[By Aryan Roy. The author is a student of Gujarat National Law University.]
“Parties cannot create something which has every feature of a rooster, but call it a duck and insist everybody else recognise it as a duck.”
Justice Gray, Re Porter (1989) 34 IR 179, 184
With the growing digitalisation of the goods and service industries, there is a parallel growing dependence on platform technology. Necessarily, this requires a simultaneous expansion in the scope of legislation and even judicial application. Neither can such development in technology be sufficiently legally pre-empted nor is playing legislative catch-up desirable – leaving Courts with the option of purposive interpretation of statutes. As such, it is opined that notwithstanding the benefits and attractiveness of the gig economy, looking at the platform business models there is a necessity to grant these “employees” their due protection.
On 19th of February, 2021, the United Kingdom Supreme Court unanimously dismissed the appeal in Uber BV & Ors. v. Aslam & Ors., having adjudged the question of whether drivers on the Uber platform are workers, entitled to minimum wages, paid annual leave for the purpose of employment legislation, or, they are merely independent contractors having none of the above benefits.
The question arose when former London based Uber drivers, Yaseen Aslam and James Farrar laid claims before the Employment Tribunal in 2016 asserting their rights as workers. The tribunal, identifying them as such, delivered its judgment in the drivers’ favour. This decision was appealed by Uber and dismissed by the Employment Appeal Tribunal in 2017 and then later by the Court of Appeal in December 2018.
The tribunal analysed the matter through the lens of section 230(3)(b) of the Employment Rights Act, 1996 [“the Act”] that defines a worker as an individual who works for another party under a contract other than one of employment. According to this provision, an employee has additional employment rights including sick pay, parental leave among others. The respondents argued that they were workers under this Act and are entitled to rights under the National Minimum Wage Act, 1998 and Working Time Regulations, 1998.
I. Uber’s Contention
Uber stressed on the respective agreements between Uber BV and drivers, and, drivers and passengers. They argued that on acceptance of passenger’s request, the driver and passenger enter into an agreement to which Uber is not a party. Its role is limited to technological assistance to the driver.
They further argued that drivers were free in their mode of work and could work as much or as little as they desired, without any obligation to the company.
Lastly, in proving compliance with the Autoclenz test, Uber claimed, for actual practice to take precedence over a written agreement, there must be shown an inconsistency between the two, and such discrepancy was absent here. They submitted, the practice of drivers performing their services through contracts with riders, with the agency of Uber London, were consistent with the written terms of the agreement between Uber and the drivers. As such, there was no basis for the written agreement to be departed from.
II. Court’s Reasoning
The Supreme Court highlighted the relevance of purposive statutory interpretation and in doing so, it reiterated the unanimous decision in UBS AG v. Commissioners for Her Majesty’s Revenue and Customs, that the facts of a case need be analysed along with a statute, and an irrelevant fact ought to be discarded. In this context, the purpose of employment laws was to protect vulnerable workers. Owing to workers’ dependent and subordinate position, a requirement identified in Byrne Brothers (Formwork) Ltd. v. Baird & Ors., the need to extend statutory reach beyond employees, to workers was felt. The Supreme Court, however, accepted this position with a pinch of salt: while subordination was an aid in distinguishing the self-employed from workers, it could not be considered in isolation.
Further, the nature of employment (or contractual relationship) could be understood through the interdependent dynamics of the employer’s control over remuneration and working conditions, and the employee’s dependence. Uber could therefore not be permitted to decide its drivers’ status owing to its standard form of contract over which its drivers had no bargaining power.
The Court referred to its earlier decision in Autoclenz where they affirmed that an employment tribunal needs to address whether the written terms in a contract do in fact represent the true agreement between the parties. In this matter, the claimant-car valets working for Autoclenz on a piecemeal basis, buying their own supplies and paying for their own insurance were self-employed. The valets successfully argued before the Supreme Court that the contractual terms did not paint a complete picture of their employment relationship. Likewise, in the case at hand, there could not be a presumption that the written contract contains all aspects of an agreement, reflecting the reality of the situation.
The SC took note of drivers’ inability to set their own rates and independently communicate with the passengers, furthering their professional abilities and settled Uber’s position as a transportation service, instead of a technological service. This distinction effectively rejects Uber’s attempt to circumvent its responsibilities as a transit service and limit obligations it would otherwise have to its employees. The Court reaffirmed certain observations of the employment tribunal:
First, that Uber through its “suggested” ride fares set the drivers’ income;
Second, that the agreement’s terms were set unilaterally in standard form and were not open to negotiation;
Third, that despite their claims of operational freedom, Uber imposed control by not disclosing to the drivers anything more than the rider’s first name and rating, and that the drivers’ choice in rejecting rides was also greatly constrained;
Fourth, that the car is not provided by the company, but must be compliant with its standards; and
Fifth, that driver-passenger communication is available only when routed through Uber.
Considering these observations, the Court found Uber’s tight control over its drivers and the provision of standardised service to riders. As such, Uber drivers could not be classified as independent contractors and were entitled to all employment benefits available to workers.
This decision serves a major milestone in the regulation of platform-based intermediaries. Uber for instance has faced constant litigation in numerous jurisdictions with regard to its market practices, employment policies and other competition related malpractices.
