A huge amount of press coverage has been generated by the seemingly stratospheric rise of Uber, the San Francisco-based car hire smartphone app business, which has in the blink of an eye turned the whole concept of taxi services on its head. The idea behind Uber is a simple one; users download the Uber app onto their smartphone, which then allows them at the touch of a button to summon the nearest Uber driver in their vicinity to pick them up and take them to their onward destination. The service has proven to be incredibly popular in big cities around the world, with some estimates valuing the company at an eye-watering $50 billion. Not bad for a business which has yet to turn over a profit.
Uber is perhaps the best known example of a recent phenomenon called ‘disruptive technology’, whereby the rapid pace of technological change and innovation has allowed start-up businesses to challenge a whole host of vested interests in ways which would simply not have been possible just a few years ago. AirBnB’s attempts to redefine the holiday accommodation market are another prime example of this.
The rise of Uber hasn’t been without its opponents however, and the “disruptive” nature of its technology has ensured that it has been on the receiving end of more than its fair share of challenges, more often than not from those who stand to lose the most from its success i.e. traditional taxi drivers.
London is a key battleground for Uber, which for generations has been dominated by the ubiquitous black cab service. London taxi drivers are famed around the world for the fact that they must memorise 320 standard routes through central London, covering a staggering 25,000 streets. Uber has been able to mount a credible challenge to this most traditional of markets by offering a service which is almost as easy to use – provided you have a smartphone – but which comes with a lower cost base, which for the end-user will usually mean cheaper fares.
One of the ways in which Uber is able to keep its cost base down is by maintaining an arms-length relationship with its drivers – whom it terms ‘partners’. Essentially, it treats them as self-employed drivers, which means that many of the employment rights which would apply to employees or workers do not apply to them.
It was therefore of little surprise that the trade union GMB waded into the debate last month by announcing a legal challenge against Uber. The GMB will argue that, at the very least, Uber drivers should be treated as ‘workers’.This would bring them under the umbrella of certain basic employment rights such as the working time regulations, national minimum wage protection, and the laws on whistleblowing.
The GMB case will be followed with interest, and is in many ways a test case for the way in which the jobs market is evolving. Technological change has for many people meant greater freedom and flexibility, allowing them to have more control over when, how and to whom they provide their services. In a vibrant economy, few people are likely to give much thought to their employment rights, provided they continue to enjoy a steady stream of income. The real test will come when the economy inevitably slows down, and we reach the end of the current business cycle. It will be at that point that the trade-off between greater flexibility and employment protection will come into sharper focus.
As with all forms of technological innovation, it usually takes a little while for the legal system to catch up. In this instance however, it looks like the Uber model is here to stay, so the law makers will need to get their heads around how best to ensure that consumers continue to enjoy the benefits which technological change can give them, whilst ensuring that those who deliver the service are afforded basic employment protections.