Uber drivers entitled to worker benefits
Uber suffered a major defeat in one of its most important markets Friday when Britain’s Supreme Court, in a ruling that could threaten the future of the unprofitable company, said that a group of drivers should be classified as workers entitled to a minimum wage and vacation time.
The court’s decision, the latest in a string of confrontations between labor groups and so-called gig economy companies in courtrooms and legislative halls around the world, represents an existential threat to Uber and other companies that rely on a sprawling labor force of independent contractors to provide car rides, deliver food and clean homes.
In a unanimous decision, the Supreme Court justices ruled that although Uber said it was only a technology platform that connected drivers with passengers, it behaved more like an employer by setting rates, assigning rides, and requiring drivers to follow certain routes and using a rating system to discipline them.
The decision was a major victory for labor activists in the United States and Europe who are pushing for better wages and stronger protections for workers with services such as Uber, Lyft, DoorDash and Grubhub, which have been criticized for how they treat their drivers and delivery people.
It was also a considerable setback for Uber, which had been able to beat back other attempts at forcing it to change how it treats its drivers, including the defeat in November of a California law that would have forced gig companies to make changes similar to those now being forced by the British court ruling.
As fast as they have become a part of everyday life and have been valued on Wall Street in the tens of billions of dollars, gig economy companies operate on precarious business models. More often than not, they lose money on every ride offered and every delivery made. In 2020, for example, Uber reported a net loss of $6.8 billion.
Their businesses were strained even further by the pandemic, as travel and entertainment spending plummeted because of lockdowns. The companies still say they can become profitable in the near future as COVID-19 vaccines help reopen economies. But paying more to drivers could make turning a financial corner even more elusive.
The British ruling could be a “nightmare” for Uber if it increases its labor costs, said Daniel Ives, an analyst with Wedbush Securities. London is one of Uber’s top five markets globally, he said.
“This case could set a precedent
for other workers and companies in the gig economy throughout the U.K. and Europe, which would be a body blow to the overall ecosystem,” Ives said in a note to clients.
Uber and other gig-economy companies have been fighting off efforts around the world to classify workers as employees, with mixed success. In France, Uber lost a decision in the country’s top court last year that a driver had the right to be considered an employee. In Germany, Italy and Spain, disputes about Uber’s labor practices also raised alarms, especially within traditional taxi businesses, limiting its availability.
But in California, Uber and other companies funded a successful ballot measure in the November election to exempt them from a law that would have required them to employ drivers and pay health care, unemployment insurance and other benefits. More battles loom in Washington and state capitals about how to classify workers for Uber and other platforms.
While Britain has been one of the company’s most important markets, it also has been a source of legal trouble. In London, where Uber cars are as ubiquitous as traditional black cabs, the city transportation regulator twice has taken steps to revoke Uber’s taxi license in recent years before the company agreed to new safety policies.
Uber fought the effort by drivers in Britain to be classified as workers for the past five years, appealing the decision all the way to the country’s top court. The ruling Friday is expected initially to affect only the 25 drivers who brought the case, but it is seen as setting a precedent for the 60,000 other Uber drivers across the country.
The ruling now will be referred to an employment tribunal, an administrative court that will decide in the next few months how to reward the drivers and how the ruling will affect other drivers going forward.
Uber sought to play down the decision, saying it would press the employment tribunal to limit its scope. The company said it believes the ruling should affect only a small number of drivers and that Uber should not be required to reclassify all its drivers as workers.
The company said that it would argue to the tribunal that it had made a number of changes to its business model to provide more protections for workers since 2016, when the case was first filed, like offering insurance to drivers if they lose income because they are sick or injured, and allowing drivers to reject taking certain rides without punishment.