After Uber: Purposive Interpretation and the Future of Contract – by Joe Atkinson and Hitesh Dhorajiwala

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Dr Joe Atkinson, University of Sheffield

Dr Hitesh Dhorajiwala, Devereux Chambers and University College London

1. Introduction

The Uber BV v Aslam [2021] UKSC 5 (‘Uber (SC)’)judgment from the Supreme Court represents the final chapter in the long-running saga of determining the employment status of drivers who provided trips to passengers via the Uber app. As highlighted by Valerio De Stefano, the finding that the drivers must be classed as workers is part of a wider trend of decisions rejecting arguments that platform workers fall outside the regulatory scope of employment law. This blog considers key aspects of the Supreme Court’s reasoning, relating to the ‘purposive approach’ and the role of contractual documentation in determining employment status, as well as some of the practical consequences of the judgment for workers.

As readers will be aware, the case concerned Uber drivers who sought to stablish ‘worker’ status for the purposes of s 230(3)(b) Employment Rights Act 1996, the National Minimum Wage Act 1998, and the Working Time Regulations 1998. According to the written documentation, the drivers contracted with Uber BV (a Dutch parent company) on terms which purported to exclude worker status, and had no formal contractual relationship with Uber London Ltd. However, Uber London Ltd held the Private Hire Vehicle Licence to operate in London, and in practice exercised a variety of forms of control over the drivers. As outlined at paragraphs [96] et seq of the Uber (SC) judgment, Uber London Ltd exercised significant control over the drivers by determining the fares charged to passengers, retaining absolute discretion to accept or decline passenger ride requests, automatically logging off drivers who did not accept a certain number of rides in a row, and placing restrictions on the communications that drivers could have with the passengers they were purportedly contracting with.

Uber’s position was that the relationship was explained by these written contractual arrangements, with Uber London Limited merely acting as a booking agent, such that no ‘worker’ relationship could exist between the drivers or any Uber entity. By contrast, the drivers successfully argued in the Employment Tribunal (‘ET’), Employment Appeal Tribunal (‘EAT’), Court of Appeal, and Supreme Court that they were in fact the ‘workers’ of Uber London Ltd, notwithstanding the supposed absence of any direct contractual relationship between the drivers and Uber London Ltd. In reaching this conclusion the Supreme Court gave a ground-breaking judgment that, although leaving some important questions unanswered, has potentially radical implications for the law relating to employment status.

2. Purposive Interpretation

Perhaps the most significant aspect of the Supreme Court’s decision are the findings relating to the ‘purposive’ approach that must be applied by courts and tribunals in future when determining a claimant’s work relationship status. This represents a dramatic shift away from the narrow contract-based analysis of the parties’ relationship towards a broad enquiry into the reality of the relationship, and requires the concepts of employee and worker status be constructed in a manner that protects those performing work in positions of subordination and dependency.

A ‘purposive approach’ to determining employment status had begun to be developed prior to Uber in Autoclenz Ltd v Belcher and Others [2011] UKSC 41 (‘Autoclenz’), where the Supreme Court found that terms in the parties’ written contracts could be disregarded when determining a claimant’s employment status where these did not reflect or accord with the ‘true agreement’. In reaching this conclusion Lord Clarke stated this “may be described as a purposive approach … If so, I am content with that description” (Autoclenz,para [35]). The label ‘purposive’ typically refers to the interpretation of legal texts in a manner that seeks to achieve their underlying goals (see A Barak, Purposive Interpretation in Law). The treatment of written contractual terms in Autoclenz is purposive in a slightly different sense: namely, that taking written employment contracts as conclusive would frustrate the protective goals of employment legislation. The result of this would be to allow employers to use their superior bargaining power and economic position to deny workers the very same statutory employment rights that were introduced to counteract and safeguard workers against those inequalities.

