Insights

Uber: what does the Supreme Court case mean for businesses with a self-employed workforce?

12/03/2021

As widely expected,  Uber lost its appeal in the Supreme Court on the issue of whether its drivers were workers.   It's tempting to think that this is only an issue for gig economy businesses or tech giants - but the implications of the case are much wider.    

Employment status is a perennial hot topic and, with off-payroll working rules for the private sector coming into effect this April, it's something businesses need to focus on at the moment.   So what lessons does the case hold for businesses reliant on self-employed individuals?

1.  Don't treat contracts as a "get out of jail free" card

The Uber case emphasises that the courts are free to look beyond the written contract terms when determining employee/worker status cases.   Well-drafted contracts are a good starting point but won't on their own demonstrate that an individual is genuinely self-employed - and contract terms which state that the individual is self-employed have no legal effect in themselves.  The starting point for businesses should be to look at how the relationship will operate commercially, and ensure that that is consistent with self-employment - and then draft the contract to reflect those arrangements.   Typically,  a genuinely self-employed individual's contract would include indemnity protection for the business and other elements indicating that the individual is running their own business and taking a financial risk (e.g. requiring deficient work to be rectified at their own cost).   Businesses should consider whether exclusivity clauses and similar protections are actually necessary, as these can undermine self-employed status. 

2.  Keep your control under control

The crucial factor in the Uber case was the extent of the control which Uber exercised over the drivers.   Although this wasn't through formal mechanisms such as a disciplinary process, Uber's system of penalties for rejected rides and other similar quality controls meant that, in practice, it controlled how the drivers carried out their work.   If your priority is to avoid worker/employee status, it's far preferable to include a right to terminate the contract on no or short notice for unsatisfactory work, rather than trying to control how the work is performed. 

3. Watch your language

Although it wasn't the determining factor, Uber's loose use of language didn't help their case.   Their painstakingly-drafted contracts were careful to describe the drivers as self-employed, but their communications with Transport for London proudly proclaimed the number of 'jobs' they had created for drivers.   This discrepancy was not lost on the courts.  Internal and external communications about self-employed staff should avoid using language associated with employment such as 'job description', 'promotion', etc.  

4.  Don't forget tax 

Although most commentary about the case has focused on the employment law consequences, the tax impact is likely to be as significant for Uber, if not more so.   Our article here, written with our Head of Tax, explores this in more detail.   HMRC's and the Tax Tribunal's approaches to determining tax status are often influenced by caselaw on employment status.   The Uber decision will no doubt encourage HMRC to look beyond the written contract terms where this may lead to an increase in tax and NI revenues.   This is a particular concern for businesses affected by the off-payroll working rules due to come into force in April, which is expected to be a major focus for HMRC enforcement efforts.  Affected businesses should take particular care to ensure that working practices are consistent with self-employed status for contractors caught by those rules.   For more information, see our dedicated IR35 hub here.

  

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