Analysis: U.K. Court says Uber drivers are no ‘independent contractors’; consequences for Brazil

RIO DE JANEIRO, BRAZIL – The United Kingdom Supreme Court has decided that from now on, Uber drivers are entitled to labor rights and can no longer be considered “independent contractors,” freelancers or partners, as the company defines them.

According to Uber, the decision does not apply to the current 60,000 drivers the company has in the UK, but to a small group of 25 professionals who sued the company for labor rights. Uber Eats has also escaped the decision.

The attorneys representing the group of workers said their compensation should reach approximately R$91.100 (US$16,000). However, this does not mean that the drivers were hired with a formal contract by Uber.

The court decision granted the professionals the title of workers, not employees -a hybrid classification in the country’s labor legislation, which ensures rights such as minimum wage, protection against illegal deductions from wages, minimum level of paid vacation, minimum length of rest breaks, less than 48 hours work per week, protections against discrimination and to report irregularities in the workplace, sick pay, maternity, paternity and adoption leave. Official employees, on the other hand have paid leave and flexible working hours, among other benefits.

Nevertheless, for the workers who sued the company, the court decision has already been considered a victory, and raised the following question: what would happen if other countries forced delivery and transport apps to create employment ties with their partners and delivery drivers?

Following the British court decision, drivers in South Africa will also be suing the transport app for labor rights, including compensation for unpaid overtime and vacation pay. In both countries, Uber’s partners are considered self-employed and have few rights and protections under the law. In South Africa, the lawsuit could affect up to 20.000 drivers, according to the law firms handling the case.

What would it be like in Brazil?

If, hypothetically, all of Uber’s 1 million drivers in Brazil had to be hired by the company, with no hybrid category in place as in the UK, they would all need to have a signed contract, the famous CLT (Consolidation of Brazilian Labor Laws), which would be costly for the app.

“The revenue that Brazil represents for Uber is more or less 10% of the total. The excessive number of hires could have a US$10 billion impact on market value,” estimates Josilmar Cordenonssi, professor of Economics at Mackenzie Presbyterian University. In February’s last trading session, on Friday, 27th, the company was valued at US$95.8 billion.

In a note sent to CNN Brasil Business, Uber said that “for the third time, the TST (Superior Labor Court) confirmed that there is no employment bond between Uber and its partner drivers” and that judicial decisions from other countries should have no effect here.

For Minister Ives Gandra, according to the same note, “partner drivers who use Uber’s platform to generate income have autonomy and flexibility, requirements incompatible with the employment relationship, since there is ample autonomy for the driver to choose the day, time and form of work, being able to disconnect the app at any time and for as long as he/she deems necessary, without any link to goals set by Uber.”

Gandra also said that “it is not up to the courts to create concepts that are not provided for in the law to try to fit the new forms of work in the requirements provided for in the legislation for employment relationship, such as the requirement of regularity and legal subordination.”

While Uber claims that its business model is flexible, unions worldwide consider the way of working adopted by the drivers to be exploitative – in some cases, drivers were working over 15 hours a day. Since March last year, the company reduced the maximum workload of a Brazilian partner to 12 hours. Consequently, they can only return to work after a six-hour break.

Bill foresees ‘hybrid contract’

Yet efforts have been made to make informal work more flexible and to guarantee benefits to these professionals. A bill authored by federal deputy Tabata Amaral (PDT-SP) proposes a similar regime to the British one to regulate the service provision of drivers with the platforms.

Bill 3748/2020 provides for the stipulation of an hourly rate, which can’t be lower than the minimum wage, adding to the remuneration a proportional vacation bonus and the 13th salary, as well as benefits such as unemployment insurance and maternity pay for workers classified as “on demand.”

“For this hybrid model to occur in Brazil, the legal change needs to be made urgently,” says Maurício Corrêa da Veiga, of Corrêa da Veiga Attorneys at Law. “Today a labor judge would not be able to partially recognize any rights for drivers. Either he recognizes a bond, or he doesn’t,” he says. According to Veiga, “an Uber driver is not an employee because he has no time limits for his work, no routine, no place of operation,” and “receives between 75% and 80% of the total of each trip.”

About Uber and informality in Brazil

Data

Uber’s market value – US$95.8 billion

App presence in cities worldwide – 10.000

Drivers/drop-off partners worldwide – 5 million

Driver/delivery partners in Brazil – 1 million

Users in Brazil – 22 million

Users worldwide – 103 million

Unemployed in Brazil – 13.9 million people

Average rate of informality in the 4th quarter of 2020 – 38.7%

Who would pay the cost

Hiring the drivers with a signed contract without an intermediary category could reduce the company’s profits and those of the professionals themselves, according to Cordenonssi.

“If you add social costs, such as INSS (Social Security), the CLT worker’s salary will raise the company’s cost by 72%. This will lead to more expensive trips. Uber would then have two options: transfer the cost to the worker, who would be paid less, or to the consumer, who would pay more,” he explains. “If the price doesn’t increase, the company will earn less. And passing on the price to consumers will be difficult, and the cab will once again be the most attractive option.”

Cordenonssi understands that the likelihood of this occurring in Brazil is quite low -but if the company were forced to hire overnight, another problem could arise. “This could force the app to discontinue business in the country, leaving even more people unemployed. In this recession, becoming an app driver is an opportunity to make money simply and quickly. If you add the CLT to this, this opportunity may become more restricted. With social costs, companies will take a long time to hire, and there is a high cost to fire. That way the market becomes less flexible.”

What Uber says

“For the third time, the TST (Superior Labor Court) confirmed that there is no employment relationship between Uber and its partner drivers. The new ruling was in line with the over 800 decisions of Regional Courts and Labor Courts that have already ruled out the employment relationship or declared the Labor Court’s lack of jurisdiction to judge the commercial relationship with Uber.

This Tuesday’s trial in the 4th Panel of the TST unanimously rejected the appeal of an independent driver against the Regional Labor Court of Minas Gerais’ decision that denied the request for an employment link.

The opinion had already been reached in two other TST trials in 2020, in February and September, and also by the Superior Court of Justice in a trial in 2019.

The rapporteur of the case, Minister Ives Gandra, considered that the partner drivers who use the Uber platform to generate income have autonomy and flexibility, which are incompatible with the employment link, since drivers enjoy “full autonomy to choose the day, time and form of work, and can turn off the app at any time and for as long as they see fit, without any link to targets set by Uber.”

The Minister also pointed out that “it is not up to the courts to create concepts that are not provided for in the law to try to fit the new forms of work in the requirements provided for in the legislation for employment relationship, such as the requirement of regularity and legal subordination.”

“How many people, in this pandemic period, who were either in the informal economy or unemployed, today have an easy and accessible source of income through Uber?”, Gandra asked in the trial.

“The app, these digital platforms, are an impressive tool of potential job generation and economic activity, but one that can be frustrated if it is mistakenly categorized within old-fashioned molds.”

In the trial, justice Guilherme Caputo also pointed out that court rulings from other countries should not influence the Brazilian judiciary because they are created within distinct legal systems.

“If the Supreme Court of the United Kingdom understood that drivers are not self-employed workers, it should not have repercussions because it is a legal system completely different from ours,” he said, in relation to the recent trial that classified a group of London drivers under the status of “worker”, a concept that does not exist in Brazilian legislation.”

Source: CNN Brasil