UBER Drivers: Employee or independent contractor? ‘Twists and turns to determine employment relationship’

“The world of work has changed considerably over the last few decades and it continues to change with formal full-time employment on the decrease. Part-time employment, outsourcing and casualization have been features of our labour market even at the time that the Labour Relations Act 66 of 1995 was passed, while the gig economy has provided new opportunities for otherwise unemployed people to earn an income. The line between who is employed and who is not is increasingly blurred as relationships have become largely anonymized, internationally and intra-nationally. “

 

[Uber South Africa Technological Services (Pty) Ltd (Applicant) and NUPSAW and SATAWU obo Tsepo Morekure,  Derick Organsie and Lee Stetson Carl De Oliveira (1st Respondent) Joseph Munzvenga & Others ( 2nd to 6th Respondents) Case no: WECT12537-16 CCMA (7 July 2017),  before Everett W,  Senior Commissioner at [33].                                        

                            

FACTUAL BACKGROUND AND COMMENTARY

This matter served before the Commission for Conciliation, Mediation & Arbitration (CCMA) – South Africa, referred by the Respondents (RP) [Applicants in the main referral] as an unfair dismissal dispute in terms of s 191(5)(a)(iii) of the Labour Relations Act, 66 of 1995 (as amended) (the LRA).

At the outset, the reader hereof should note that the Applicant (AL) [Respondent in the main referral] challenged the jurisdiction of the CCMA to entertain the matter.

To those not educated in legalese, so to speak or rather the meaning of legal words, terminology and phrases it has been deemed appropriate to define ‘jurisdiction’ hereunder by referring to the judgment Danone v CCMA & Others (Case no: JR2177/16) [2017] ZAFLLI (30 June 2017), before Snyman, AJ:

‘Jurisdiction’

The Court in Danone referred to the locus classicus [leading case] namely, SA Rugby Players Association and others (2008) 29 ILJ 2218 (LAC) at paras 39 – 40, wherein the LAC articulated the review enquiry when a jurisdictional challenge of the CCMA was brought and held as follows:

‘The issue that was before the commissioner was whether there had been a dismissal or not. It is an issue that goes to the jurisdiction of the CCMA. The significance of establishing whether there was a dismissal or not is to determine whether the CCMA had jurisdiction to entertain the dispute.

It follows that if there was no dismissal, then, the CCMA had no jurisdiction to entertain the dispute in terms of s 191 of the Act.

The CCMA is a creature of statute and is not a court of law. As a general rule, it cannot decide its own jurisdiction. It can only make a ruling for convenience. Whether it has jurisdiction or not in a particular matter is a matter to be decided by the Labour Court…’ [Emphasis added].

For the purpose of convenience, the parties will be referred to as in convention.

Also of edification is that the Ruling by Senior Commissioner Everett has as its heading IN LIMINE RULING’.

In limine means:

‘In Limine’

‘At the very outset of the hearing; initially; a term referring to legal proceedings at the very outset of the hearing process, usually relating to a jurisdictional point.’ [See Bakker & Holtzhausen, ‘South African Labour Glossary’ Juta 1996, 73].

Having clarified the legalese and other technicalities the crux of Uber’s jurisdictional challenge was that the Applicants [ALS] were not ‘employees’ in terms of s 213 ‘Definitions’ as contained/defined in the LRA.

They were at most ‘independent contractors’ and as a consequence, the CCMA lacked the required jurisdiction to entertain the matter.

The legal device of attempting to characterise the relationship in which one person provides services to, or ‘works for’, another person as one between an independent contractor and a client, rather than an employment relationship, has a long history in our labour law.

Its primary objective has often been to attempt to exclude this relationship from the ambit of  labour legislation. The law reports are littered with cases where the courts and arbitrators have been faced with the task of determining the true nature of this relationship.

For example, in White v Pan Palladium SA (Pty) Ltd (2006) 27 ILJ 2721 (LC), the court held that the definition of "employee" in section 213 of the LRA was not dependent solely on the conclusion of a contract recognised at common law as valid and enforceable.

