The Shake Up Of The Gig Economy

The Shake Up Of the Gig Economy

Young professional, Mia Siddique, explores the potential impact that the recent Deliveroo and Uber rulings could have on the gig economy.Mia Siddique

Background At the beginning of the year, the Supreme Court made a ruling that Uber drivers were workers, not self-employed contractors like Uber claimed, giving drivers rights to employment benefits such as holiday pay and minimum wage. This came after two former Uber drivers took Uber to an employment tribunal in 2016, arguing they worked for Uber and had little control over the services they provided, so were entitled to the workers' rights benefits. Uber fought back and argued that they are a booking agent with self-employed drivers, and therefore were not responsible for paying any minimum wage nor holiday pay. However, the Supreme Court ruled against this and ruled in favour of the former Uber drivers, shaking up the gig economy.The Independent Workers’ Union of Great Britain (IWGB) have been arguing the same case in court since 2017 for Deliveroo. However, just last week the Court of Appeal upheld previous verdicts that found the food delivery couriers to be self-employed, not to be workers. Lord Justice Underhill said this was due to the principle that they do not fall under the definition of employees under article 11 of the European Convention of Human Rights, which governs rules on freedom of assembly, including unionisation. And, although they had the right to organise, which was the main focus of the case, they did not have the right to do so via a trade union.Deliveroo’s lack of fixed hours or requirement for its riders to login to the app and work also meant they were deemed to have enough control to be classed as self-employed. Riders providing their own bikes or vehicles also worked against them in the eyes of the judges. Contrastingly, in Uber’s case, the judges found that Uber did not have much freedom as: Uber sets penalties for rejecting pickups, Uber sets the fare, and the drivers had no say in the contract terms that Uber set out. Thus, it was ruled that drivers were “in a position of subordination and dependency to Uber”, entitling them to employment benefits.Both cases have set a precedent for how tribunals may decide future cases relating to employment status, as it is evident that courts are trying to ensure the rights of individuals are met and wish to limit exploitation from organisations who assert a copious amount of control over their workers, but are reluctant to pay them rightly for their services.What does this mean for employers? The Supreme Court’s ruling in the Uber case has extensive implications on the gig-economy, forcing employers to review their structure to ensure there are no weak links regarding employee contracts that could impact the business. Organisations that fail to do this and are viewed as exploitive may lose market share which, in the disruptive wake of Brexit and the impact of the Covid-19 pandemic, could be the difference between their survival or their demise.If there are found to be weak links, we may see businesses increase their prices to cover the additional costs involved in paying their workers employment benefits. Or, we may see businesses amending their platforms to make their workers become self-employed and allow them more control. However, allowing their workers more control over the services they provide and how they conduct their businesses could result in the company having little control on consistent customer experience, branding, and reputation. There is undeniably a harsh balancing act to be done here.

Wider issues and implications The Uber ruling could be viewed as a win-win for drivers, passengers and cities, as Uber now has the correct economic incentives not to oversupply the market with too many vehicles and drivers. In turn, this could be beneficial in tackling pollution, congestion, and rates of poverty, with drivers now having rights to minimum wage and holiday pay. It will be interesting to see how this may impact Uber’s recovery from pandemic-invoked issues it has faced, such as fares being down 80% due to restrictions on travel.Deliveroo’s defeat could give organisations the idea that, as long as they give their self-employed contractors an element of control over how they conduct their business, they may be safe from facing additional costs that comes with employee benefits, but may face harsh consequences surrounding the consistency of their services.

‍Deliveroo’s IPO Deliveroo’s use of gig economy riders and the risk of associated legal challenges was cited as a key factor in its meagre public listing on the London Stock Exchange in March. But, the news of Deliveroo’s case buoyed Deliveroo’s share price as it rose almost 9% on the day to around £2.75, the highest level since April, as it became certain that Deliveroo drivers had flexibility and control over their services, which was supported by many investors. This is however still well beneath its IPO price of £3.90. IWGB is considering appealing to the Supreme Court over the Court of Appeal’s ruling, which may see an impact in the share price again. In any event, both rulings highlight the UK governments uncertain attitude when it comes to working conditions and employment rights. In 2019, Boris Johnson pledged to introduce an employment bill that would protect and enhance workers’ rights as the UK left the EU, making Britain “the best place in the world to work”. This is yet to be seen. A recent investigation by the Bureau of Investigative Journalism found that some riders for Deliveroo make just £2 an hour, and Deliveroo excuse this by arguing its employment model provides riders with “flexibility”. How organisations choose to conduct their businesses going forward will be interesting to see.