The definition of workers set out in section 230(3) of the Employment Rights Act 1996 goes beyond those engaged on a traditional contract of employment to include individuals who undertake to perform personally any work or services for another party to the contract. There is an exclusion for circumstances where the other party to the contract can be considered a client or customer of any profession or business carried out by the individual. An individual who does not fall within this definition will usually be regarded as genuinely self-employed.

Workers are entitled to a number of specific employment law rights by virtue of their status. These include the right to receive the national minimum wage for each hour of work, and rights to holiday and rest periods in respect of their working time.

There are approximately 40,000 drivers registered with Uber in the UK. A number of Uber drivers brought claims for unlawful deductions from wages, through an alleged failure to pay the national minimum wage, and for a failure to provide paid annual leave. The employment tribunal considered two particular Uber drivers as test cases in order to determine whether their working arrangements satisfied the definition of workers.

In order to reach a decision, the tribunal undertook a detailed analysis of Uber's assertion that it does not offer taxi services, but rather that its business is to provide access to a technology platform which facilitates the provision of taxi services. This was underpinned by complex contracts between Uber London Ltd, its parent company, Uber BV, the drivers and the passengers. In essence, Uber's position was that it acts as an agent for the drivers through the use of the Uber smartphone app, and that the contract for the provision of the taxi service is between the individual Uber driver and passenger. As a consequence, Uber treated its drivers as being genuinely self-employed, and therefore not entitled to the employment rights applicable to workers.

The tribunal identified a broad range of factors which undermined Uber's position, and demonstrated that Uber exercised significant control over the arrangements for the taxi services. These factors included that Uber:

In light of these various factors the tribunal concluded that the Uber drivers were workers at all times when they satisfied each of the following conditions:

In reaching this conclusion the tribunal made it apparent that it regarded Uber's position as lacking in credibility when considering the reality of how the business operates on a day-to-day basis. It also noted that Uber had made public comments which contradicted its position. In these circumstances, it was appropriate to disregard the content of the contracts between Uber and the drivers.

Having concluded that the Uber drivers were workers, the tribunal went on to apply its analysis to the question of what amounted to the drivers’ working time for the purposes of the Working Time Regulations 1998 (SI 1998/1833). This question was relevant to issues such as the calculation of the drivers' entitlement to paid annual leave.

On this point, the tribunal held that the drivers' working time was limited to periods when they had the app turned on, when they were willing and able to accept fares and when they were in the territory in which they were authorised to work or returning to this territory after dropping off a passenger outside this territory. The argument that the drivers’ time spent commuting to and from the authorised territory each day amounted to working time was specifically rejected.

The tribunal followed the analysis in relation to working time for the purposes of determining the drivers’ hours under the National Minimum Wage Act 1998, concluding that the arrangement fell into the category of unmeasured work. Therefore the drivers were entitled to be paid at least the national minimum wage rate for each of these hours.

The decision has potential implications for all businesses which seek to offer customers the type of job-by-job services provided by Uber through the engagement of independent contractors. It is clear that the arrangements between the business, the individual and the customer will be closely scrutinised, and contracts will be disregarded if these do not reflect the reality of the arrangements. Indeed, an overly complicated contractual structure may attract scepticism. To the extent that individuals are deemed to be workers, employers will need to consider the impact of employment rights including minimum paid leave and rest breaks, and the national minimum wage. There is also the possibility of claims for compensation based on past practice.

That being said, this is a first instance decision and Uber has indicated an intention to appeal. It is also notable that the tribunal made it clear that its decision did not mean that Uber could not have formulated a business model which did not involve it engaging the drivers as workers. Rather, it was the case that the current model used by Uber simply does not achieve that aim.