The court stated that:

"Someone who works for another assists that other in his business and receives remuneration may, under the statutory definition, qualify as an employee even if the parties inter se have not yet agreed on all the relevant terms of the agreement by which they wish to regulate their contractual relationship." [At 391BC].

Of further interest is the observation by Van Niekerk A, AJ (as he then was) in Discovery Health Limited v CCMA & others [2008] 7 BLLR 633 (LC) “It follows that a person who renders work on a basis other than that recognised as employment by the common law may be an "employee" for the purposes of the definition. Because a contract of employment is not the sole ticket for admission into the golden circle reserved for "employees"…”’[At 49].

Suffice it to mention in passing that Part Time CCMA Commissioners and even Magistrates do not enjoy statutory protection as provided in SA labour legislation of the same or similar nature than that of a person falling under the scope of the definition of ‘employee’.

It is trite that Commissioners are not bound to follow the awards [including Rulings] of colleagues as pronounced by the LC in Mustek Ltd v Tsabadi NO and others [2013] 8 BLLR 798 (LC) at 13.

However, the awards by Senior Commissioners of the CCMA has persuasive value especially the in limine Ruling by Senior Commissioner Everett. It is respectfully submitted that subject matter is contemporary and the questions of law and fact arising have been dissected and the Ruling motivated in detail with reference to precedent and authoritative publications.

It is therefore of significant value insofar as it constitutes a work of reference to other Commissioners who have to determine the same or similar jurisdictional challenges.    

The Commissioner had to decide the legal and factual questions as set out below:

 

ISSUE TO BE DECIDED

‘I must decide whether Uber drivers are employees of Uber Technologies South Africa (Pty) Ltd (“Uber SA”) for the purposes of the Labour Relations Act 66 of 1995 as amended (LRA), as defined in section 213 of the LRA.’ [At 8].

BACKGROUND – IN LIMINE RULING

The decision or ruling was handed down by agreement based on the evidence on affidavit and the arguments submitted in writing and argued orally.

In the footnote, the Commissioner recorded: ‘that the bundles were voluminous and the decision was written under tight time constraints. It incorporated principles developed in case law, particularly South African case law, the relevant cases have not been consistently cited.

In this regard, the Code of Good Practice: Who is an Employee? has effectively codified the South African case law on the issue’.

i) All ALS except the 3rd AL were drivers or part-drivers for Uber.

[The Commissioner referred to Uber in the colloquial sense, as a well-known company and brand, without identifying whether the reference is to Uber SA or Uber BV, registered in the Netherlands. Even Uber markets itself as such and, for marketing purposes and in the eyes of the public, it does not distinguish between Uber SA and Uber BV. (Where necessary, Uber SA and Uber BV was specifically cited].

ii) The drivers were “deactivated” and they referred unfair dismissal disputes to the CCMA.

[Uber SA, (although the drivers cited merely “Uber” in the referral forms) objected to the CCMA’s jurisdiction in the unfair dismissal cases, claiming that the drivers were not employees of Uber BV with whom they have a contract, let alone Uber SA which is a subsidiary of Uber BV].

 

SUMMARY OF EVIDENCE AND ARGUMENT

Uber BV provides an app through which riders can request a driver to lift them to a destination of their choice. There are three types of persons involved in the delivery of the transportation services:

1)      The “partner only” owns one or more vehicles, but does not drive. Partners provide one or more vehicle for drivers to drive. The partner receives payment of fares less a fee deducted by Uber and the partner pays the driver.

2)      A “partner-driver” is a partner vehicle provider who also drives a vehicle. As a partner, the partner-driver may appoint another to drive and, if so, that driver must be approved on the Uber app.

3)      A “driver only” does not drive her vehicle or provide a car and drives a vehicle provided by a partner. [At 11 - emphasis added].

The matter concerned drivers who were either:

i) partner-drivers; or

ii) drivers only.

Drivers were at liberty to move between categories i) or ii) at will.

