In February 2021, the Supreme Court ruled that Uber drivers are workers and not independent contractors. This judgment has inevitably led to higher costs for Uber, with the ride share business now being required to ensure compliance with national minimum wage, holiday pay and put in place minimum pension contributions for its drivers. Riders may have noticed a knock on effect of those increased overheads reflected in higher prices for rides using Uber's app.
A potentially unexpected outcome of this change in the status of Uber's drivers has been that Uber is now able to record the value of gross bookings as revenue, rather than just Uber's commission from the fares paid to drivers. This, along with an increase in rides being taken following the end of Covid-19 lockdown restrictions, has resulted in Uber reporting a significant increase in revenue totalling $983 million (£806 billion) and a knock-on positive impact on Uber's share price.
However, revenue figures do not give an idea of a business’ profitability and it remains to be seen how the change in the employment status of Uber's drivers will impact its bottom line on a long-term basis.
This long-term impact will likely affect other gig economy employers who may now be in the process of reviewing their business models. These employers may consider whether changes need to be made to how they engage their workforce and may be driven by Uber's increased revenue to implement a similar change.
Whether they implement these changes or not, employers will always need to review the reality of how they engage people and properly apply the relevant employment status tests to determine how to do so appropriately. For some, the decision to acknowledge those they engage as workers or employees and providing them with the relevant employment rights will be seen as an ethical approach, in a market where the conduct of employers is widely reported and open to critique.
However, employers also need to consider the knock on impact of increased costs for the business. There is also an increased risk of facing employment tribunal claims raised by individuals relying on their new employment rights. All of which are likely to ultimately impact the prices that need to be charged to the user.
Joe Aiston is a senior counsel and Ruth Moffett is an associate in the employment, pensions and mobility group at Taylor Wessing
