Are Uber Drivers employees?

Are Uber drivers employees? A look at emerging business models and whether they can be accommodated by South African Labour Law (2016) 37 Ill 1574

2016 IL] p1574

Kgomotso Mokoena!

Globally, we have seen the introduction of a number of innovative business models whichdisrupt long-standing systems and standards in various sectors. Many of these models focus oncutting the cost of labour and operations by utilising technology to connect consumers to services or products in an easier fashion. 1 These new business models are symptomatic of a 'sharing economy' that is characterised by a system in which demand for services is satisfied by non standard forms of supply. These forms focus on the mobilisation of dormant assets.

Over the last few years, Uber has taken over the South African taxi industry by creating a technology-based solution which attempts to make it considerably easier and cheaper forcommuters to use taxi services. Although this service has been of considerable benefit tocommuters, it is impossible to ignore the implications of Uber for the labour market. As more innovative business models enter the market, it is necessary to consider whether these models fit comfortably within our legal framework and its objective of protecting vulnerable workers. In this note, it will be considered whether Uber's claim — that it does not employ its drivers — is correct in South African law.

 

What is Uber and what does it rely on for its existence?

Uber describes itself as a company which 'offers information and a means to obtain transportation services offered by third party transportation providers, drivers or vehicle operators (the "Transportation Provider") which may be requested through the use of anapplication supplied by Uber and downloaded and installed — by you — on your single mobile device'.

In litigation, which will be considered more extensively later in this article, Uber has similarly described itself as a 'technology company' and not a 'transportation company'. It describes its application as a 'lead-generation platform' that can be used to connect 'businesses that provide transportation' with passengers who need transport.

2016 IL) p1575 Uber further notes that it owns no vehicles and argues that instead of employing drivers, it partners with independent contractors. a In short, Uber is a mobile application that is easily and freely downloadable by users. This application allows them to source transportation from a private transport provider. Once the application has been downloaded, the user may request transportation and Uber will source the nearest driver. When the driver or 'transport provider' accepts the request, the user is sent the name, photograph and licence plate details of the driver. The user is also able to call the driver through the application and vice versa. This functionality is disabled once the trip ends. At the arrival of the driver, it is possible for the user to monitor the trip on her or his mobile telephone. Immediately after disembarkation, the user is sent an invoice as to the amount which will be deducted from her or his bank account. The costs are calculated according to time and distance and it is possible to request a fare estimate prior to requesting a driver. Lastly, Uber incorporates a rating system where users can rate driver performance out of five stars.

Uber has had considerable success in South Africa and globally. As of December 2014, the business was valued at $40 billion, appreciating by $19 839 per minute. 5 Uber currently operates in 51 countries and more than 254 cities. The company boasted that during 2014 it added more than 30 000 drivers per day to its network. 6Companies like Uber, Lyft (a competitor of Uber) and Airbnb are all characteristic of new and disruptive business models which will, at least for some time, exist within their own precarious legal void. A legal void which, in South Africa and in other countries, may adversely affect the level of protection afforded to vulnerable workers.Arne Kalleberg describes these sorts of businesses as those which 'embody the macrostructural changes of the mid-1970s that were accompanied by a decline in protections for workers through labour market institutions, such as unions, minimum wage laws, and protective legislation'. Consequently, Kalleberg explains, the balance of power shifted to employers who were able to restructure employment systems to achieve greater flexibility for themselves. Kalleberg goes on to explain that for its existence, Uber relies on the presence of three key conditions:

(a) Its ability to classify itself as a technology company, thereby avoiding the legal frameworkinvolved in providing transportation.

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(b) The ability to classify its drivers as independent contractors, thereby carefully evading theemployment law framework of many jurisdiction

(c) A depressed labour market where desperate workers are willing to shoulder the risk and burden of driving for Uber in order to obtain work. 5 These are factors which the author will consider during this discussion.

 

 

Does Uber employ drivers?

Uber, as stated previously, contends that it does not employ any drivers but instead partners with 'transportation providers'. Transportation providers can be businesses which provide drivers, or private individuals who drive their own vehicles in order to provide services to those seeking transport through the application.

