The disruption Uber caused to the transport market was phenomenal, and it has quickly become one of the most popular ways to travel. The concept isn’t just appealing to potential clients, but also to potential drivers: suddenly, without needing skills or qualifications, ordinary people could earn a little more cash on the side or even make it into their dominant source of income.
Uber’s model relies on its drivers to be classified as contractors, as a way of keeping down the costs and risks associated with the employment of thousands of drivers. While they have many similarities to casual employees – flexible working hours, no leave entitlements, no notice period for termination – Uber has always firmly maintained the position that its drivers are not in its employ, but operate as independent businesses offering their services.
The UK decision
In a case handed down late last month, an employment tribunal in the UK decided that Uber’s drivers are employees rather than independent contractors, resulting in Uber being vicariously liable for the negligent acts of its drivers, as well as owing thousands of dollars in unpaid leave entitlements and minimum wage rates.
Uber had unsuccessfully tried to argue that its drivers could choose when and where they worked, a flexibility it claimed was only enjoyed by contractors, but this was overshadowed by the fact that the drivers had little power or control over what they did when they were working: they simply follow Uber’s procedures, are offered and accept trips on Uber’s terms, and receive the pre-allocated fees without the ability to negotiate different arrangements.
What’s the problem?
Independent contractors and employees have a completely different set of entitlements, including those relating to the payment of taxation and superannuation. If one is suddenly determined to be the other, the risk of underpayments arise in relation to entitlements which were not given or paid under the original arrangement.
It is unlawful in Australia to disguise an employment relationship as one of an independent contractor, and businesses and individuals found to be doing so face hefty fines and significant brand damage. This practice is known as “sham contracting”.
What does this mean for Australia?
Uber has announced that it will appeal the UK decision, so it will be several more months before a final decision is reached. But the success of this initial case may prompt Uber drivers in Australia, or even other workers in the “gig industry”, to challenge their own engagement relationships.
HR Assured expects this issue to get a lot more airtime in the near future, especially as it follows on from other accusations of sham contracting involving major brands which were brought into light earlier this year.
Businesses who engage independent contractors should review their arrangements to ensure that they truly are contractor-principal relationships. If you have any concerns or doubts, seek legal or HR professional advice. If any businesses are situated in the gig industry like Uber, we recommend that you start making preparations for the ripple effect the UK decision is bound to have on Australia, and consider what you can do to avoid the same fate.
For more information on contractors and what this means for you, clients should contact the HR Assured team. If you’d like more information about the benefits of becoming an HR Assured client contact us today for an informal chat.