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UK court rules Uber drivers are employees, not contractors

The ride-hailing service has long maintained its drivers are independent contractors. In a decision that could majorly impact the gig economy, British judges disagree. A London court ruled Friday that Uber drivers should be classified as employees, rather than independent contractors. The decision could have serious ramifications on the ride-hailing company and its so-called “gig… Read more UK court rules Uber drivers are employees, not contractors

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The ride-hailing service has long maintained its drivers are independent contractors. In a decision that could majorly impact the gig economy, British judges disagree.

A London court ruled Friday that Uber drivers should be classified as employees, rather than independent contractors. The decision could have serious ramifications on the ride-hailing company and its so-called “gig economy” brethren.

Uber’s current classification of drivers as contractors means the company isn’t responsible for many costs, including Social Security (in the US), health insurance, paid sick days, gas, car maintenance and much more. If all drivers are eventually deemed employees, Uber will have to pay for all of this, as well as manage a workforce of more than one million.

“This is a groundbreaking decision,” Annie Powell, a lawyer for the firm Leigh Day that represented UK Uber drivers, said in a statement. “It will impact not just on the thousands of Uber drivers working in this country, but on all workers in the so-called gig economy whose employers wrongly classify them as self-employed and deny them the rights to which they are entitled.

A UK court rules that Uber drivers should be classified as employees rather than independent contractors

Gig economy is a term given to the workforce in which someone is hired, usually through a digital marketplace, to work on demand, for a short-term engagement.

Founded in 2009, Uber offers a mobile app that lets passengers hail a ride from their phone. The company began operations in San Francisco and is now one of the world’s biggest ride-hailing services, operating in more than 450 cities in more than 70 countries.

Uber is also the highest-valued venture-backed company in the world with a valuation of $68 billion. Much of this valuation, however, is based on Uber’s ability to be profitable by running its ride-hailing platform. If the company has to pay for its drivers’ expenses, profits could diminish or costs could be transferred to passengers.

As discussions of driver classification arose over the past couple of years, Uber has always said that it classifies drivers as contractors because that’s what drivers want

“Tens of thousands of people in London drive with Uber precisely because they want to be self-employed and their own boss,” wrote Jo Bertram, Uber UK’s regional general manager, in an email to CNET. “The overwhelming majority of drivers who use the Uber app want to keep the freedom and flexibility of being able to drive when and where they want.”

In the US, Uber settled two similar lawsuits in April over the classification of drivers. The class action suits were brought in California and Massachusetts and involved roughly 385,000 drivers. Under the settlement agreement, Uber was allowed to continue classifying its drivers as independent contractors but had to pay $100 million to the drivers involved in the suit. The ride-hailing company also agreed to certain concessions, including giving drivers more information when they’re banned from the service, not terminating drivers at will and creating a “Driver Association” to address drivers’ concerns.

The London Central Employment Tribunal on Friday took these decisions a step further. The court said Uber drivers should be classified as employees, earn at least the national minimum wage and get paid vacations. The tribunal will hold another hearing to determine the amount of pay drivers should receive.

Uber said it is appealing the decision.

While this preliminary decision threatens Uber’s business model, it’s currently limited to only two drivers. Uber has more than 40,000 drivers in the UK. Lawyers for the two drivers said they intend to open the case up to those thousands of other drivers.

In the wake of Uber’s worker classification battles, several other on-demand companies have begun to rethink employee classification. The grocery-delivery startup Instacart said in June 2015 that it’s switching hundreds of its personal shoppers from contract workers to part-time employees. House-cleaning startup Homejoy said in July 2015 that it was permanently shutting down after being sued over the classification of its workers. Several similar lawsuits have also popped up against other on-demand companies, including Postmates, Handy, Shyp and Washio.

“The Uber ruling will demystify much rhetoric on the ‘gig economy’ being inherently liberating,” said Guglielmo Meardi, industrial relations professor at Warwick Business School in the UK. “Over recent years self-employment has increased, but often coming with very bad conditions, prompting fears that it was being used to bypass employment legislation.”

Would you like to know how you can eliminate the risk of employee / sales rep misclassification and other risks of working through foreign independent contractors?

Source: www.cnet.com

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4 essential tips to prevent employee / independent sales reps misclassification in Germany

Preventing full-time employee / independent sales reps (manufacturer’s agents) misclassification is important in any country. This is especially true for Germany since the German labor laws have some of the strictest punishments when the courts decide that you willfully neglected the law. The claims for backdated social security contributions can go back as far as… Read more 4 essential tips to prevent employee / independent sales reps misclassification in Germany

Preventing full-time employee / independent sales reps (manufacturer’s agents) misclassification is important in any country. This is especially true for Germany since the German labor laws have some of the strictest punishments when the courts decide that you willfully neglected the law. The claims for backdated social security contributions can go back as far as 30 years. If found guilty, the employer could also face criminal charges for tax evasion, which results in high fines and/or a prison term.

Unfortunately, the definition for employee misclassification (scheinselbständigkeit) is not very clear. There are however certain criteria you can take into consideration when trying to prevent full-time employee / independent sales reps (manufacturer’s agents) misclassification.

So here are 4 essential tips to prevent employee / independent sales rep misclassification for your German sales reps.

#1. Have an external party check the nature of the working relationship between your company and the sales rep

The golden tip is to have an external party check whether there is a case of full-time employee / independent sales rep misclassification or not. This will not prevent employee / independent sales rep misclassification cases.

Either the German labor laws or the relationship between your company and the independent sales rep could change. However, having the relationship verified by an external party will make it less likely that you will be charged with willful neglect. This is important because when found guilty you must ‘only’ pay social security contributions for a maximum of four years.

#2. Make sure the independent sales rep has multiple sources of income

If the sales rep receives approximately 80% of his income from one customer, then this will be a red light for labor authorities. As noted above, the relationship between the sales rep and the employer can change over time.

Keeping away from the 80% figure over a long period is essential to prevent full-time employee / independent sales rep misclassification.

#3. Don’t act as the employer

When working through independent manufacturer’s agents, don’t make the sales rep comply with a certain number of working hours. Don’t give too detailed instructions about how the work should be executed. Don’t let the sales agent work on your property. Don’t make the independent sales reps write detailed periodic reports about their activities. Don’t make investment in office supplies for your independent sales agents. Don’t prevent the sales rep from operating under his own tradename, etc.

#4. Use an Employer of Record solution

The above-mentioned measures can make it less likely to be charged with misclassification of employees as independent sales reps. However, if you want to eliminate the risk completely, then the best option will be to to use the services of an Employer of Record Organization in Germany.

Acumen International offers fully compliant global employment solutions in more than 190+ countries. Our Global Employer of Record solutions have already helped hundreds of manufacturing companies eliminate employee / sales rep misclassification (implying an obligation to pay backdated contributions and penalties when found guilty) as well as other legal, financial and business risks related to working through independent sales reps. Among them valuable customer base loss, recruitment costs required to replace the reps when they decide to leave, etc.  Manufacturers are now free to focus on the ways to get higher revenues, while selling their product in the global marketplace in a fully compliant manner, irrespective of the number of foreign markets they operate in.