This may, it is argued, create two distinct scenarios which may give rise to employmentrelationships in terms of South Africa's labour dispensation. First, it will be demonstrated that Uber transport providers who are owners and drivers of their own vehicles are atypical, casual employees of Uber and are thus entitled to all rights and benefits created by the existing legislative framework. Secondly, it will be argued that Uber drivers who do not own their vehicles, and are thus employed by businesses who provide transportation services, are in fact employed by temporary employment services (TESs) and thus are deemed employees of Uber (the client) after the lapse of three months by virtue of s 198A of the Labour Relations Act (LRA). However, both scenarios will, in practice, have to be assessed on a case-by-case basis before any relevant dispute resolution forum, as happens with any dispute relating to the presumption of employment.

 

 

Who is an employee? an examination of the presumption of employment in South Africa and California.

3.1 The presumption of employment and dominant impression test in South African lawOur labour legislation and subsequent jurisprudence is fairly clear on the presumption of employment. Van Niekerk J notes interestingly that 'employment in post-apartheid South Africa has been characterized by casualization and externalization. This entails a process whereby employers shape employment relations to informalize working arrangements and thus deprive employees of their basic statutory

2016 ILJ p1577 rights'. 10 The rebuttable presumption of employment was therefore created as a response to this challenge in the market, a challenge currently presented by Uber. The rebuttable presumption is set out in s 200A of the Labour Relations Act (LRA) 11 as discussed below.

Section 200A of the LRA applies to employees who earn less than R205 433.30 per annum. 12 If a worker alleges that she or he is an employee, and renders services to another, she or he is presumed to be an employee if any one of the following factors is present in the relationship: (a)The manner in which the person works is subject to the control or direction of another. 13 (b)The person's hours of work are subject to the control or direction of another. 14 (c)In the case of a person who works for an organisation, the person forms part of that organisation. i s (d)The person has worked for that other person for an average of at least 40 hours per month over the last three months. 1-6. (e)The person is economically dependent on another person. E (f)The person is provided with the tools of trade or work by the other person. 18 Further, the courts have developed the dominant impression test. -12 In terms of this test, a person is an employee if: (a) she or he renders personal services; (b) she or he performs these services personally; (c) these services are used at the behest of the employer; (d) lawful commands and instructions of the employer must be followed; and (e) the contract will terminate on the death of the employee or expiration. 20 2016 Ili p1578

3.2 Californian law: O'Conner et al v Uber Technologies Inc.,et al

In early 2015, a United States district court in California had the opportunity to consider the presumption of employment in that jurisdiction in relation to Uber drivers. ?1 Thecontracts between Uber and its transportation providers explicitly exclude employment relations and expressly state that the relationship is, rather, akin to that of an independent contractor. Further, as considered previously, Uber describes itself as a technology company as opposed to a transportation company.