The ALS claimed that drivers, even if also partners, were employees when they drive, and they did so as employees irrespective of whether they own or in some other manner secure a vehicle to drive.

The Commissioner then summarized the ‘life cycle’ or the relationship between Uber and driver:

i) inception starts pursuant to a process of being ‘on boarded;’

ii) involves, registration on the app;

iii) approval of the vehicle the driver will use;

iv) documentation regarding, identity status of the driver, obtaining PDP license;

v)  standard business plan provided by Uber;

vi) training and information session at Uber CT offices, with focus on the usage of the app, standards required by Uber;

vi)  partner or partner drivers click to indicate acceptance of terms of the agreement;

vii) agreement detailed, dense and identifies partners and partner drivers as independent contractors.

Drivers may choose when they wish to drive by logging on and off the app. No minimum amount of time to drive, however, if deemed ‘inactive’, they are ‘archived’ and could be ‘reactivated’ when they become ‘active’.

When a rider requests a ride on the app, the rider specifies the pickup point, the rider is advised of fare and receives driver’s name and photo etcetera.

The rider and driver may cancel a trip, however, drivers are required to avoid cancelling a predetermined average to prevent being deactivated.

Drivers are monitored by GPS system and required to avoid deviation. Uber deducts fare through the app from the rider and thereafter its fee (originally termed a commission) and pays the balance to the partner.

The partner may deduct a fee for use of his vehicle and the driver receives the balance from the partner. However, each driver receives a statement of income generated for the week, detailing the hours she was logged on and the fares earned.

Uber even generates an invoice on behalf of the driver. There is an incentive payment to drivers in certain circumstances.

Uber sets performance standards in the form of an average rating by riders and they are required to maintain an average rating of 4.3 in Cape Town (this may vary from city to city).

From time to time, drivers are given suggestions on how to improve their ratings and if the rating starts to drop, they are warned of this.

If there is no improvement, the driver may be deactivated and she may go for top up training to improve her ratings and in this way be reactivated.

Drivers’ acceptance of trips is monitored and too many cancellations may also lead to deactivation.

Uber has a deactivation policy for the Sub-Saharan African region. The policy sets out:

i) the reasons why a driver may be deactivated;

ii) the steps that will precede deactivation.

It is the driver who is deactivated, not a partner only, and this occurs directly from Uber BV.

The affidavit of Morekure, the 3rd AP and the supporting documents, showed that partners have no control over deactivation.

The ‘deactivation’ procedure:

1)      Prior to deactivation, the driver is advised that her average rating by riders has fallen, or that she has higher cancellations than average, and given suggestions to improve.

2)      If there is no improvement, deactivation follows in the form of a simple notification to the driver that she has been deactivated.

3)      The final stage in the life cycle is that if a driver is in dispute with Uber, the service agreement provides that the laws of The Netherlands apply and disputes may be resolved by submission of the dispute to the International Chamber of Commerce for Mediation and Arbitration.

 

SUMMARY OF HEADS OF ARGUMENT

Uber argued that drivers were not employees of Uber BV, and as Uber SA is ancillary to Uber BV, it follows that they are also not employees of SA.

Uber listed six considerations which, it argued, made it clear that drivers are not employees.

First, there was no legal obligation on the part of any driver to drive any Uber registered vehicle or to use the Uber App, as is clear in the Uber BV service agreement.

Second, there existed no right to instruct a driver to drive his vehicle, and the driver has a choice of where to drive and which passengers to transport.

Third, a partner-driver may employ another driver to drive.

Fourth, drivers are free to work whenever they like on anything else, including direct competitors.

Fifth, the partner (and not Uber) is required to supply a vehicle and to carry all associated expenses. This is the essential tool of the trade and it is not provided by Uber.

Sixth, the risk of profit or loss is borne by the partner as an independent contractor.

Finally, a driver is free to move from one partner to another. The contract could only be ignored if it was a sham, drafted to conceal the real agreement.

