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.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
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.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
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
-
Twenty 'finfluencers' questioned under caution by the UK regulator
The individuals were interviewed voluntarily using the Financial Conduct Authority’s criminal powers
By Chris Newlands Published
-
Number of ISA millionaires triples in three years
The number of people with £1 million in their ISAs has tripled in three years to reach 3,180. But could next week’s Budget put an end to future ISA millionaires?
By Ruth Emery Published
-
Should you invest in Canada?
Canada presents a compelling opportunity for investors who want to look beyond the US. Greg Eckel of Canadian General Investments highlights four favourites
By Greg Eckel Published
-
What will a broken-up Google look like?
The US courts have ruled that Google is a monopoly, leaving it facing the prospect of a break-up. WIll that be a good thing?
By Matthew Lynn Published
-
How will the UK gambling sector be hit by the Budget?
There are concerns for the UK gambling sector in the lead-up to the Autumn Budget. What could be on the cards?
By Dr Matthew Partridge Published
-
HSBC returns to cost-cutting plan
HSBC is set to revamp its commercial banking division – but will it come at a cost?
By Dr Matthew Partridge Published
-
Will European stocks bounce back?
European stocks have looked unattractive for some time – will they bounce back?
By Alex Rankine Published
-
British American Tobacco goes smokeless – can it survive?
British American Tobacco’s core product is struggling, but new areas bode well, says Bruce Packard
By Bruce Packard Published
-
Pfizer shares rise as US investor takes $1 billion stake
Pfizer shares are on the up since US activist investor Starboard Value built up a stake in the drug maker. But strategic options appear limited
By Dr Matthew Partridge Published
-
LSL Property Services: a profit-machine in the property sector
LSL covers every area of the residential real estate market and should thrive after its shake-up
By Rupert Hargreaves Published