On 19th February 2021, the Supreme Court of the United Kingdom ruled against Uber in a landmark judgment affirming previous decisions on the status of Uber drivers. The court held that these drivers were workers under an employment contract, based on unmeasured work and therefore, entitled to the incidental worker benefits.
What the Contract says
The Uber Model presents a tripartite service level arrangement between Uber and the driver on the one hand and Uber and the rider on the other. Before using the app for the first time, drivers must sign a ‘Partner Registration Form’ (which was later modified in 2015 as ‘Services Agreement’) indicating that they agree to comply with the terms and conditions. Under this Agreement, Uber agrees to provide electronic services to the driver which includes access to the Uber app and payment services while the driver agrees to provide transportation services to passengers thus, creating a direct relationship between itself (driver) and the rider to which neither Uber BV nor any of its affiliates in the territory is a party.
Further, the driver (i) appoints Uber as its limited payment collection agent solely to accept the fare on behalf of the driver via the payment processing system facilitated by the Uber services; and (ii) agrees that payment made by the rider to Uber shall be considered the same as a payment made directly by the rider to the driver. Uber agrees to remit to the driver on at least a weekly basis the fare less a ‘service fee’ calculated as a percentage of the fare.
Pacta Sunt Servanda or Rewriting the Contract?
The principle of Pacta Sunt Servanda in the law of contract implies that obligations created in an agreement must be upheld by the parties. Closely associated is the principle of autonomy of parties which allows parties enter into mutually beneficial arrangements that distribute responsibility, benefits and liability according to ability, resources and bargaining power. The Services Agreement between Uber and its Drivers indicates that the parties intend to operate as if the company were a mere technology services provider and not a transportation service provider. The Services Agreement further defines ‘transportation services’ as the ‘driver’s provision of P2P passenger transportation services to Users via the Uber Services in the territory using the vehicle’ artfully placing the responsibility and liability of transportation services on the driver.
In 2016, a court in Florida stated that courts would assist in enforcing the agreements of parties but not in toppling the terms and conditions of a negotiated agreement. However, this principle appears not to have been upheld in recent decisions involving Uber, particularly the case by Aslam&Ors. against Uber. It is understandable that in some circumstances, the court may need to step out of its conservative posture and take on a more active view on negotiated agreements between parties. The question then is; does the Services agreement between Uber and its Taxi Drivers present such an opportunity? At first blush, this may be answered in the negative.
However, upon reflection, the overarching need for fairness in contracts and compliance with the spirit of legislation may have the courts resorting to an active view of interpretation of contracts. In this decision, the UK court highlighted that it “would be inconsistent with the purpose of this legislation to treat the terms of a written contract as the starting point in determining whether an individual falls within the definition of a “worker”. To do so would reinstate the mischief which the legislation was enacted to prevent”. The court seeks to ensure that parties do not contract out of the protections made in statute, especially concerning parties with weaker bargaining powers, which the statute was in the first place designed to protect.
In December 2017, the European Court of Justice curbed Uber’s avoidance of strict regulation by ruling that Uber is not a mere digital company but one providing transport services. This decision materially impacted Uber’s market structure by adding on more liability than anticipated especially as the structure runs in about 10,000 cities across the globe with a market cap of circa US$102.99 Billion.
While it is not the primary aim of the court to dispense with commercially savvy decisions, at what point must the courts take an approach to ensure that Big Tech is not overly regulated, and its very appealing structure is not dismantled by traditional restraints that made Big Tech so necessary and welcome in the first place?
Policy Considerations
This decision represents a significant setback for employers in this space. Generally, service providers have been on the receiving end of a wave of consumer protection laws in many jurisdictions. While it remains essential for the state to protect end-users of services, it must be balanced against a skewed approach to consumer protection. This may cause an increase in litigation, as in law, vicarious liability increases the chances of larger payouts in compensation.
Importantly, we expect this decision to significantly impact the way the Uber structure and similar eHTS are run. The Uber model rests significant control in the driver and plays mainly an intermediary role between the driver and the rider. Would Uber and other similar service providers stick to this model in the face of this judgment? We expect eHTS providers to assume more control over the driver and possibly reverse the current fee structure, placing a greater burden on the end-user.
Conclusions
We believe this decision represents a challenge for innovation and market disruptions, which have put traditional service providers on edge and raised competition. Although only persuasive in Nigerian courts, the unanimity of all the courts in the hierarchy shows the disposition of the courts towards the protection of the employee.
We expect this decision to define subsequent decisions and have significant impact given that Uber remains a global brand with presence in multiple jurisdictions.
Anwuri, a first-class graduate of law, is an Associate in the Finance Practice Group of Templars, a leading commercial law firm in Nigeria. She regularly advises on domestic and cross-border transactions including mergers and acquisitions, corporate restructuring, joint ventures, capital market and project finance.
David has amassed cognate experience in structuring commercial deals and works with the Corporate and Commercial Practice Groups of Matrix-Solicitors LLP. He regularly advises on infrastructure & project finance and oil & gas. He holds an LLM Degree in International Commercial Law from the prestigious University of Dundee, United Kingdom.
Anwuri, a first-class graduate of law, is an Associate in the Finance Practice Group of Templars, a leading commercial law firm in Nigeria..
David holds an LLM Degree in International Commercial Law from the prestigious University of Dundee, United Kingdom, and regularly advises on infrastructure & project finance and oil & gas.
