Uber hit a roadblock last month when it lost a five-year legal battle over drivers' rights in Britain. On Tuesday, the ride-hailing company said it would reclassify them as workers, entitled to the minimum wage, pensions and holiday. That is not quite the concession it appears. Even so, the traffic is heading in just one direction: towards much tougher regulation of disruptive tech giants.
The offer is a "day late and a dollar short", according to the claimants. Further legal challenges are likely, as it is debatable whether the concessions fully comply with the ruling. Drivers will not receive minimum wage during the time before they have been paired with a passenger. Even so, it is likely to push up prices to compensate. Plans to post a profitable quarter — on an adjusted ebitda basis — before the end of the year should not be knocked off-course, says Uber. London is one of its few profitable markets worldwide.
The Supreme Court's decision rattled other companies engaged in the gig economy, which also rely on the flexibility of the self-employed. But the judgment relied on specific facts about the relationship between Uber and its employees. Significantly, Uber is not extending the change in classification to couriers in its food delivery business, Uber Eats, who remain self-employed.
The difference is likely to stem from the fine print of contracts. In deciding whether people are workers — a different category to employees or the self-employed under UK employment law — it matters whether or not they could ask someone else to substitute for them. That is not possible in ride-sharing for security reasons, but other gig economy businesses are not so constrained. Deliveroo, the food delivery company about to join the market, has won three legal battles in the UK over the self-employed status of its riders.
Uber and other gig economy companies do not just have to deal with the quirks of UK employment law. Tax is another battleground. An argument over VAT that raises similar issues to the workers' rights dispute could cost Uber more than £1bn. Moreover, there are conflicts over employment rights in at least 40 countries across the world. Only last month, Italian prosecutors levied a heavy fine on Uber Eats and other food delivery companies.
Lawyers and lobbyists will continue to fight such cases. Regardless, gig economy companies will end up being bound by more regulation. The days of being able to exploit ambiguities in the law are coming to an end. Their transition from freewheeling innovators to rule-takers has begun.
- Financial Times