Uber will be forced to change its business model in London to contract directly with passengers who book, after a high court ruling that will affect all private hire operators in the capital.
The judgment was hailed by unions for giving both drivers and passengers more protection, by underscoring previous legal rulings that drivers are workers with rights, and making firms responsible once bookings are accepted.
The ruling could indirectly lead to a price rise, with Uber and others now liable for VAT, which could add up to 20% more to the cost of a trip.
The high court case was brought by Uber after supreme court judges suggested, in the case this year where it ruled that drivers were workers and not contractors, that Uber could not be viewed simply as an agent.
Uber sought clarification on the point, hoping to retain its existing model, but in a ruling on Monday, the judges said the law required a contractual obligation between operators and passengers once a booking is made, adding: “To interpret the act in this way gives effect to the statutory purpose of ensuring public safety.
“If the passenger’s only contractual relationship is with a driver he or she has never heard of and who is in any event unlikely to be worth claiming against, any claim is likely to be practically worthless.”
Transport for London has written to the larger operators to review their contracts to ensure compliance. A TfL spokesperson said: “All operators will need to carefully consider the court’s judgment and take steps to ensure that they comply with it, including considering whether any changes to their way of working are required.”
Others said it was a “damning” verdict for TfL, as well as Uber. Sian Berry, a Green party London assembly member, said TfL had, since Uber emerged, been “failing properly to use the powers it has to regulate and protect London’s private hire operators and drivers”.
She added: “In the interests of passenger safety, they must now follow the court ruling and make sure all operators are compliant with the correct legislation without delay.”
The GMB union said the ruling confirms London private hire drivers are legally classed as workers and should be treated as such under law, adding: “It means TfL’s guidance is now incorrect and it means most operators are acting illegally and must get their house in order.”
James Farrar, general secretary of the App Drivers and Couriers Union, said the ruling would “transform the London minicab industry for the better”, adding: “Uber was determined to double down on misclassification at the cost of worker rights, passenger safety and the avoidance of VAT.”
While Uber lost the case, a spokesperson for the company said the case would ensure that other operators could not avoid the rulings it was now bound by on holiday pay and pensions. “Every private hire operator in London will be impacted by this decision, and should comply with the supreme court verdict in full,” it said. “We’re not the only player in town. Other operators must also ensure drivers are treated fairly.”
