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 CEO Dara Khosrowshah
Uber CEO Dara Khosrowshah is hoping to pre-empt further regulation
(Image credit: © PHILIP PACHECO/AFP via Getty Images)

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.

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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.

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri