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Uber loses key legal fight, which could hurt its business model in the U.K. and hit gig-economy companies

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Uber lost a key court ruling on Friday, which could hurt its business model in one of its biggest international markets.

The U.K.’s Supreme Court has decided that drivers of the ride-hailing app should be classified as workers, which means they are entitled to holiday pay and the minimum wage. In early premarket trade, Uber shares fell over 3%.

The crucial ruling from the country’s top court has broad implications for the so-called gig economy, and could mean Uber
UBER,
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faces large compensation claims.

Read: Uber shares hit after losing license to operate in London over safety fears

The case about the employment rights of Uber drivers is similar to one brought to the courts in California last year.

In the U.K., Uber argued that it acted solely as a technology provider and was a booking agent for drivers who are approved by Uber London. The ruling says: “The Supreme Court disagrees.”

In a move that could have a major financial impact on the company, it also ruled that drivers were deemed to be working when they were looking for passengers and not just driving them.

The court documents said: “The Supreme Court also holds that the employment tribunal was entitled to find that time spent by the claimants working for Uber was not limited (as Uber argued) to periods when they were actually driving passengers to their destinations, but included any period when the driver was logged into the Uber app within the territory in which the driver was licensed to operate and was ready and willing to accept trips.”

Read: Uber wins 18-month license to continue to operate London

The long-running case was originally brought in 2016 by drivers James Farrar and Yaseen Aslam in an employment tribunal.

Jamie Heywood, Uber’s regional general manager for Northern and Eastern Europe, said: “We respect the Court’s decision which focused on a small number of drivers who used the Uber app in 2016. Since then we have made some significant changes to our business, guided by drivers every step of the way.

“These include giving even more control over how they earn and providing new protections like free insurance in case of sickness or injury. We are committed to doing more and will now consult with every active driver across the U.K. to understand the changes they want to see.”

The firm added that the verdict does not reclassify all UK drivers as workers. The judgement only focused on the group of drivers who brought the claim at a 2016 employment tribunal, many of whom no longer drive on the app. It also said a worker is not an employee. Employee status was not claimed in the litigation and so this ruling does not find the claimants to be employees.

This comes just months after Uber won an appeal allowing it to continue to operate in London, its biggest European market, over concerns about its safety practices.

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As Congress scrutinizes gig worker rules, small-business owners need to know the basics – The Philadelphia Inquirer

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Uber’s UK ruling could have implications for gig economy startups

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Former Uber drivers Yaseen Aslam and James Farrar first brought their case against Uber in 2016
(Carl Court/Getty Images)

The UK’s Supreme Court has rejected Uber‘s appeal against an earlier ruling that said its drivers must be classified as workers, a result that may have a significant impact on other gig economy companies.

The decision—which cannot be appealed—means thousands of UK Uber drivers cannot qualify as being self-employed, entitling them to both minimum wage and holiday pay. The ridehailing company could now face paying substantial compensation to its drivers.

The ruling, which criticized Uber for sidestepping UK labor laws to withhold benefits, could influence other battles between gig workers and the companies that hire them. Earlier this month, the Independent Workers’ Union of Great Britain appealed against a court decision preventing riders for food delivery startup Deliveroo from engaging in collective bargaining due to their self-employed status. Deliveroo, which is backed by investors including Durable Capital Partners and Amazon, is looking to go public this year.

“Employees should benefit from improved rights; however, employers are likely to face increased costs of labor and disruption to their business models, which have proven to achieve rapid scale with gig workers,” said PitchBook analyst Nalin Patel. “The ruling may also now set a precedent in the UK and force other gig economy startups that utilize the self-employed contractor model to rethink how they operate in the region moving forward.”

Former Uber drivers James Farrar and Yaseen Aslam originally won their tribunal against Uber in 2016. Uber appealed the decision, but it was upheld in 2017, and again in 2018 by the High Court.

“This ruling will fundamentally re-order the gig economy and bring an end to rife exploitation of workers by means of algorithmic and contract trickery,” said Farrar, who is also a general secretary with the App Drivers and Couriers Union. “Uber drivers are cruelly sold a false dream of endless flexibility and entrepreneurial freedom.”

In a statement, Uber’s regional general manager for Northern and Eastern Europe, Jamie Heywood,  said the court decision was focused on a “small number of drivers” who used the app in 2016. Since then, he said the company had made changes to its business,  providing free insurance in case of sickness or injury. He added: “We are committed to doing more and will now consult with every active driver across the UK to understand the changes they want to see.”

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The future is now for gig-based entrepreneurship – San Gabriel Valley Tribune

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With Californian Kamala Harris as vice president, it’s clear the new Biden administration is taking its cues from the once-Golden State on labor policy.

In one of its first acts in office, the Biden Administration placed a regulatory freeze on a Department of Labor regulation enacted in the waning days of the prior administration relating to independent contractors.  The rule, according to labor and employment law firm Fisher Phillips, “aims to make it easier for businesses to classify workers as independent contractors.”

It’s unlikely this rule to give more workers freedom to be their own boss and set their own schedules will survive in a Biden administration that was heavily reliant upon labor unions for money and manpower to win the 2020 campaign.

Meanwhile, House Democrats recently re-introduced the controversial PRO Act in Congress, which “seeks to reduce the use of the independent contractor classification by companies such as Uber,” according to CNBC.

Both of these efforts followed the lead of California’s liberal legislative majority, which two years ago enacted the controversial Assembly Bill 5 to severely restrict the ability of Californians to work as independent contractors.  Their goal is to increase union membership and dues and force people to work in traditional, 9-to-5, union jobs that are relics of the past.

Doubling down on AB 5-type restrictions at the national level – which may be the Biden administration’s goal with the nomination of Julie Su, California’s chief AB 5 enforcer, as deputy Secretary of Labor – would be a tremendous mistake.  It would threaten innovation and hurt the ability of Americans who have lost their jobs to put food on the table during a global pandemic.

As documented in the new Pacific Research Institute study, “The Small Business Gig,” Americans are increasingly working in the gig economy.  They don’t want government – whether in Sacramento or Washington, DC – dictating how they can earn a living.

A 2018 Gallup survey found that 36 percent of U.S. workers have some sort of a gig worker arrangement.  Whether renting out an extra room to earn cash to pay the mortgage or using an app to earn a living on an alternate schedule, the gig economy is increasing opportunities for Americans to become entrepreneurs, while providing customers with lower cost services.

Many in California state government see the gig economy as exploitative and disruptive.  But data from the ADP Research Institute shows that 70 percent of gig workers are independent workers by choice.  Gig Economy Data Hub research found that more than two-thirds of gig economy workers are satisfied with their current work arrangement.

Government shouldn’t pick winners and losers in the economy.  New restrictions on the gig economy, like those proposed in Congress, will limit people’s freedom to become entrepreneurs while institutionalizing the old way of doing work.

Instead of adopting regulations at the federal level that 58 percent of Californians – Democrats, Republicans, and independents alike – rejected when they passed Proposition 22 in November, the Biden administration and Congress should take the opposite approach and enact market-based policies to encourage entrepreneurship and innovation.

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