The meaning and proper application of this purposive approach remained uncertain, however, and clarifying this was a key issue before the Supreme Court in Uber. Commenting on the Court of Appeal judgment in Uber BV v Aslam [2018] EWCA Civ 2748 (‘Uber (CA)’), Alan Bogg and Michael Ford QC identified two distinct readings of the purposive approach established by Autoclenz. First, a ‘contractual’ reading, where the focus is on identifying the parties’ true agreement and the courts disregard documents “which do not reflect the reality of what is occurring on the ground” (‘Uber (CA)), para [66]). Second a ‘statutory’ reading, where the courts are guided by the underlying purposes of the legislation and the key question is “whether the relevant statutory provisions, construed purposively, were intended to apply to the transaction, viewed realistically” (Collector of Stamp Revenue v Arrowtown [2003] HKFCA 46, para [35]). Bogg and Ford QC suggested the statutory purposive approach should be preferred by the Supreme Court in Uber, with the contractual reading of Autoclenz being applied “in more overt cases of contractual manipulation”.

This distinction between contractual and statutory purposive approaches is illuminating, and it seems entirely right that statutory employment rights should be applied in a manner that seeks to achieve their underlying purposes and goals. Purposive interpretation of this kind is now accepted as part of the general approach to statutory interpretation (Attorney-General’s Reference (No 5 of 2002) [2004] UKHL 40, para [31]) and has been widely adopted in other contexts (see Bennion, Bailey and Norbury on Statutory Interpretation (2019), [12.2] – [12.4]). It is a mistake, however, to think of the contractual and statutory purposive approaches as being mutually exclusive, or that that there is a need to choose between them. Rather, they are mutually supporting elements of an overall purposive approach, relevant at different stages of the courts’ deliberation. The ‘statutory’ approach applies at the abstract level, when the courts are constructing and defining the boundaries of the concepts of employee and worker status. At this stage, the purposes of employment statutes are used to guide and identify the types of relationships that should fall within the protective scope of the legislation. The ‘contractual’ approach is relevant at the more concrete level of the courts’ analysis, when they are deciding whether on the facts of the specific case before them the claimant has the type of relationship captured by the categories of employee or worker. At this stage, the protective goals of employment law demand that written documentation that does not reflect the reality of the working arrangements and relationship be disregarded. It is true that the courts’ primary focus in particular cases may be one of these stages more than the other, either abstract characterisation or concrete application, meaning that employment status will turn on either the statutory or contractual purposive approach. But there is no need to prioritise one as a matter of principle, and both are necessary to achieve the underlying purposes of employment legislation.

Given this, it is welcome the Supreme Court in Uber confirmed that both statutory and contractual purposive approaches should be applied by courts when deciding employment status. As advocated by Bogg and Ford QC, the Court found the statutory purposive approach should be adopted, under which the “ultimate question” determining whether someone is an employee or worker is “whether the relevant statutory provisions, construed purposively, were intended to apply to the transaction” (Uber (SC), para [70], citing Arrowtown). The Court identifies the purpose of statutory employment rights as being to “protect vulnerable workers” who need the rights due to their ‘subordinate and dependent’ position (Uber (SC), para[71], citing Byrne Bros (Formwork) Ltd v Baird [2002] ICR 667 (EAT), para [17]). The Court further stated that relationships of this kind can be identified by asking whether there is “control exercised by the employer over their working conditions and remuneration”, as this is the “correlative” of subordination and dependency (Uber (SC), para [75]).

In addition to this strong endorsement of the statutory purposive approach, however, the Supreme Court also recognised that the protective goals of employment legislation require that employers must not be able to use written contractual documentation to characterise the relationship. Taking the “terms of a written contract as the starting point” would frustrate the purpose of employment statutes, even as a “prima facie” starting point which could be displaced by the reality on the ground (Uber (SC), para [76]). This confirms, and extends, the contractual purposive approach established in Autoclenz: what matters is the reality of the parties’ relationship, not the written documentation.

