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Uber’s court defeat in London on Friday was the latest sign of the growing resistance to the key premise that has powered the rise of the so-called gig economy: that workers work for themselves and not the apps that rely on them.
Companies such as Uber portray themselves as simple matchmakers that use technology to connect customers with self-employed people who want to sell their services.
But courts, regulators and politicians are disputing that assertion — posing a threat to the business models of many tech-based consumer services groups.
“It goes right back to the question at the centre of the gig economy business model: is it matchmaking, or is it providing a service?” says Jeremias Prassl, a law professor at Oxford university.
“You’re now seeing courts all over the world agreeing that the service provided by the app is more than just the intermediation.”
The judge in London’s employment appeal tribunal — put forward by co-claimants James Farrar and Yaseen Aslam — concluded that Uber drivers were not independent contractors making use of an app. It backed the decision of the original tribunal last year that they were Uber’s “workers” because the company controlled much of their work — allocating them customers and dictating the prices, for example.
The UK — where Uber also faces being kicked out of London after the city’s transport authority refused to renew its licence to operate — is not alone in taking a keen interest in the car-booking app’s business model.
The European Court of Justice will soon make a decision on whether Uber is classed as a tech company or a transport company, a classification that will have knock-on effects on all areas of its business across the EU.
Uber has faced legal challenges in the US too, although these have had setbacks recently as Uber contracts stipulate that the drivers must seek arbitration, instead of filing a court case.
The biggest case in the US over employment status has been hung up on precisely that issue, as courts debate whether or not the thousands of drivers represented can take part in a class-action lawsuit.
The fight in London is far from over. Uber has several more chances to appeal against the ruling, which could drag on for several years.
The company has not been singled out: tribunals in the UK have made similar judgments in a slew of cases recently, not all involving technology platforms.
But the stakes for the gig companies are high: if they have to assume responsibilities as employers, they will have to cover holidays and absorb labour costs during periods of low demand, in addition to potentially facing higher taxes. They argue increased costs would have to be passed on to consumers, who have become used to cut-price services.
Speaking before the appeal judgment, the chief executive of a UK-based gig economy app, talking on condition of anonymity, says politicians and courts were pushing against the interests of ordinary people.
“I think it would be a shame if the politicians and courts together ignore what is the will of the hundreds of thousands of people who sign up for this kind of work, which is increasing week on week on week all around the world.”
Yet policymakers’ attitudes towards disruptive technology apps seem to be darkening in some countries, as they weigh the benefits of innovation against the risks of people working without a safety net of employment rights.
At the Web Summit technology conference in Lisbon this week, regulators and policymakers from across Europe raised concerns to the FT about an increase in precarious working conditions driven by on-demand technology apps.
Xavier Bettel, prime minister of Luxembourg, said Uber had approached him about launching in the country two years ago, but it had raised concerns over the lack of social security contributions for drivers.
“Innovation doesn’t mean I don’t care,” he said. “For me Uber is innovation — I really support innovation — but I don’t want to produce people where in 10 years they will have no salaries, no pensions, no security.”
Uber has argued that the main obstacle in Luxembourg are the regulations that require private hire trips to last a minimum of one hour, which would not work for shorter trips, but the transport ministry said this “could easily be solved if needed”.
Gig economy companies such as Uber have long argued that drivers prefer flexible working to the restrictions that would have to accompany minimum hourly wages and holiday pay.
When Uber was threatened with a ban in London, drivers were among the first to criticise the decision. At the time, Mr Farrar, co-claimant in the tribunal, said: “This is a devastating blow for 30,000 Londoners who now face losing their job and being saddled with unmanageable vehicle-related debt.”
Uber’s new chief executive Dara Khosrowshahi is tasked with navigating between the demands of regulators, needs of the drivers and the eventual goal of one day making a profit.
After just two months in the role, Mr Khosrowshahi set out his position on Uber’s treatment of drivers on Thursday. In response to a question about low driver pay at a conference in New York, he said: “Believe me, we are not making a ton of money here in the US off of the drivers,” he said. “It is the facts of the economics of the business.”