While Uber is dreaming about deploying flying cars by 2026, the news from London is likely to bring the disruptive startup down to earth with a bang. Uber has just lost a tribunal over the treatment of its drivers, which means bad news for Uber, similar companies, and it also calls into questions the future of the entire gig economy.
Uber's initial business model was based around hiring self-employed contractors to provide flexibility for people who are not interested in permanent or fixed schedule roles, where the company benefited from having a limited responsibility and reduction of operating costs. Similar concept companies followed the same path, which further boosted the popularity of freelancing in the from a gig economy. And it's not only Uber who has got itself into trouble, the food delivery company Deliveroo recently faced scrutiny for absolutely the same reasons - the absence of holiday and sick financial coverage, minimal living wage, and poor treatment.
It's been over a year since workers, legal representatives, and trade unions started questioning the legitimacy of Uber's model, and, eventually, numerous complaints from drivers and labor advocates evolved into a lawsuit. The case was brought by the GMB trade union who claimed that the company failed to provide drivers' basic employment rights. From Uber's perspective, however, the company positions itself as a tech company with the aim to connect independent drivers with passengers through their digital app - as opposed to conventional taxi companies, where drivers are officially counted as employees.
What does the case mean for the gig economy?
Jo Bertam, regional general manager of Uber in the UK explained: ‘Tens of thousands of people in London drive with Uber precisely because they want to be self-employed and their own boss.' If we look at the situation from a business perspective, companies like Uber and Deliveroo achieved rapid revenue growth and dominant positions in the markets specifically because such thing as self-employment exists.
Categories of self-employment and full employment mainly differ in their benefits package and working hours, so if one day, the law rules that both categories must exist under equal conditions, both categories may cease to exist or evolve into something completely different. Self-employment status may become less attractive for contractors as they would be obliged to show loyalty to the company who would treat them as employees. And with full employment, many permanent jobs (especially low-paid) would be able to move towards less working hours and more flexibility because there would be no visible difference between the two.
With this in mind, Bertam insisted that: 'The overwhelming majority of drivers who use the Uber app want to keep the freedom and flexibility of being able to drive when and where they want. While the decision of this preliminary hearing only affects two people we will be appealing it.' Uber's initial policy did not oblige drivers to log in for a minimum number of hours nor did it put restrictions to only be loyal to one company. However, since opinions on the matter are now divided, with one group hoping to preserve the best of the gig economy, and others seeing it as evil - the situation must be resolved, otherwise, both contractors and companies will be affected badly.
The truth now lies somewhere in between. There are, indeed, companies who falsely classify their workers as self-employed. These aim to reduce a company's costs and promote a hands-off relationship between a company and a contractor. The problem appeared because one of the parties breached the concept of self-employment as a whole, practically making it close to the full employment, but without supporting benefits and proper labor rights. As with Uber, the company doesn't let contractors setting their own fare prices, influence regulations and procedures associated with their work - which does not resonate with the initial concept of self-employment.
It seems like businesses and those who seek job opportunities should look at employment in a different way as it's now clear that there has been a massive change in the meaning and understanding of employment as a whole, which has triggered confusion and dissatisfaction from both sides. It may come a time when we need to consider creating a new status or fully adapt conventional labor rules to the trends of the modern society - but for now, it is highly likely that there are more lawsuits to come.