What then, is the effect of the purposive approach adopted by the Supreme Court? Although purposive statutory interpretation is not novel, and there has long been a “trend away from the purely literal towards the purposive construction of statutory provisions” in English law (Carter v Bradbeer [1975]1 WLR 1204, 1206–1207), it has dramatic implications in the context of employment status. After Uber, the protective scope of statutory employment rights must extend to everyone whose working relationships are characterised by subordination and/or dependency. The decision represents a dramatic shift away from the previous approach of courts seeking to identify the contents of the parties’ agreement, whether this be the written contractual terms or ‘true’ agreement. Instead, courts must undertake a broader enquiry into whether the reality of a claimant’s working arrangements and relationship is of the type that the employment statute has the purpose of protecting: namely, subordinate and dependent work. Control over working conditions and remuneration is identified by the Supreme Court as the key proxy of subordination and dependency, meaning “the greater the extent of such control the stronger the case for classifying the individual as a “worker”” (Uber (SC), para [84]). The result of this is to substantially narrow the gap, possibly to vanishing point, between worker status under domestic law and the EU law concept (see: Allonby v Accrington & Rossendale College [2004] IRLR 224 (ECJ)).

The statutory purposive approach also requires a reassessment of the existing legal tests and principles used to determine employment status, to ensure they are rationally connected to the legislation’s purpose. After Uber, the legal rules and principles used to determine employment status must track the underlying purpose of employment statutes, and courts should therefore only consider factors that help them identify workers in subordinate and dependent positions and distinguish these workers from individuals who should be “treated as being able to look after themselves” (Byrne Bros, para [17(4)]). Any tests, factors, or principles historically used by the courts to determine employment status that do not help identify relationships of this kind must now be abandoned.

The significance of the purposive approach established by Uber is compounded by the fact that it must be adopted for ‘employee’ as well as worker status. Applying the statutory purposive approach to employee status appears less straightforward, because the concept of ‘employee’ is defined by reference to the common law ‘contract of employment’ (ERA s 230(1)). However, the reasoning underpinning purposive approach in Uber applies equally to employee status. Although employee status is equated with the common law contract of employment the substantive rights involved are created by statute, and the statutory nature of the rights is the “critical” reason why legislative purpose must guide their protective scope (Uber (SC),para [69]). That both statutory and contractual purposive approaches must be adopted for employee status is reinforced by the Supreme Court’s reference to employees as well as workers when identifying the purpose of employment statutes (Uber (SC), para [71], citing Byrne Bros), and in their findings on the role of written contracts (Uber (SC), para [85]). To identify who is an employee therefore, courts must now undertake a broad enquiry into the reality and nature of the claimant’s working relationship, and decide whether it is one that should fall within the protective scope of the legislation, given its purpose of protecting those in subordinate and dependent positions.

Despite the purposive approach in Uber representing a welcome development, there are some unresolved questions and reasons for caution regarding the Supreme Court’s conceptualisation and application of this approach. First, the decision only engages with the statutory purposive approach and the goals of employment law in a relatively surface-level manner. It is not clear, for instance, how the purpose of employment statutes should be (or is) identified by the Court: is it Parliament’s (actual or presumed) intention that matters as seems to be implied at para [76]; or the Court’s own view of the best understanding of the legislation’s purpose? The statement that it is “not in doubt” that the “general purpose” of employment legislation is to protect subordinate and dependent workers also ignores the possibility that different areas of employment law may have varying goals and purposes. For example, it is not obvious to us that the purpose of national minimum wage legislation maps perfectly onto the purpose of statutory trade union rights, or protections from discrimination. Although the general purpose of these statutes can be stated as protecting workers who need the relevant rights, it may well be that different classes of workers need these various legal protections. In particular, employment legislation that protects universal human rights arguably requires a more inclusive scope than other areas of employment law under a purposive approach. Adopting the purposive approach may well therefore lead to the fragmentation of employment law’s relational scope across different employment statutes. We do not offer a view on the merits of this fragmentation here, and merely highlight it as a real possibility that must be confronted under the purposive approach.

