Can Uber Survive As An Employer?

The big names relying on casual staff in the so-called gig-economy have been served notice that they are employers after all.

Uber lost an appeal yesterday against an earlier court decision that contrary to what it claimed, the ride-hailing app is an employer. As such, it followed in the footsteps of Deliveroo, which lost a case this summer brought by 50 of its riders who can now be legally referred to as staff members.

What does this mean? Well, for Uber it really does suggest that it has to stop fighting the authorities and make good on its promise to be a good corporate citizen. The court case it lost last year was itself an appeal against an original 2016 ruling that one of its drivers could be classified as employed. So in the past three years it has fought the British legal system and lost three times. Surely the message has got through?

For Uber and Deliveroo, the big impact is that they are no longer the digital equivalent of the guy in a truck who stops at the corner and picks out a bunch of people for a day's labour in the fields. They have fought for that right and lost. 

The gig economy workers have repeatedly won the right to be treated as employees, and so that starts with being paid at least the minimum wage of GBP7.83 per hour for workers ages 25 or over. Their employer must also pay National Insurance (NI) contributions and provide holiday and sick pay. 

In short, the entire model is changed from relying on cheap labour to be ultra flexible and risk earning nothing to one of an everyday company that bears the brunt of that risk. When drivers and riders log on, they will effectively be clocking on to work and notching up hours that must be paid a certain wage, regardless of how successful they were in attracting rides or delivering pizzas. The risk is being moved away from the gig worker to what can now be termed as their employer. 

One can only imagine what this will do for the pricing structure at both Uber and Deliveroo. Moving toward guaranteed wage rates for each hour worked, as well as NI, holiday and sick payments surely has to push the cost of the service up.

I'm sure there are a few black cab drivers in London toasting the Court of Appeal today for making Uber an employer and raising its costs so the fare differential between the famous app and hailing an iconic cab on the street is reduced. 

Union members protested yesterday outside the court and Labour politicians lined up to celebrate the decision. it's become a political decision, as well as work issue, because it is viewed as a David vs Goliath situation where the little guy takes the risk, rather than the billionaire app founder, and the government loses out on NI payments. The government also loses out if gig economy workers don't make enough money and need to claim benefits. 

Putting the onus back on the tech companies to be employers and letting them take on the risk of a poor shift leading low productivity rather than no wages, is a hugely popular decision.

What will remain to be seen in 2019 is how these tech companies pivot to embrace being employers and what this does to their prices and working practices. What happens when a low-risk app that connects drivers and cyclists with clients has to start paying wages and benefits. This is going to be a fascinating story unfolding next year.

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