Court decision on drivers’ rights sends Uber’s share price into reverse

Uber must treat its drivers as staff rather than as self-employed contractors. What does this mean for its prospects?

Uber’s share price has been “sent into reverse” thanks to a “landmark” judgement over the employment status of the ride-hailing app’s UK drivers, says Simon Freeman in the Evening Standard. The UK Supreme Court has decided to uphold a 2016 ruling by an employment tribunal that drivers on its platform should be classified as Uber workers rather than self-employed. This means that Uber’s drivers in the UK are entitled to “a minimum wage, overtime, sick pay, holiday pay, pensions” and possibly retrospective compensation.

The ruling is definitely bad news for Uber, as it threatens its entire business model, says Morgan Schondelmeier in The Daily Telegraph. Not only will drivers be entitled to rights such as paid holidays and regular breaks, but the Supreme Court has also ruled that a driver is “considered working any time they are logged into the app, not just when on an active trip”. As a result, Uber will have to pay for any downtime as well. All this will “drastically raise employment costs” – and prices for customers. There is even a chance that Uber could reach a “tipping point” and decide to leave the UK.

Further trouble ahead? 

Not so fast, says Sam Schechner in The Wall Street Journal. Uber argues that the ruling will only set a “limited” precedent as it “has changed how it handles its relationships with drivers since 2016”. It has given them more flexibility, including the right to turn down fares repeatedly. According to the judgement, the lack of such flexibility played a key part in the Court’s original decision to rule against them. In any case, the effect on costs will be lessened by the fact that Uber has already “increased benefits for its drivers” and the fact that other places in the world, such as California, have voted to classify Uber drivers as independent contractors.

Still, the UK isn’t the only place in the world that is thinking about regulating employment platforms, such as Uber, more closely, says Natalia Drozdiak on Bloomberg. The European Union is working on proposals to “improve the working conditions of platform workers”, including strengthening their right to bargain collectively, while even the recent Californian law sponsored by the company forces Uber to provide more benefits. Besides, even Uber’s CEO Dara Khosrowshahi has admitted that the company needs to “do more and go much further” if it is to pre-empt additional regulation.

Overall, there’s no hiding the fact that the ruling is a “kick in the tyres” for Uber, says Lex in the Financial Times. Investors who have “already borne the cost of regulatory battles from New York to Hong Kong”, must be wondering how long it will be before the technology platform finally turns a profit. Still, they are not alone in their misery. You can expect “potential litigation and labour policies” to rate a mention or two in Uber Eats rival Deliveroo’s prospectus when it floats in a few weeks’ time.

Recommended

Will energy prices go down in 2023?
Personal finance

Will energy prices go down in 2023?

Wholesale gas prices are on a downward trajectory, but does this mean lower energy bills later this year?
27 Jan 2023
Best regular savings accounts – January 2023
Savings

Best regular savings accounts – January 2023

You can earn an attractive rate on the best regular savings accounts. We tell you the best on the market to take advantage of right now
27 Jan 2023
Equity release v downsizing – which is best?
Personal finance

Equity release v downsizing – which is best?

Equity release hit a record high in 2022. But is downsizing a better way to hold on to your money?
27 Jan 2023
Self-assessment tax returns: what you need to know about getting your tax bill right
Income tax

Self-assessment tax returns: what you need to know about getting your tax bill right

Understanding how self assessment works can help you ensure you pay the right amount of tax, as well as avoid penalties for missing the deadline.
27 Jan 2023

Most Popular

House prices could fall 30%. Should investors be worried about a repeat of 2008?
Investments

House prices could fall 30%. Should investors be worried about a repeat of 2008?

Some analysts are predicting that house prices could fall as much as 30%, which, when compared to the fact that prices have jumped 28% since April 201…
24 Jan 2023
Will energy prices go down in 2023?
Personal finance

Will energy prices go down in 2023?

Wholesale gas prices are on a downward trajectory, but does this mean lower energy bills later this year?
27 Jan 2023
Council tax increases 2023 – how much more will you pay?
Tax

Council tax increases 2023 – how much more will you pay?

Your council tax bill will go up in April - we reveal the councils that have confirmed what this year’s increase will be.
23 Jan 2023