The Uber drivers verdict and what it means for contractors inside IR35

Over a week on from the landmark case in which the Supreme Court ruled that Uber drivers are indeed workers, and not independent contractors as argued by Uber, we’re reflecting on what this means for consultants and contractors working inside IR35.

The Uber case

The verdict on 19th February 2021 was the end of a four-year court battle in which Uber fought to overturn the ruling of an employment tribunal, brought by two of its drivers. The unanimous dismissal by the Supreme Court was informed by the following factors:

  • Contract terms were imposed by Uber on the drivers, who had no say in them
  • Uber exercised ‘significant control’ over drivers in relation to performance ratings
  • Uber dictated fares, which impacted how much the drivers could earn

The court determined that the drivers were in a position of subordination and dependency in relation to Uber, and that the only way of increasing their earnings was to constantly meet Uber’s performance measures. 

In a statement, Uber stated that over recent years it has made “significant changes” to its business and the examples cited in the judgement are “no longer relevant”. 

However, this case could have wide reaching implications for how the self-employed, gig economy workers and contractors and consultants working inside IR35 should be treated by organisations to comply with employment law.  

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inniAccounts CEO, James Poyser, on what this could mean for contractors working inside IR35

A positive for inside IR35 workers 

James Poyser says:  “This throws ‘inside IR35’ into chaos. Currently, inside IR35 means you’re treated as a worker for tax purposes, but without any rights that workers are afforded. As a result of this landmark trial, it’s likely that those deemed inside IR35 are, in fact, workers, and thus afforded protections under the Employment Rights Act 1996, the National Minimum Wage Act 1998 and the Working Time Regulations 1998.” 

A wake-up call for organisations

James continues: “This should serve as a wake-up call to any organisation engaging with gig-economy workers, contractors and other independent professionals. The position is now very clear: you must either engage them as workers, and provide them with the protections the Supreme Court has confirmed they are entitled to, or engage them as self-employed professionals, thus falling outside of the scope of IR35.”

Writing on LinkedIn, director of tax investigations at WTT, Thomas Wallace said: “Now that Uber drivers are classified as workers, they will be entitled to, amongst other things, NMW [national minimum wage], paid holiday, and protection against unlawful discrimination.

“Whilst this adds to the body of case law on employment status, in my view it does not introduce any new points of law or overturn any previous cases in this arena.”

Fair treatment for ‘deemed employee’ workers

Ultimately, we believe that the Uber ruling has positive consequences for anyone inside IR35 who is being taxed as an employee but has none of the rights and protections that employees get. 

In a recent article on LinkedIn, employment status, off-payroll & IR35 expert Rebecca Seeley Harris said that the self-employed, ‘deemed employees’ and small businesses are “the lifeblood of the economy” and that “it is time to recognise that the ‘deemed employee’ should not be the ‘damned employee’.” 

James has similar thoughts: “It is no longer acceptable for organisations to abuse the rights of workers, even if their tax status differs from their employment status.”  

A clear need for policy reform 

James continues: “It’s clear that this news requires action by Parliament. However, with the advancing of IR35 reforms, the lack of regulation of the umbrella company sector and, most recently, HMRC misleading a Select Committee on disguised remuneration schemes, we have very little confidence that the government will take action to protect the rights of workers who are vulnerable to abuse.

“I believe there is a way for HMRC to protect revenue, keep British business firing on all cylinders and give every worker the flexibility to choose how and when they work with rights, but it will take a fundamental review in policy.”

A refresher on employment rights for contractors

  • If you’re working outside IR35, you’re not entitled to employment rights, with the exception of:
    • protection for your health and safety on a client’s premises
    • protection against discrimination
  • If you use an umbrella or go onto PAYE as a ‘worker’, you are entitled to employment rights, thanks to the agency worker regulations, including:
    • written terms outlining your job rights and responsibilities
    • National Minimum Wage
    • paid holiday
    • payslips
    • protection against unlawful discrimination
    • protection for ‘whistleblowing’
    • not being treated unfairly if you work part time
    • access to employee facilities (canteen, parking etc)
    • the same pay as client’s employees, including basic, individual bonuses, commission and overtime
    • the same holiday pay as the client’s employees, if it’s above the legal minimum
    • the same sick pay as the client’s employees
  • If you’re inside IR35 with a deemed payment, you’re not entitled to employment rights. However, the Uber ruling may put an end to this.

A good source of free and impartial advice on employment rights is ACAS