ADCU back at the High Court today as regional minicab operators fight to prop up brutal gig economy business model

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·        Regional operators resisting legal challenge to close gig economy loophole enabling the dodging of worker rights and tax

·        Uber seeks a narrow, self-serving declaration to level the competitive field

·        Sefton Council taking a ‘neutral’ position despite worker rights and tax detriment to public interest

·        ADCU intervening to defend worker rights, driver & passenger safety

The ADCU is intervening in a crucial legal action at the High Court today as two major regional operators claiming to represent more than forty more, seek relief for the industry’s longstanding exploitative and tax avoiding business model.

Background

Last year, the ADCU defeated Uber in a similar action in the High Court under separate legislation covering only London. As a result, Uber has been forced to change its business model contract directly with passengers rather than misclassifying itself as an agent. This has helped confirm driver status as workers with statutory protections. And since Uber becomes the principal rather than the agent, it is now liable for VAT.

By falsely designating their drivers as principal for the last decade, no VAT has been paid on Uber services since drivers do not earn enough to meet the VAT threshold of £85,000. This changed on October 31, 2022 when Uber announced that it had reached a settlement with HMRC for back VAT payment of £615 million in unpaid tax. In our opinion, this is another HMRC sweetheart deal with Uber paying only a fraction of what is really owed.

Legal action today

Now, in order to level the competitive playing field nationally, Uber is seeking a declaration at the High Court to the one imposed on it for London to cover the rest of England and Wales. This is opposed by the Veezu Group, Delta Merseyside and a coalition of operators they claim to represent. The ADCU is intervening in the action to ensure the worker’s voice is heard. Sefton Council is the named Defendant for the purposes of this declaration and is claiming to be neutral before the court.

Section 56 (1) of the 1976 could not be any clearer:

“For the purposes of this Part of this Act every contract for the hire of a private hire vehicle licensed under this Part of this Act shall be deemed to be made with the operator who accepted the booking for that vehicle whether or not he himself provided the vehicle.”

Yet, despite the obvious clarity of the meaning of the letter of the law, not a single licensing authority in England and Wales has bothered to enforce this provision nor has HMRC insisted upon VAT payment accordingly.

The declaration Uber seeks to clarify Section 56(1) is as follows:

In order to operate lawfully under Part II Local Government (Miscellaneous Provisions) Act 1976, a licensed operator who accepts a booking from a passenger is required to enter as principal into a contractual obligation with the passenger to provide the journey which is the subject of the booking.

Why ADCU are intervening

The ADCU is intervening in the case because the declaration Uber seeks is too limited. Uber seeks to restrict the application of Section 56 (1) only to cases where a booking is sub-contracted from one operator to another. We say the meaning of Section 56 (1) applies to all booking, in all circumstances, at all times.

We are also intervening because Sefton Council is failing in its public duty not only to uphold the law but to defend the claim. Instead, Sefton Council while declaring neutrality is effectively supporting an industry model based on tax evasion and worker rights abuse.  In their submissions Sefton Council say:

“enforcing a requirement that operators or drivers are not to apply the agency model would not bring any additional public safety benefit, and has the potential to indirectly disadvantage the safety of the public in ways that are not possible for the Defendant to predict. If the Act is to be interpreted in the terms of the proposed declaration, this would require the implementation of new standard conditions by each provincial local authority, and give rise to complexity, the risk of conflicting conditions, and resulting increased costs to authorities, which will be recoverable by increased licence fees and ultimately passed on to passengers.”

This analysis runs counter to common sense and the judgment handed down against Uber in London last year which found that misclassification of drivers as the contract principal endangered the public and weakened consumer rights. The Council that if minicab operators are to pay their workers and tax properly they may have to raise fares and this could endanger the public who might have reduced access to abysmally low fares.  In other words, the Council advocates a dangerous race to the bottom.

Uber’s motives in bringing this action are distinctly suspect given it took the opposite position just a year ago and given that it remains in defiance of the 2021 Supreme Court ruling on worker rights. And, as mentioned above, Uber has opportunistically sought a narrower definition than what we believe parliament intended.

The ADCU is intervening because the current practice of contractually misclassifying drivers as the principal has enabled operators to set up sham self-employment arrangements to deny driver’s their rights. Clarifying the law on who is allowed and who is prohibited from contracting passengers will clarify the employment relationship. We are also intervening because the current model is race to the bottom is detrimental to driver and passenger safety. Finally, we are intervening to prevent future unfair VAT liability being dumped on drivers by bad bosses.

Yaseen Aslam, President of ADCU said:

“This case has arisen because, despite the clear meaning of the letter and spirit of the law, not a single licensing authority in England and Wales has enforced these regulations in the 46 years of the history of this legislation. These regulations are necessary for the safety of the travelling public, to prevent exploitation of workers and to curb tax evasion. It should not be the responsibility of unions to ensure the industry is regulated properly but we will continue to do whatever it takes to clean up the industry and make it fit for workers and the travelling public.”

The ADCU is represented by William Kenyon at ITN Solicitors and Claire McCann of Cloisters.

CONTACT

James Farrar 07530 319206 jamesfarrar@adcu.org.uk

BACKGROUND

1.      ADCU Skeleton legal arguments separately attached

2.      See para 45 of Supreme Court ruling which questions legality of prevailing contract model https://www.supremecourt.uk/cases/docs/uksc-2019-0029-judgment.pdf

3.      Earlier High Court ruling for London area https://www.bailii.org/cgi-bin/format.cgi?doc=/ew/cases/EWHC/Admin/2021/3290.html

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