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Uber Ruling: The Devil is in the Detail

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Following a landmark Supreme Court ruling last month, Uber will now have to reclassify all 70,000 of its UK drivers as ‘workers’ rather than ‘independent contractors’, entitling them to benefits such as a minimum wage, vacation pay and a pension plan. Specifically, drivers will receive a minimum wage of £8.72 per hour starting on Wednesday, a holiday pay will be based on 12.07% of their earnings every two weeks and a pension scheme that will include 3% contributions of their incomes. Ultimately, such a decision undoubtedly poses significant changes to Uber’s business model not only in the UK, but also, globally. 

With the UK being Uber’s largest European market and also one of its biggest worldwide, constituting 6.4% of its total mobility revenue, it is fair to conclude that this change will increase costs for the firm, and in turn, potentially increase prices for UK consumers. While Uber has reassured individuals that it will keep both fare prices competitive in the near future and earnings expectations unchanged, it is hard to know for certain whether it will fulfil its promises in the long-term as the new worker status may expand to other markets and most definitely appreciates costs. With most Uber drivers in London already earning £17 per hour on average and £14 in the rest of the country, added costs will derive from the introduction of holiday payments and pensions contributions rather than the minimum wage. 

In many ways, this decision may mark the beginning of a new gig economy, one which values its workers and is committed to improving their conditions through greater employment protection and benefits. Although this is most certainly a step in the right direction, this change and the broader implications it will have upon the underlying market structure are quite significant. Most notably, the lean and low-cost model of many app-based transportation and delivery companies will be altered and eroded with the introduction of these new laws. In addition to the internal labour market ramifications of this decision, it is likely that this ruling and its ripples will transcend domestic waters. In fact, Uber did indeed face similar legislative pressures in California in the past with the Assembly Bill 5 (AB 5) state statute. Though AB 5 failed to stand with the successful passing of Proposition 22 in November 2020 which declared ride-sharing drivers as independent rather than employees, it still granted drivers some new concessions and protections such as a wage floor. More importantly, it highlights how this issue still remains a divisive one, and an ongoing concern which may potentially plague Uber in the future. 

Crucially, while this ruling does underscore the difference between US and European labour markets and the uniqueness of UK employment law, this new precedent will unquestionably influence policy makers worldwide, change the way Uber conducts business, and fundamentally, signal the dawn of a broader reckoning for the gig economy.

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