Other areas of uncertainty after Uber include what is meant by subordination and dependency, and how these can be identified by courts and tribunals other than via a claimant’s lack of control over their working conditions. Is dependency meant in purely economic terms, or as also encompassing dependency for social relationships and a sense of self-worth and contribution to society? Can subordination be present where an individual has a high degree of freedom over how an individual performs their work? We should be cautious about viewing control as the sole or precise proxy for subordination and dependency given that some relationships that we think of as ‘employment’ lack this control, such as company directors. While the Supreme Court views control as ‘a touchstone’ of subordination and dependency (Uber (SC), para [84]), it should ultimately be the nature of the relationship that matters under the purposive approach. The Court in Uber does appear to accept that someone may be in a position of dependency, and therefore classed as a ‘worker’ on the purposive approach, in the absence of control due to their integration into the business and inability to market the services to anyone else (Uber (SC), para [74], citing Clyde & Co LLP v Bates van Winkelhof [2014] UKSC 32). However, the extent to which control is regarded as the touchstone for subordination and dependency or one of several relevant indicators remains unclear.

Finally, it is not clear where Uber leaves the relationship between employee and worker status. If a purposive approach is adopted to both, and the purpose of statutory employment rights is to protect subordinate and dependent workers, then on what basis can/should courts distinguish between these categories? If the answer is simply that the necessary threshold of subordination and dependency (as evidenced by control) is lower for workers than employees, then it is far from clear where this line should be drawn.

3. The Role of Contract after Uber

The Uber decision also has significant implications for the role of written documentation in determining employment status, and the proper approach to applying the contractual purposive approach developed in Autoclenz. This was a key issue in the Court of Appeal in Uber. Sir Terence Etherton MR and Bean LJ in the majority stated that in applying Autoclenz, a court or tribunal must examine the parties’ actual agreement by reference to all the circumstances, “of which the written agreement is only part” (Uber (CA), para [73]). By contrast, Underhill LJ in the minority took the view that written agreements ought to play a much more central role, and may only be disregarded where they are shown to be inconsistent with the true agreement between the parties (Uber (CA), paras [119] – [120]).

This difference was resolved by the Supreme Court in Uber, which provided its view on the role of contract as part of the purposive approach to determining employment status. Lord Leggatt found it to be inconsistent with the purpose of the relevant legislation to allow written contractual terms to characterise an individual’s employment status, even as prima facie starting point. This is due to the unequal bargaining power that exists between employers and workers, resulting in a lack of negotiation over the written terms and the employers’ ability to dictate the formal terms of the relationship. In light of this, to give any written agreement a privileged position in the characterisation of the work relationship would seriously undermine the efficacy of the statutory protections (Uber (SC), paras [76] – [77]). This treatment of the written terms was also supported by reference to the restriction on contracting out contained in the relevant statutes, which should be taken as applying to any provisions which have the “object” of excluding their operation (Uber (SC),paras [79] – [80]. However, Lord Leggatt did go on to clarify that any written agreement or documentation need not be entirely ignored: the “conduct of the parties and other evidence may show that the written terms were in fact understood and agreed to be a record, possibly an exclusive record, of the parties’ rights and obligations towards each other” (Uber (SC), para [85]). Nevertheless, the key point remains that written contractual documentation drafted by a (putative) employer can no longer be taken as the starting point for the courts’ analysis of employment status.

