The development of new business models on the Internet, especially those related to the so-called sharing economy – such as Uber – has been accompanied by a rising number of legal and regulatory issues that threaten to jeopardise such business models’ existence. The study ‘Mapping Uber’ looks at the main policy issues and the legal actions undertaken against the company in various countries.
The ride-sharing application Uber has seen a rapid expansion in the past three years. This has been accompanied by a wave of legal controversies, including court cases, rulings by regulatory authorities, and decisions by other administrative bodies. Most issues associated with the sharing economy are related to the fact that the sharing economy’s business model is still not clearly regulated.
In expanding its business, Uber presented serious competition to traditional taxi services. Many of the initial cases against the company were initiated by taxi associations on unfair competition grounds. A key question is related to how Uber was to be classified within the scope of the regulatory regime. In the EU, the answer came in December 2017, when the Court of Justice of the European Union (CJEU) ruled that Uber was a transportation company, and not an information services provider.
Courts of various levels and across nations were faced with related legal issues. Among these is the question of whether Uber’s drivers are direct employees or independent contractors. If they are employees, the company needs to provide them with employee benefits, such as minimum wage. UK courts have already taken a stand, deciding that drivers are considered to be workers. In the US, a decision on the matter is still pending. Although the CJEU’s ruling in December 2017 did not address the question of employment, it may impact the issue in the coming years.
Uber’s enormous exposure to litigation has triggered a large variety of cases against the company. Among related issues are background checks for drivers, reports to regulatory authorities, drivers’ alleged discrimination against blind people, and the physical assault of customers. In the US, which has the largest number of cases and class actions against Uber on record, the situation is even more complex due to procedural issues. Numerous disputes are awaiting a final decision on whether drivers can sue Uber in a court of law, or whether they need to resort to arbitration, since drivers’ contracts contain an arbitration clause to which drivers would have agreed to before joining the company as service providers.
The lack of a clearly defined regulatory regime is perhaps the main reason for so many court cases. At the same time, legal loopholes are a motivation for some to exploit the situation by profiteering through endless litigation. That is why the international community should promptly react in creating a predictable legal framework for the sharing economy that will both respect the interests of traditional professions and stimulate the digital economy and new business models.
Places where Uber is banned, partially banned, or risking a ban
The lack of licences, safety considerations, and the non-fulfillment of other conditions that are generally necessary for taxi drivers (such as the type of car being used, insurance requirements, etc.) have also been raised in court cases.
Uber is subject to either partial or complete bans in countries including Denmark, France, Germany, Hungary, Switzerland, and Turkey. Reasons for these prohibitions range from alleged unfair competition to a lack of safety measures and problems with illicit dispatcher services.
In Germany, for instance, a court in Cologne recently ruled that the app breaches a German law stipulating that taxis and similar services should be administered via a central dispatch office. However, Uber still operates in large cities such as Berlin, Munich, Düsseldorf, Frankfurt, and Hamburg.
In Turkey, a court ruled against Uber in a lawsuit filed by the Istanbul taxi drivers’ association (arguing that the app represented unfair competition to taxi drivers) and instituted a national ban. The same reason has been cited for partial bans of Uber in Italy and the Netherlands.
Argentina is Uber’s fastest-growing market and Uber continues to operate in the country, but the company is in legal limbo in the country. Not only are Uber drivers there faced with steep fines of up to US$5 000 but also face the danger of violent attacks from the so-called ‘Caza Ubers’ (‘Uber hunters’).
Other countries have introduced new regulations for ‘alternative transport services’. Romania adopted an emergency ordinance in 2019 that established the conditions under which providers must operate. These include a requirement that digital ride-hailing platforms obtain a technical authorisation and pay an annual tax of around EUR10 000, and that all drivers providing ride-hailing services are licensed as providers of transportation services.
Drivers' employment status
The employment status of Uber drivers has been a particular issue for the company, legislators, and drivers alike, and has been exacerbated by the gig economy’s rapid pace of development. The problems hinge on whether drivers are considered to be contractors, dependent contractors, or employees.
Uber contends that its drivers are contractors, and it is an argument that has achieved some support. In Belgium, government analysis concluded that drivers are ‘self-employed and not employed by Uber’, and Brazil’s Superior Court ruled that they are ’independent workers’. Similarly, in Australia, the Fair Work Ombudsman ruled that Uber drivers are independent contractors rather than employees, and confirmed that they are not entitled to the minimum wage, annual leave, or sick leave.
Other countries, such as Germany and Canada, have adopted the intermediate classification ‘dependent contractor’ (i.e. a freelancer who primarily works for one business and therefore enjoys some of the rights afforded to employees) and ruled that it applies to Uber drivers.
However, courts elsewhere have ruled that Uber drivers are in fact employees. In Switzerland, this could ultimately result in the entitlement of all ride-hailing drivers to social security protection and notice in advance of termination, which Uber does not currently provide. In France, the Court of Cassation ruled that Uber had employed one of its drivers. The court held that a relationship of subordination typical of an employment contract exists between Uber and its drivers and highlighted three main points in this regard. First, the service of transportation is entirely organised by Uber. Second, Uber selects the clients for the drivers. Third, Uber has the authority to disconnect drivers from the application temporarily or permanently in cases where drivers refuse clients more than three times consecutively. While an intermediate regime between employment and self-employment exists in certain countries in Europe, such as in the UK (‘worker’ is an intermediate category between ‘employees’ and ‘independents’), as well as in Italy (‘collaborazione coordinata e continuativa’ and ‘collaborazione a progetto’ contracts), French law only has two statuses: self-employed and employed.
In the UK, the Court of Appeal validated the ruling of the Employment Appeals Tribunal that Uber drivers are workers and thus entitled to the minimum wage. A similar decision was made in Uruguay. Legal action is also ongoing in other countries including Nigeria, where drivers brought a case before the National Industrial Court in Lagos arguing that ‘they are not meant to be classified as independent contractors’.
The status of Uber drivers in the US is currently disputed. Whereas they are deemed contractors under the Federal Fair Labor Standards Act, drivers have challenged the company to reclassify their contract due to new legislation in California.
Ride-hailing drivers have resorted to strike action in a number of jurisdictions to demand more favourable working conditions. Their demands have included job security, higher pay, and a cap on the amount that platforms are allowed to take from fares.
Mapping Uber: a database of court cases and rulings
Uber has been involved in legal action over several issues, and in more than 25 countries. The database below describes the court cases and other rulings, and includes details such as the court or authority passing the ruling, dates, and status of the case.
Mapping Uber: the main digital policy issues
The issues tackled in the court cases and rulings by government authorities were categorised according to a taxonomy of 48 issues on the Digital Watch observatory, including: E-commerce and trade, Convergence and OTT, Future of work, and Arbitration.
Of the 65 cases surveyed in this study, convergence-related issues are predominant. These include both questions of licencing (taxi companies largely arguing that Uber does not have a licence to operate in the region) and classification (asking whether Uber should be classified as a technology company or a traditional taxi service).
Issues related to the future of work are also prominent. The main question is whether Uber drivers are employees or independent contractors. If they are employees - as some courts have already determined - the company would need to offer the same protections and benefits to its drivers as any regular employee.
Competition was a widespread argument used by taxi companies in their cases against Uber involving questions of licencing, as well as issues related to unfair practices such as price-fixing, colluding, or misleading practices.
Cases that were excluded from this study included cases dealing with criminal law (such as those related to indecent assault) and copyright cases that are not specific to ride-sharing.