The test for employment in California is fairly similar to that in South Africa. It takes the form of a two-pronged approach. Firstly, once an employee can provide evidence that she or he has 8/2/2016 Are Uber drivers employees? A look at emerging business models and whether they can be accommodated by South African Labour Law (2016) 37 IL... provided a service to the potential employer, she or he has established prima facie evidence of her or his employment and is therefore presumed to be an employee. 22 This is similar to the South African rebuttable presumption of employment. At the second stage of the enquiry, the onus then shifts to the employer to rebut thispresumption. In other words, the employer must show that the employee is in fact anindependent contractor. The Yellow Cab case confirms this, stating that there is a presumption that a service provider is an employee unless the principal can affirmatively prove the contrary.23 Again, this presumption mirrors the South African presumption of employment and later it will be shown that there are similarities between the relevant factors used by Californian courts and the elements set out in the South African dominant impression test. In O'Conner, Uber contended that its drivers were independent contractors, not employees. Consequently, these drivers were not entitled to protection afforded to employees by the California Labour Code. It was further argued that Uber exercised minimal control over how its transportation providers provided their services. z4The plaintiffs in the matter, a group of Uber drivers, disputed this contention indicating that Uber exercised considerable control over drivers. 25 The court referred to the ruling of the Supreme Court of California in Borello stating that the fact that a person performs work for another is prima facie evidence of employment in the absence of evidence to the contrary. Furthermore, the Supreme Court's decision highlighted relevant factors that would point to the existence of an employment relationship, the right to control being the most significant. In the same matter, the Supreme Court emphasised that control meant 'the right to 2016 IL) p1579 exercise control at will without cause'. The question was not how much control the allegedemployer had but whether or not it had a right to exercise control. Lastly, the court made it clear that the label parties placed on a relationship was not necessarily an indication of the reality of the relationship. The court was dismissive of Uber's contention that it was a technology company as opposed to a transportation company. It highlighted that without the existence of drivers or vehicles, there would be no Uber and thus the business was entirely dependent on the sale of rides, not the free application download. It considered the fact that Uber set prices and standards of service, and not the drivers. Uber further had the ability to suspend drivers from using the service for disciplinary purposes. In fact, Uber regularly terminated the accounts of drivers who did not meet performance standards. Poor performance standards also equated with the rejection of too many trips as referenced by an email sent to a driver from Uber indicating that his 60% was too low and that if he did not reach an 80% acceptance rate, he risked being suspended from the service. 29 The court found that a presumption of employment of the drivers did exist and that the factual questions as to whether the presumption was rebuttable would be heard at a later stage.



4 Legal position in South Africa: How Uber drivers may be employees

It has been mentioned that there are at least two scenarios under which an Uber driver may be considered an employee of Uber.

4.1 The owner/driver

There are a number of Uber drivers who not only drive but also own the vehicles. They are in a relationship directly with Uber and are not employed by any third party. For the purposes of this discussion, these Uber drivers will be referred to as owner/drivers. It is argued that owner/drivers are employees by virtue of the presumption of employment. These individuals have already been considered above but to add substance to the discussion, guidelines created in the Code of Good Practice: Who is an Employee 21 may be considered.

2016 IL) p1580
(a) Degree of control In Parliament of the RSA v Charlton, the Labour Appeal Court considered the importance of the degree of control. 2-2 The court emphasised that there can, in certain circumstances, be an employment relationship even where there is a relatively low degree of control. Although Uber drivers do not physically report to Uber, the way they perform their activities is monitored by the fact that the prices of trips are set for them and they may be suspended from the platform entirely for transgressions relating to the way in which they perform their functions.


(b) Hours of work Item 18(b) of the Code of Good Practice tells us that the factor relating to hours of work will be present if the alleged employer determines the times during which the employee should work. Although the Uber drivers, upon receiving requests, can decline a request, there are clear consequences of declining too often, namely the possibility of being suspended from the platform.


(c) Forming part of an organisation and 40 hours of work per month Factually, the Uber drivers do not necessarily form part of the organisation and therefore it is not believed that this criterion is met. Whether a driver works for Uber for 40 hours per month for a period of three months is a factual enquiry which will have to be dealt with on a case-by- case basis. However, it is worth noting the decision in NUCCAWU v Transnet Ltd wherein the Labour Court held that individuals who work only when the employer has a need for them do fall within the ambit of employees. 33 Similarly, the Labour Court held in Sibiya that there is no distinction between casual and permanent employees and that an enquiry must focus on the question whether or not a person is an employee. •M


(d) Economic dependence The Code of Good Practice, at items 18(d) and (e), indicates that for the most part anindependent contractor will bear the element of risk of acquiring her or his own work. This is far from the case with Uber where drivers are directly handed the work by the company in the form of ride requests from consumers. Benjamin is of the view that the concept of independent contractors should only be reserved for individuals who are truly independent. 15 This was also the approach 2016 IL3 p1581 taken by O' Regan 3 in South African National Defence Union v Minister of Defence.36It is true that Uber drivers may acquire work in other ways and do not need to work for Uber exclusively in terms of their contractual arrangements. However, this is a case-by-case analysis to be done as and when disputes arise. Van Niekerk J expresses the view that being a part-time employee does not diminish one's status as an employee.