This extends the contractual purposive approach adopted in Autoclenz and marks a remarkable shift in the manner in which courts and tribunals are expected to determine a claimant’s employment status. Such an approach does not entirely disregard any written contractual agreements but provides them no privileged role in the purposive analysis articulated by the Supreme Court: rather they are simply a piece of evidence to be considered in the broader analysis of the true nature of the claimant’s relationship. The practical effect of this appears to be switching the burden from claimants needing to show written terms do not represent the reality of their relationship, and so should be disregarded following Autoclenz; to employers now needing to persuade courts that the written documentation should be given weight in their assessment of the reality of the relationship. The precise consequences of such an approach will no doubt be seen in future litigation (with some possibilities discussed below) but this demotion of the role of contract suggests a shift towards a more ‘relational’ approach to the question of status and personal scope, that denies employers the power to initially dictate the tenor of how a work relationship is analysed by reference to written terms alone.

Recalibrating the Autoclenz test to remove the primary significance of contract also indicates that the statutory requirement for there to be a contract between a worker and employer (e.g. in s 230(3)(b) ERA 1996) may well be much more malleable that thought prior to Uber. Indeed, on the facts of Uber itself, the employing entity was found to be Uber London Ltd; an entity that the relevant drivers appeared to have no formal contractual relationship with at all (for a detailed analysis on this point, see Aslam v Uber BV v Aslam [2016] 10 WLUK 681 (‘Uber (ET)’), para [98]). This suggests that following Uber, the courts must focus on the reality of the relationship in order to identify the employer, as well as to determine the status of the worker, with a limited role for any written documentation drafted by the employer. This is of particular significance because courts and tribunals have historically been wary of implying a contractual relationship between parties in the presence of existing contractual frameworks that can explain the parties’ relationships, relying on orthodox contractual concepts such as necessity to determine whether such implication could occur (see: James v Greenwich LBC [2008] EWCA Civ 25). The Supreme Court’s move away from the centrality of contract in characterising the relationship between a worker and employer suggests that the statutory requirement for there to be a ‘contract’ between the parties for a particular work relationship status should now be approached in a more flexible way. Indeed, if the reality of the relationship is that work is being performed by an individual in a position of subordination and dependency towards another, then the ‘gap’ of an absence of a formal written contractual relationship between the parties can be bridged by the purposive analysis discussed above.

This appears to be what happened in Uber, and points towards an analytical approach to work relationship status that will be freed from formalistic ties to the need for a contractual relationship between worker and their employer. In short, if a relationship without a formal contractual link is properly characterised as a ‘worker’ relationship following the purposive analysis of the relevant statutory provisions, then it may well be a mere formality for the relevant court or tribunal to make a finding that a contract existed between the parties as part of that relationship to satisfy the statutory wording. It would perhaps be going too far to suggest that such an approach would be appropriate on the facts of all cases, as the reality for many agency and atypical workers is that they are employed by the third-party company rather than the end user company. But the Supreme Court’s reasoning opens the door to a more sympathetic approach to the statutory requirement of a contractual relationship where a purposive suggests that the relationship ought to be classified as a worker status relationship notwithstanding the absence of a contractual nexus between the worker and employer.  This application of the contractual purposive approach may appear radical in its potential to pierce the corporate veil, but makes sense in principle; if the protective purpose of employment legislation and the prohibition on contracting-out both mean that employers must not be permitted to characterise work relationships by dictating the content of contracts, then they should also not be able to characterise the nature of these relationships via written documentation that appears to deny the very existence of a contract between the parties.

Moreover, the approach set out by the Supreme Court looks to be moving towards a form of analysis that Mark Freedland and Nicola Kountouris identified in their 2011 work, The Legal Construction of Personal Work Relations (OUP 2011). While there is not enough space in this piece to do justice to the full intricacy of this work, one of its main proposals was to approach the question of legal regulation through a form of ‘relational’ analysis, which analyses the relevant legal connections between the parties in a work relationship, but in a manner in which formal individual bilateral relations between parties (e.g. written contractual documentation) ought not to hold any particular privileged position as part of the analysis of that relationship. In a sense, it would appear that the approach which has been articulated by the Supreme Court has moved towards this form of analysis: the key question is whether the relationship exhibits the necessary characteristics to be classified as a ‘worker’ status relationship, without any particular emphasis on any legal form that this relationship must exist within.

