The Supreme Court agreed with earlier rulings by the Employment Appeal Tribunal and Court of Appeal that Uber drivers are not independent contractors. As such, drivers whose work is arranged through Uber’s smartphone application work for the company under workers’ contracts and so qualify for the national minimum wage, paid annual leave and other workers’ rights.
In a similar ruling in the Netherlands, the Amsterdam Court of Appeal ruled on February 16 that Deliveroo riders should be classed as workers that give them the right to formal contracts, holiday and sick pay. However, Deliveroo plans to appeal this case to the Supreme Court, according to local reports.
In the UK judgment, the Supreme Court dismissed Uber’s reliance on the Secret Hotels2 case of 2014 to argue that the ride-hailing company was an intermediary. That case focused on the classification of a relationship for VAT purposes, whereas Uber’s case was centred around employment.
“This is a landmark victory for Uber drivers. It has the potential to set a precedent for all gig economy workers, many of whom need and deserve employment rights,” said Seb Maley, CEO at tax, IR35 and employment status firm Qdos.
The case means Uber may have to pay employment taxes for its riders, including paying national insurance contributions (NICs) and offering a workplace pension. However, this may still need to be determined, based on whether Uber drivers are classified as self-employed or employed.
UK tax authority HM Revenue and Customs (HMRC) may enquire further into whether the drivers, who have proved that they are workers, are employees or not.
“We believe this decision does not set a blanket precedent for tax treatment across all gig workers," said Kevin Sefton, CEO at untied. "The decision on whether someone is employed, self-employed, both or neither for tax purposes, will depend on many factors, and can be complicated. It is possible for someone to have one status for employment law purposes but have a different status for tax purposes."
“On its most basic principles for tax, an employee must generally carry out their work personally, but someone who is self-employed has the freedom to send someone else to do the work in their place. However, this can be more complex and ultimately each scenario needs to be considered on its own merits," Sefton added.
Nevertheless, the potential for employer taxes such as NICs is a growing concern for gig economy businesses. The Taylor Review on modern working practices recommended that gig economy companies pay NICs on behalf of their workers after it explored the forms of employment or engagement that had been developed simply to try to avoid paying taxes as part of a wider review.
“Sometimes these are pretty straightforward attempts to circumvent the law, but other times – like in the cases of Uber and Deliveroo – the issues are more complex, where the organisation claims that it has legitimate grounds to say that people are self-employed,” said Matthew Taylor, the report’s author and chief executive of the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA), after publishing the report in 2017.
“Now, generally speaking, the courts are not agreeing with those companies and I think that our review recommendations would overall mean more people getting workers' rights and also being subject to employer's national insurance contributions,” Taylor told ITR.
Since the Taylor Review and the introduction of IR35 rules for the private sector, tax professionals have been arguing that the employment tax system is fundamentally unfit for purpose and needs reforming. However, little has been done to make the necessary changes.
The two decisions in the UK and Netherlands over workers’ rights this week may have a fundamental impact on how companies in the gig economy operate and their long-term tax liabilities.
