Drivers for Uber Technologies Inc. are entitled to workers’ rights including paid holidays and the minimum wage, a London tribunal ruled Friday, a potential setback for the ride-hailing service that could further jeopardize its highflying business model.
The ruling could affect around 30,000 Uber drivers in London and significantly raise the company’s costs there. Uber, which argues it is a technology platform that matches riders with drivers, has relied on a contractor workforce of motorists who take on their own expenses like insurance, fuel and car upkeep.
Uber is waging similar fights in the U.S. It offered $100 million to settle a class-action suit by drivers in California and Massachusetts who sought to be treated like regular employees, but the settlement was rejected by a judge in August.
The battles over employment status add to Uber’s regulatory headaches around the world, as lawmakers from Austin, Texas, to Buenos Aires to New Delhi question whether ride-hailing apps threaten passenger safety and should be regulated like taxi companies.
Friday’s ruling by the Central London Employment Tribunal brings to an end the first such legal action in the U.K, which was brought by one current and one former Uber driver and will determine 17 more driver claims against the firm.
Uber said Friday it would appeal the tribunal decision. “This is a preliminary hearing, and not a final determination on the question of whether the claimants have or have not received the national minimum wage,” Uber said in statement. “The vast majority of people who have chosen to drive with the Uber app have done so in order to be their own boss and choose when and where they drive.”
Contractor status is crucial for Uber and other so-called on-demand companies that rely on a pool of freelance workers to drive taxis, clean houses, fetch food or perform other menial tasks. Those firms say they would likely have to raise prices and couldn’t depend on workers who may be willing to work just a few hours a week.
Uber, which was valued this year at $68 billion by its investors, has maintained it is a technology company, not a taxi company, and its drivers are self-employed workers who are free to work as little or as often as they like. Consequently, it has said its drivers aren’t entitled to the most basic of workers’ rights.
“This judgment [in London] is likely to have massive implications across the gig economy, as we see an increasing number of startup businesses effectively adopting Uber’s model,” said Tim Goodwin, associate solicitor at Winckworth Sherwood LLP. “Those kinds of business may owe a lot more to their workers, such as paid holiday and minimum wage, than they had bargained for.”
Mr. Goodwin, whose firm wasn’t involved with the case, said he expected a protracted fight against the ruling because of its potential impacts. The ruling states there are about 30,000 Uber drivers in the London area and 40,000 in the U.K.
Law firm Leigh Day, acting on behalf of the drivers, argued that Uber was acting unlawfully by not providing basic workers’ rights, including the right to paid holidays and the right to be paid at least the National Minimum Wage.
Leigh Day said the drivers were deserving of worker status as the company had “considerable control” over their drivers’ activities.
Uber lost another fight in London this month when the transportation agency there said drivers for its black and UberX service would have to pass a stringent English language proficiency test, echoing requirements for traditional taxi drivers. The agency said the test was necessary to ensure passenger safety, while Uber said the £200 ($244) test fee was an unnecessary roadblock to getting more drivers on the road.
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Uber Drivers Entitled to Workers’ Rights, UK Tribunal Rules – Wall Street Journal