4. Some Practical Consequences

The full consequences of the Supreme Court’s decision will only emerge as it is applied by courts and tribunals in the years to come. However, some consequences are predictable. The first is that the approach taken by the Supreme Court ought to make it more likely for casual and other atypical workers to succeed in claiming statutory employment rights. For example, individuals whose written contracts contain rights of substitution, or denials of any ongoing obligations to offer/accept work, can no longer be denied statutory employment rights if they are working in a position of subordination and dependency. What’s more, written contractual terms will be void if the court believes they have the ‘object’ of avoiding the relationship being characterised as one of employment; effectively disarming the infamous ‘armies of lawyers’ deployed by employers to draft these contracts. While the onus remains on the workers to bring the claim, and each case will turn on the tribunal’s assessment of the reality of their working relationship, the statutory purposive approach combined with the demoted significance of contractual wording will make it easier for workers to successfully argue they fall within the protective scope of employment legislation.

Additionally, we have seen in Uber what we would refer to as a ‘third face’ for mutuality of obligation. The general understanding of the mutuality of obligation criterion is that it exists as a form of contractual consideration in a single engagement (McMeechan v Secretary of State for Employment [1997] ICR 549 (CA); Quashie v Stringfellow Restaurants Ltd [2012] EWCA Civ 1735), or as an obligation to offer/pay for and accept work between engagements (Cotswold Developments Construction Ltd v Williams [2006] IRLR 181 (EAT)). By contrast, Uber offers an approach to mutuality which appears to sit somewhere between these conceptions. The ET had found that a worker’s obligations to work existed where: a) the app was switched on; b) they were in the territory authorised by the app; and c) they were ready and willing to accept trip (Uber (ET), para [100]); and the Supreme Court concluded that it was entitled to make this finding (and in fact querying the necessity of the third criterion) (Uber (SC), para [130]). That drivers were able to turn down some work, by refusing rides, was not incompatible with them having the “irreducible minimum” needed for employee or worker status; what mattered was that there was an “obligation to do some amount of work” (Uber (SC),para [126]-[129]). Although this finding may, to some extent, be a unique finding on mutuality in the context of the Uber decision, it demonstrates that courts and tribunals should be willing to have a more sensitive approach to the question of when the obligations to offer and accept work actually exist.

The analogy between the mutuality findings in Uber and other work on-demand via apps may well be straightforward to draw. But even where the analogy is not neat, as in the case of zero hours contracts where workers have some degree of flexibility to turn work down, the Supreme Court’s endorsement of the ET’s conclusion on mutuality of obligation means courts and tribunals should feel comfortable moving away from the two orthodox conceptions of mutuality, which sit at the extremes, and consider whether the facts may allow for a conception of the criterion which sits somewhere in between. Once again, this approach will make the process of establishing status more straightforward for a putative worker, and potentially represents a step towards the recognition of what Freedland described as ‘intermittent’ employment in The Personal Employment Contract (OUP 2003).

5. Conclusion

Uber has transformed the approach that must be applied by courts and tribunals when determining an individual’s employment status. It represents a dramatic shift in focus, replacing a contractual approach with a broader ‘relational’ analysis that engages with the underlying goals and purposes of employment statutes. Despite some areas of uncertainty, the Supreme Court’s reasoning establishes that the protective scope of statutory employment rights must extend to all individuals performing work in conditions of subordination and dependency. The full implications of this will need to be worked out in future cases, but should clearly make it easier for other groups of atypical workers to claim statutory employment rights.

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(Suggested citation: J Atkinson and H Dhorajiwala, ‘After Uber: Purposive Interpretation and the Future of Contract,’ UK Labour Law Blog, 1 April 2021, available at https://uklabourlawblog.com/)