Uber’s rollout of living wage will put ‘further pressure’ on other gig economy firms to follow suit, experts warn

Business announced it would pay its drivers statutory minimum wage and offer other benefits following last month’s Supreme Court ruling 

Uber’s decision to pay its drivers the statutory minimum wage following a landmark court ruling over their employment status could have significant implications for other businesses in the gig economy, experts have warned.

As well as paying drivers at least the national living wage, which is currently £8.72 an hour for over-25s, Uber will now start providing other employment benefits, including holiday pay and a pension scheme. The changes are expected to affect some 70,000 drivers in the UK.

However, Uber has said it will continue to only pay drivers from the moment they accept a trip request, despite the Supreme Court ruling that drivers were working from the moment they log into the app.

Last month the Supreme Court ruled that Uber drivers were workers and not self-employed contractors, meaning they were entitled to basic employment rights – ending a protracted court battle started by a number of drivers in 2016.

In its ruling, the Supreme Court unanimously agreed that Uber drivers were working ‘for and under’ the firm regardless of how the arrangement was written into their contractual agreement. Because of this the court ruled the relevant employment legislation applied.

Beverley Sunderland, director and partner at Crossland Employment Solicitors, said this judgment would have a big impact on other gig economy employers. “It reminded us that the purpose of [employment legislation] is to protect vulnerable workers from being paid too little for work they do, or who are required to work excessive hours or are subject to other forms of unfair treatment such as victimisation and whistleblowing,” she said.

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Going forward, Sunderland said, tribunals and courts would look at the “reality” of the relationship between firms and contractors, “and particularly the level of control and subordination, and reach a conclusion as to whether individuals are workers or not”.

“It is difficult to see a situation where any individual contracted to deliver parcels or food is not going to be a worker as well,” she added.

This was echoed by Michael Powner, employment partner at Charles Russell Speechlys, who said that while the Supreme Court’s decision was based on facts specific to the Uber case and its business model, the ruling was “likely to be a very persuasive authority” for future tribunals deciding whether others in the gig economy should have workers’ rights.

“The reality of the working relationship was that it was largely under the control of Uber. It is therefore likely that companies operating similar business models will need to think very carefully about the implications of the Uber decision going forward,” he said – adding that Uber’s decision to pay the national living wage and provide other benefits would put “further pressure on other gig economy businesses to do the same”.

However, Marc Moore, chair in corporate and financial law at UCL Laws, said he was hesitant about applying the Uber decision directly to other gig economy firms – particularly food delivery platforms.

“Uber's employment practices, and especially the level and types of control that it exerts over its drivers, are in many respects quite unique, even compared to the rest of the gig economy,” he said.

“Just because Uber drivers are now paid the minimum wage doesn't necessarily mean that other gig economy employers will be required to follow suit. Indeed, from a legal point of view, the recent Uber ruling answers some questions while giving rise to many new ones.

“Suffice to say this debate is far from over yet.”

The changes Uber is making to its drivers’ contracts will not be extended to couriers working for its Uber Eats food delivery service.

Kate Smith, head of pensions at Aegon, also called into question some of the details of the company’s new benefits offering. Based on the new national living wage – which will increase to £8.91 in April – drivers would need to be paid for at least 22 hours a week to earn the £10,000 a year threshold for being auto-enrolled on Uber’s pension.

“It looks as though there will be further wrangling over what Uber deems the drivers’ working hours and this will have important ramifications for whether people meet the minimum income threshold to be enrolled in a pension,” she said, referencing Uber’s decision to continue to only pay drivers from when they accept a trip request.

It also isn’t yet clear how Uber will remunerate drivers for past failures to compensate drivers properly, said Rebecca Thornley-Gibson, partner at employment lawyer DMH Stallard.

“This will be a significant cost to Uber and involve complex calculations,” she said. “Those fighting on behalf of the drivers will continue to be involved in discussions that should result in settling historic underpayments.”