LONDON – For years, Uber has successfully deployed armies of lawyers and lobbyists around the world to combat attempts to classify drivers as company employees eligible for higher wages and benefits, rather than low-cost, self-employed freelancers.
Now the hail giant is pulling back from that tough stance after a severe legal defeat in the UK, one of its key markets.
On Tuesday, Uber announced it would classify more than 70,000 drivers in the UK as workers on a minimum wage, vacation pay and access to a retirement plan. The decision, Uber said, was the first time the company had agreed to classify its drivers in this way, and it was in response to a landmark decision by the UK Supreme Court last month that Uber drivers were entitled to more protection .
The decision represents a postponement for Uber, even though the move was made easier by UK labor rules, which offer a middle ground between freelance and full-time employment not found in other countries. That middle ground makes it unclear whether Uber will change its stance elsewhere. More industrial disputes are coming in the European Union, where policymakers are considering stricter labor regulations for gig economy companies, and in the United States.
The fragile business model of Uber and other so-called gig economy companies depends on labor costs being kept low by an extensive network of workers defined as independent contractors. Although the services have transformed the way people commute and order take-out and have been valued by billions of dollars in investors, they have struggled to make a profit. In 2020, Uber recorded a net loss of $ 6.8 billion.
Uber had fought previous labor regulations by arguing that it was only acting as a technology platform connecting drivers and passengers. However, the UK Supreme Court justices unanimously ruled that Uber is acting more like an employer by setting tariffs, assigning rides and asking drivers to follow specific traffic routes.
The court ruling was welcomed by labor activists who have for years criticized the way companies like Uber, Lyft, DoorDash, and Grubhub deal with drivers and deliverers.
In the UK, Uber originally tried to downplay the Supreme Court ruling. The company said the decision would only apply to a very small number of drivers in the UK. However, the company risked being stuck in lawsuits involving individual drivers across the UK over the application of the ruling.
Uber said that as of Wednesday, all drivers in the UK will be defined as “workers,” a legal classification in the country that gives drivers a minimum wage and minimum vacation time. It does not provide the full protection of the fully “employee” classification, which includes paternity and maternity leave and severance pay upon dismissal.
In a statement, Uber said last month’s court ruling “provides a clearer path for a model that gives drivers worker rights – and keeps them flexible, as they have done since Uber’s launch in the UK in 2012 . “
Uber said drivers would receive the country’s minimum wage from the time they accept a ride request until they drop the passenger off at the location, but not while they wait for someone to request a ride. Motorists can still earn more if a fare is higher than the minimum wage, as is often the case, Uber said. As of April 1, the UK minimum wage for people over 25 is £ 8.91, or around $ 12.40.
For the vacation, drivers receive 12 percent of their income, which is paid every two weeks, a calculation set by the government.
Uber didn’t reveal how much reclassifying British drivers would add to costs, but said in a filing for approval that it didn’t change the company’s goal of becoming profitable this year. London is one of Uber’s five largest markets, and the UK accounts for about 6.4 percent of the company’s total gross bookings.
Jamie Heywood, Uber’s regional general manager for Northern and Eastern Europe, put pressure on other hail shipping companies to adopt similar guidelines in the UK.
“Uber is only part of a larger private rental industry. We hope all other operators work with us to improve the quality of work for these important workers who are an integral part of our everyday lives,” he said in the statement.