Uber’s premise, that its drivers are no more than voluntary independent contractors, has suffered severe backlash and rightly so. * In 2015, the California Superior Court in a landmark decision classified Uber drivers as employees, noting that the company was involved in “every aspect of operation”. The European Court of Justice in 2017 concluded, while an intermediary service, Uber is intrinsically linked to transportation service and ought to be regulated by transport policy.
In February 2020, the Brazilian Superior Court took an opposing stance, finding drivers to be independent contractors due to the lack of any hierarchical relation between the driver and Uber, a fixed income and work timetable. In March 2020, the French Cour de Cassation affirmed the employee status owing to the evident “relation of subordination”.
The U.S. presents a crucial example in gig economy litigation. California in early 2020 adopted the ‘Assembly Bill 5’, a landmark legislation that installed the ABC test to determine whether a worker was an independent contractor rather than an employee. The hiring entity would need to show that the worker was free from control of performance of work, the work was beyond the entity’s usual course, and that the worker routinely engaged in independent trade. This broadened potential liability to businesses that were found to misclassify workers. This was soon followed by the controversial Proposition 22 in November 2020, where Californian voters proposed a law in the form of a petition to maintain drivers working for platform based services as independent contractors. To achieve this, Uber and Lyft spent nearly $205 million in campaigns, representing anti-democratic, corporate law making. Under the incumbent Biden-Kamala administration, the Democrat-heavy House of Commons passed the Protecting the Right to Organize Act in an attempt to grant employee status to independent contractors, among other things.
‘Gig economy’ & the ‘worker-contractor’ debate
The gig economy has boomed with short-term freelancing manifesting as contractual services without a continuous period of employ. On the plus side, it features an entrepreneurial system of employment, a culture of self-reliance, greater employment generation and skill enhancement, of which the last two factors have become all the more important in the 21st century. The dark underbelly however features fluctuation in remuneration, non-uniform workload, job insecurity, next to no medical, social benefits, no employees’ provident fund and more. Often, employers opt for contractors as “cheap labour” to excuse themselves from costs. Perhaps most importantly, they have next to no employment related rights.
Uber Technologies Inc. for instance cleanly cuts around employer obligations by limiting its role as external to the driver-rider relationship. Such strategy further perpetuates the worker-contractor debate. A 1989 California decision took long strides in holding the employer’s right to control as a significant consideration, and a certain degree of freedom inherent in the work does not preclude from an employee status.
A key takeaway from the recent decision is, a company cannot decide to whom legislation applies. Employment regulation is not an A la Carte menu, and the Parliament decides who qualifies for statutory protection.
The Indian atmosphere
India has seen great proliferation of gig workers with a steadily growing number of the population opting for this means of income. There is an estimated 56% of new employment being generated in this sector.
Section 2(s) of the Industrial Disputes Act 1947 defines workman, but does not cater to the gig economy and as such these workers have been protected by judicial decisions. In 1957, the Supreme Court of India considered workers as different from independent contractors in that the former possess a degree of personal commitment to work. Here, the Court underscored the ‘supervision and control’ test in establishing employment.
The Court then took a more integrated approach including the right to dismiss workers, pay remunerations and the employer’s operational control over the worker. A mere claim of independence is insufficient to make it so, and the same may be concluded only if the independence is real and not illusory.
In 2017, the Delhi Commercial Drivers Union filed a writ petition in the Delhi High Court alleging exploitation and claiming Ola and Uber drivers to be employees. While the Delhi government, Uber and ANI Technologies were issued notices, the matter continues to remain in limbo.
More recently, with the enactment of the Code on Social Security, 2020, the legislature has sought to provide uniform social security benefits by consolidating earlier laws. The Code recognises and defines gig workers as being part of work arrangements different from traditional employer-employee relationships. This formal recognition offers protection to the large number of temporary workers who otherwise have had to run from pillar to post.
Under Chapter IX, the Code details the provision of social security for the unorganised gig workers and platform workers. With a focus on this unorganised trade the Code provides legislative support to the sector in a way that the UK employment legislation does not. While the UK has come closer to including gig and platform work in formal work structures, India has taken a commendable step in assuring labour rights to a broader definition of workers.
Dynamic industries like IT, design and content creation act as magnets for gig workers, with a huge supply of highly skilled workers freelancing tilting the balance in favour of employers who use this to circumvent employment regulation. This judgment is the culmination of a long line of judgments where the façade of platform-based entrepreneurship has been pierced. While most have taken firm stances as to the employment status, some have taken a more intermediate stance.
It is not unexpected, following these business practices, that Uber drivers have suffered greatly. In 2017, prior to Uber’s initial public offering, executives demanded greater financial performance. This led to slashing of incentives that attracted drivers to the company in the first place. Where at one point, a driver could earn Rs. 70,000 – 1 lakh per month, they now earn anywhere between Rs. 22,000 and 50,000. Ola and Uber, the major competitors in the business, have turned towards aggressive profit maximisation.
Considering that this litigation began in 2016, concerning a small group of Uber drivers, there are questions as to its wider applicability. Uber claims to have made significant changes to its business since then. The European Commission, following this debacle, on 24th of February, 2021, launched its initial consultation on working condition of gig workers.
It is hoped that authorities across the world take a firm and favourable stance towards the gig economy workers, lest there be multinational corporations bypassing legislations and regulations in their pursuit of anti-democratic, corporate law-making.