing, gig and app economy. All of these businesses have started up within the last two years, which makes a lot of what they do trial and error. But basic business ethics clearly apply.
“In a way we’re not doing anything new. If anything, we’re taking consumers back to how the doctor-patient relationship used to be back in the ’70s and ’80s with personalised, one-on-one care. But in terms of the way we work, workers’ rights and so on, our industry needs regulation,” Doctor Care Anywhere founder and CEO, Bayju Thakar told GrowthBusiness.
The Uber ruling may be the first in a series of many regulatory nudges in store for shaping the UK’s gig economy.