Uber has lost its Supreme Court Appeal on whether drivers are self-employed or workers, directly employed by Uber itself.
The appeal was Uber's fourth, and final attempt to overturn the judgement. That it took the case to such lengths highlights that the case had implications beyond its responsibilities to workers on issues such as minimum wage and holiday pay.
The Uber model relies heavily on the firm's ability to minimise the impact of driver cost on the service it offers. This is because the driver is, ultimately a fixed cost in proportion to the number of passengers that can be carried in a vehicle. Reducing it, or removing it completely (a reason for Uber's heavy investment in 'driverless' technology) is a critical part of the company's path to profitability. Indeed the risk that it could not do so, and this case, were specifically referenced in the firm's IPO as key risks on investment.
Beyond this, the ruling also causes issues for Uber in relation to its tax position within the UK. In order to minimise its tax obligations to the Treasury, Uber has long walked a careful line between being a minicab operator and an 'App'. The former is critical to its ability to operate within London, and has been the cause of the majority of its regulatory run-ins with TfL. Yet its tax position largely depends on Uber's ability to claim that it is the latter.
This is because, by being an 'app', Uber is able to effectively operate as a number of separate companies. Most critically, it means that UBV, its Dutch Subsidiary, can take passenger payments while its UK subsidiaries provide the actual ride. This leaves the profits sitting in the Netherlands, and the cost sitting in the UK (or elsewhere).
It has also allowed Uber to minimise its VAT contributions. Indeed this is a key hidden outcome of the current employment ruling. As long as Uber's drivers were individual contractors, Uber could reasonably argue that the drivers were individually liable for VAT on rides. A situation that was beneficial to Uber, as the majority (if not all) of drivers fall below the individual VAT threshold.
Both of these financial instruments have allowed the firm to truthfully claim that it pays all the tax it is required to by UK law, whilst perhaps skirting the spirit. Today's final ruling reopens the question as to whether it is actually breaking the rules as well. HMRC were watching this case with interest.
Failing the Duck Test
The reasons why Uber have lost this case are long, and fascinating. Broadly speaking, they relate to Uber's desire to pitch itself to passengers as the full service operator, while trying to use contractual law and wording to claim it was not in the courts.
Unfortunately, employment law in England and Wales is less amenable to this approach than many jurisdictions elsewhere - such as the US. The 'Duck Test' (If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck) is not just firmly wired into English employment law, but has also been tested (most notably in regards to pole dancers and their employment status in Stringfellows night clubs). This was something Uber seemingly failed to recognise until it was too late.
Rather than discuss that in detail again here, however, we will point you to our detailed breakdown on this case, and all the issues it would (and has) highlighted back in 2019, Schrodinger's Cab Firm: Uber's Existential Crisis. We will also leave you with the words of the original ruling that was confirmed today:
“Any organisation (a) running an enterprise at the heart of which is the function of carrying people in motor cars from where they are to where they want to be and (b) operating in part through a company discharging the regulated responsibilities of a PHV operator, but (c) requiring drivers and passengers to agree, as a matter of contract that it does not provide transportation services (through UBV or ULL) and (d) resorting in its documentation to fictions, twisted language and even brand new terminology, merits we think a degree of scepticism.
“Reflecting on the Respondents’ general case, and on the grimly loyal evidence of Ms Bertram in particular, we cannot help being reminded of Queen Gertrude’s most celebrated line:
‘The lady doth protest too much, methinks.’”
