A route around the independent subcontractor defence?

03 Mar 2021

The Supreme Court’s latest ruling on the status of workers in the gig economy provides useful guidance for both claimants and defendants considering the strengths of claims brought alleging vicarious liability for the actions of a third party who is definitely not an employee, but may potentially still fall within the criteria for vicarious liability to arise.

In Uber BV v Aslam [2021] UKSC 5 the Supreme Court considered the employment rights and status of Uber drivers in an appeal brought by Uber after the Court of Appeal ruled that the drivers were to be considered “workers”, rather than independent subcontractors and so were entitled to a number of employment rights. 

Employment law contains three potential classifications: employee; independent subcontractor; and “worker” - a hybrid role for individuals who are self-employed but who provide their services as part of a business undertaking carried on by someone else.  The impact of the classification for the Uber drivers is that as workers they qualify for certain statutory employment rights such as minimum wage and paid annual leave.  Outside of employment law, however, the key distinction is that an entity would be more likely to be vicariously liable for the actions of its “workers” than for the actions of its contractors, especially after the continued validity of the “independent subcontractor defence” was reasserted by the Supreme Court in the decisions of 1 April 2020 in Barclays Bank v Various Claimants [2020] UKSC 13 and WM Morrisons Supermarkets plc v Various Claimants [2020] UKSC 12.[1]  

Whilst the Supreme Court judgment in Uber does not comment on the law on vicarious liability, it does provide useful guidance as to the distinction between an independent subcontractor and a worker. Previously in the Pimlico Plumbers Supreme Court decision on employment status in 2018[2], it was key to the finding that the claimant was a worker that he had worn a Pimlico Plumbers’ uniform, was in a Pimlico Plumbers branded van, and worked exclusively for Pimlico Plumbers.  None of those things are true for Uber drivers, and in fact they are actively discouraged from displaying Uber branding within London.

In Uber the Supreme Court focussed on the relative degree of control exercised by Uber over the drivers. In particular:

  • Uber fixes the prices, Uber fixes their “service fee” and whilst Uber permits a driver to offer a lower fare to a passenger it is a meaningless autonomy as there is no way for the driver to benefit from a discount, for example through repeat custom.

  • All contract terms are fixed by Uber, both for passengers and drivers.

  • Once logged into the Uber app, a driver’s freedom to choose work is restricted by the terms of the app; for example, the driver does not know the destination until the passenger is collected, and a driver who refuses more trips than Uber considers acceptable is penalised.

  • Uber exercises significant control over the delivery of the service; Uber has complete ownership and control over their App and will vet the type of car used by the drivers.

  • Feedback from passengers is used only as an internal performance management tool and not for marketing; a use characteristic of employment relationships.

  • Uber removes as far as possible the potential for drivers to market their own services to passengers and thereby develop their own independent business by keeping drivers and passengers at arms’ length.

Whilst this decision is not inconsistent with previous rulings on the status of the gig economy, it appears the criteria which must be met for a contractor to be considered a “worker” has become broader as the courts adapt to these new and more prevalent ways of working, and take steps to ensure that businesses cannot simply side step the statutory obligations of an employer by declaring their staff to be independent subcontractors. 

This is good news for the Uber drivers but may have an unintended consequence on the law of vicarious liability.  Last April in Barclays Bank and in Morrisons the Supreme Court was resolute in stating that the independent subcontractor defence held firm in the face of the ever widening scope of the law on vicarious liability.  But if more individuals, who would once have been considered bona fide subcontractors, could now be classified as workers, then the applicability of that defence is narrowed, regardless of how staunchly the court defends its existence. For those pursuing and defending allegations of vicarious liability this remains a developing area to continue to monitor as to just how far the courts are willing to extend the definition of worker.

 

[1] See - https://www.blmlaw.com/news/barclays-bank-v-various-claimants-where-does-it-take-us-on-liability-for-property-damage   for previous comment on the impact of the Supreme Court judgments in Barclays and in Morrisons on liability for property damage.

[2] See - http://www.blmlaw.com/news/subcontractor-or-employee-pimlico-plumbers-and-the-potential-for-property-damage-liability-to-rest-in-unexpected-places - for comment on the Pimlico Plumbers decision in the Court of Appeal, subsequently upheld in the Supreme Court.

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Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to customers of BLM. Specialist legal advice should always be sought in any particular case.

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Caroline Kane

Caroline Kane

Partner,
Birmingham


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