Britain says Uber drivers entitled to benefits
U.K. high court says workers due vacation time
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 already 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 like Uber, Lyft, DoorDash and Grubhub, which have long 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.