(e) Tools of the trade
The code advises that tools of the trade should not be considered in a narrow sense, for example hammers, saws and spades. 31 In this case, Uber does not provide cars to drivers but it does provide the second most important tool for the functioning of the business — the application. Van Niekerk 3 also highlights that it makes no difference whether the tools of the trade are received for free, 3-9 as is the application.


If we consider how Uber drivers fall into the dominant impression test discussed previously, A` the following factually apply to these individuals:


(a) They render personal services. (b) They perform these services personally. (c) These services are performed at the behest of the employer (upon receipt of a request). (d) Lawful commands and instructions of the employer must be followed. Although Uber drivers have a choice, factually there are consequences for not accepting enough ride requests as mentioned previously. (e) The contract will terminate on the death of the employee. Thus if, factually, the factors above are present, a court will find that owner/drivers are at least presumed to be employees of Uber in the absence of any evidence to the contrary.


4.2 The driver


A second category of driver exists within Uber in that there are drivers who are employed by third parties to drive vehicles for Uber. The third parties would be 'businesses which provide transportation services' as envisaged by Uber. n" Arguably, the drivers concerned may, too, in certain circumstances, be employees, albeit for a slightly different and nuanced reason.


2016 IL) p1582


Temporary employment service relationships exist where the 'recruitment, dismissal andemployment functions conventionally performed by the employer are outsourced to an intermediary or a TES'. AZ In this scenario, the client issues the instructions and supervises the employees without incurring the costs of employment.


This scenario is a common one within the Uber framework. Individuals, taxi companies or taxi owners purchase vehicles and hire drivers whose express purpose is to drive the vehicle for Uber. In this case, the TES (whether it is an individual or a corporate entity) is the owner of the vehicle and the client is Uber. Uber 'supervises' the work of the drivers without incurring the costs associated with employment.


Section 198 of the LRA defines a TES as:


Any person who, for reward, procures for and provides to a client other persons — (a) who perform work for the client; (b) who are remunerated by the temporary employment service.'


The employer of the individual, in our law, is the TES in terms of s 198(2). But the situation has changed to an extent as a result of recent amendments to the LRA.


Section 198A(3)(a), albeit controversial and unclear, now tells us that a TES arrangement may not exceed three months, in that way making the arrangement genuinely temporary. If the employee is stationed with a client for a period exceeding three months, the employee is deemed to be the employee of the client. This is subject to the proviso that the employee in question earns less than the gazetted amount of R205 433.30 per annum.


In the view of the author, drivers who are employed by third parties but drive predominately for Uber (in line with the dominant impression test) for a period exceeding three months are deemed, by operation of s 198A(3)(a) to be the employees of Uber, with all the rights and obligations encompassed in an employment relationship.


5 Conclusion

It may be concluded, therefore, that at least some of Uber's drivers are employees. Thedifficulty is in ascertaining who among the drivers is an employee or not, prior to a dispute arising. In all likelihood, such issues will only be dealt with as and when a dispute arises, which may involve the worker in prolonged litigation. Uber could be proactive and offer contracts of employment to its drivers, which would create rights and obligations but could remain flexible regarding time and associated benefits. As it stands, Uber drivers are not entitled to unemployment insurance, for example, or any benefits which come with security of employment. They also may 2016 ILJ p1583 not, as independent contractors, organise or participate in protected industrial action, which leaves them even more vulnerable. It is likely that these concerns will arise in other innovative business models. South Africa is undergoing a concerted drive to promote entrepreneurship, specifically among young people. With innovation, more technology-based businesses are bound to emerge. The question which arises is whether the South African labour dispensation can currently accommodate innovation while sufficiently protecting workers. It is likely that this and related questions will preoccupy the South African courts over the next decade. The courts will have to be creative in considering possible adjustments to the existing legislation, as well as interpretations which both support innovation and adequately protect vulnerable workers.

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