Tech firms driving the gig economy could be forced to change their approach to employment, and the way they define themselves, following a December ruling by the European Court of Justice. Julian Blake reports.
Uber is officially a transport company and not just a digital service, Europe’s top court, the European Court of Justice has ruled. The ruling could have far-reaching implications for tech firms operating in the 1.1m-strong UK gig economy.
The controversial ride-hailing firm – which had its licence suspended by London mayor Sadiq Khan in September – had argued in court that it was an “information society service” rather than a taxi firm.
Uber had argued that it existed merely to help people connect electronically via its smartphone app.
The case had come to court after Uber was told by the authorities in Barcelona that it was acting unfairly and had to obey local taxi licence rules. The challenge was the culmination of protests by local cab services operating in cities across Europe.
The ECJ ruling said that “an intermediation service such as that at issue in the main proceedings, the purpose of which is to connect, by means of a smartphone application and for remuneration, non-professional drivers using their own vehicle with persons who wish to make urban journeys, must be regarded as being inherently linked to a transport service and, accordingly, must be classified as ‘a service in the field of transport’ within the meaning of EU law.”
“Consequently, such a service must be excluded from the scope of the freedom to provide services in general as well as the directive on services in the internal market and the directive on electronic commerce.”
Responding to the ruling, Uber said the verdict “will not change things in most EU countries where we already operate under transportation law”. In a statement, the firm said “millions of Europeans are still prevented from using apps like ours.
“As our new CEO has said, it is appropriate to regulate services such as Uber and so we will continue the dialogue with cities across Europe. This is the approach we’ll take to ensure everyone can get a reliable ride at the tap of a button.”
The ECJ ruling – stating that Uber is a transport company rather than just a tech business – could affect how it and other gig economy businesses such as couriers operate going forward.
Earlier this year Matthew Taylor’s RSA report on the gig economy called for an overhaul of employment laws.
Right now like Uber insist that workers are self-employed and can work when they want. They have argued that workers should not receive the same benefits as full-time employees, like the minimum wage, sick pay, holiday entitlement or pension.
Observers predicted that the ruling could lead to fare rises as the firm is forced to charge VAT.
Uber was founded in the US 2009 by Garrett Camp and founding CEO Travis Kalenick.
During its rise it has been reined back and blocked by regulators, forcing it to change its business model. In London last month, Sadiq Khan told Uber that its appeal to renew its licence could take years.
In 2016 Uber generated revenues of $6.5bn in 2016 but posted losses of $2.8bn. That has not stopped it from reaching a market valuation of $68bn,
Many point to the firm’s aggressive model for taking market share in new cities, subsidising fare prices to undercut local opposition. Many believe the firm will reach profitability only by deploying driverless cars.
This year has been something of an annus horribilis for Uber. As well as having its London licence put on hold, the firm has been slammed for a toxic work culture and sexual harassment.
Kalenick himself was forced to resign in June, replaced by Dara Khosrowshahi who has promised a break with the firm’s aggressive business practices.