The decision is likely to have significant ramifications. The Parliament Education and Workforce Select Committee is considering the Employment Relations Amendment Bill, which includes a gateway test to determine whether workers are contractors or employees.
This test is widely viewed as a response to the previous Uber decisions. The Supreme Court’s decision will only serve to better inform the legislation which is designed to give certainty and flexibility to both employers and employees. The select committee was due to report back to Parliament by now but this has been rescheduled for release on Christmas Eve.
Uber has consistently argued it supplies digital services to drivers and riders enabling them to connect and form their own business relationship.
It has claimed the rider pays the fare to the driver and Uber earns a service fee, paid by the driver, for its services. The court however, found Uber was in the business of supplying passenger transport services and it engages drivers to deliver those services.
That is also how Uber earns its revenue; it charges riders for trips. Although it describes itself as a technology business, it does not make money by distributing its software. Its revenue takes the form of fares paid.
In reaching this finding the court considered a number of factors:
• Drivers and riders are not given one another’s phone numbers.
• The fare is not communicated to the driver when the trip is accepted.
• The driver is only given the fare information when the trip has been completed.
• Uber collects fares from users and facilitates payment to the drivers.
• Off-app pickups are prohibited as are street hails or touting while using Uber apps.
• The driver cannot negotiate a higher fare or solicit tips.
• Uber controls the amount and payment of other charges such as cancellation fees or cleaning charges, and reserves the right to adjust payment for reasons such as an inefficient route.
Significantly, drivers are not given any real information they might use to contact their rider outside of the app. The service agreement between the parties prohibits them from doing so.
There is no pre-trip contact between rider and driver or negotiation. Users and drivers are practically anonymous throughout the entire transaction.
The court found anonymity is not consistent with the idea drivers and passengers form a contractual relationship through Uber’s claimed delivery of an online platform.
A passenger could not reasonably be expected to think they were contracting with the driver when they got in the car. They ordered and agreed to pay for the service from Uber.
Uber argued the drivers may work as little or as much as they like and are permitted to compete with it on alternative platforms such as Ola.
However, the court found freedom was illusory. Uber operates a rewards system for completing trips. The rewards system is integral to Uber’s tight control of their work.
The system does not work to inform users’ choice of supplier as is normal for most platform businesses; rather it operates as an internal management tool for Uber and is the basis for making termination decisions when driver ratings are not meeting Uber’s performance levels.
Drivers who do not accept three trip requests in a row will be logged off. Drivers whose acceptance rate is too low receive warnings. The court found the rewards programme creates powerful incentives to be available for work at Uber’s preferred hours, to accept and complete trips and to maintain a very high driving rating. It also found multi-apping is not an available option in reality because of Uber’s close monitoring of drivers’ locations and acceptances.
The amount of control Uber exercises over drivers is a significant consideration. Drivers are prohibited from using subcontractors. The only way drivers can increase their earnings is by managing their costs.
By standardising the service and prohibiting off-app contact with riders, Uber’s terms and conditions deprived drivers of the opportunity to earn goodwill.
The court found Uber’s control is more extensive than necessary for efficient safety and it leaves drivers with very little real autonomy. Uber’s disciplinary processes also maintain close control of drivers’ performance.
The court also found the drivers were integrated into the Uber business. Uber engages drivers to deliver the transport service it supplies to users. This means drivers are fundamental to Uber’s business.
It was also significant there is no ability for a driver to build their own businesses by virtue of contact with Uber’s customers. This means customers are Uber’s customers and not the driver’s.
Where there are areas where drivers have some autonomy, these are limited and are overridden by the extent of the drivers’ integration into Uber’s business, as well as the drivers’ lack of control over quantity and quality of the work they receive, the price paid for it and their inability to develop their businesses through contact.
Concerns have been raised about what the court’s decision means for the gig economy.
However, the United Kingdom Supreme Court and the New Zealand Court of Appeal found all digital platforms which connect sellers and buyers of goods and services on a pro-service basis are not the same and it is important to consider the way in which Uber differs.
While booking agents for services such as hotel accommodation typically book on standard terms and handle payment in return for a service fee, they do not offer a standardised product which they define or set the price.
Customer ratings are used to help new customers choose a supplier, and the platforms do not try to restrict customers from dealing directly with suppliers.
The other significant concern arising from the decision centres around certainty of contractual arrangements. In this case the agreement between the parties explicitly stated the drivers were not employees. However, the Court of Appeal described the language as “window dressing” and “fiction, evidently designed to confer control over drivers’ labour while skirting the margins of employment law”.
Section 6 of the Employment Relations Act 2000 focuses on the real nature of the relationship. The parties’ intention in striking an agreement is relevant, but not decisive. It is hard to see how businesses can gain greater certainty around contracts within the current legal framework.
Parliament will need to provide that certainty by legislative change. By Christmas Eve we will have a better idea of what this change might look like.
• John Farrow is a partner with Anderson Lloyd specialising in employment law. The opinions expressed in this article are those of the writer and do not purport to be specific legal or professional advice.