The respondents [ALS]  argued that riders do not contract independent drivers, but Uber.

It is Uber that issues a receipt for its services. It was necessary to distinguish Uber from, for example, Airbnb where the customer knew that he or she was contracting with the guesthouse owner.

 

Drivers maintained that Uber controls them in a number of ways:

i) They are required to personally perform their tasks;

ii)  Uber controls their conduct and how they do the work through a system of ratings for the customer and policies regarding cancellation rates;

iii)  Uber controlled the actual conditions under which business was done, including pricing and the number of drivers in a city or at specific locations such as the airport.  Drivers would control this if they were independent contractors;

iv) they would determine where and how to place themselves in the market.

iv) Uber exercised extensive control over driver conduct; how drivers must do the work:

v) Although characterised as help or tips, this construction fell apart in the light of Uber’s power to deactivate drivers and prevent them from earning an income;

vi) The power to terminate the working relationship is the ultimate control and this is what attracts the protections of the LRA.

vii) The drivers maintained that Uber controlled their performance and have incentive schemes.

vii) The confusion between Uber SA and Uber BV is precisely the situation that sections 200B and 198 of the LRA seek to address by providing for joint and several liability.

ix) The local subsidiary of an international company must be regarded as the employer to avoid severe disadvantage to South Africans working for foreign companies.

x) The Uber office in Cape Town has a general manager, with whom some drivers actively engaged, and emails came from an Uber Cape Town email address.

ANALYSIS OF EVIDENCE AND ARGUMENT

The Commissioner made reference to local and international developments in law as regards those who deserve protection in the form of employment laws by analysing an article by the celebrated author Benjamin, Paul “An Accident of History: Who is (And Who Should Be) an Employee Under South African Law” (2004) 25 ILJ 787.

She also made the observation that in South Africa and internationally, judges and arbitrators are required to categorize the increasingly nebulous group of workers into one of the two categories.

It was argued by the drivers that the real question to be determined was; who we as a society wish to protect in the form of employment laws, as Paul Benjamin argued in the article supra.

The counter-argument was that this fell within the scope of the legislature to determine and again, the reply has been that the legislature has already done so in the form of the amendments to the LRA and in the provision of the Code of Good Practice: Who is an employee? Issued by NEDLAC GenN 1774 in GG 29445 of 1 December 2005. [At 34].

Also of importance, although not cited in the Ruling is the judgment by Steenkamp, J in Melomed Hospital Holdings Ltd v CCMA & Others (2013) 34 ILJ 920 (LC) where the Court determined the existence of an employment relationship. [See Ingrid Lewin “Employee or independent contractor? Twists and turns to determine employment relationship” Contemporary Labour Law Volume 23, No. 6 January 2014 at 55].

In Melomed Judge Steenkampemphasised the need to look more closely at the meaning of the second part of the definition of “employee” in the LRA, namely:

“(b) any other person who in any manner assists in carrying on or conducting the business of the employer” [my emphasis] and consider whether persons are conducting their own businesses or merely assisting an employer to conduct theirs.

[“50] Along that fault-line, [Benjamin] suggested, lies the true divide between employment and self-employment. And that is exactly the situation that pertained before the arbitrator in this case. The evidence before the arbitrator led to a reasonable conclusion that Burger assisted Melomed in carrying on its business; he did not conduct his own business. On the evidence before the arbitrator, this conclusion was not only reasonable but correct”.

Section 213 of the Labour Relations Act defines an employee as

a)             any person, excluding an independent contractor, who works for another person or for the State and who receives, or is entitled to receive, any remuneration; and

b)             any other person who in any manner assists in carrying on or conducting the business of an employer.

The Commissioner found that Part b) of the definition was broad enough to include Uber drivers. It is fairly obvious that the drivers assist in the business of Uber, which has a worldwide reputation as a provider of lifts for people wanting a ride, and not vice versa.

Part a) requires the payment of remuneration.

Uber drivers receive the fare less the fee deducted by Uber and, in the case of drivers only, less the amount the partner deducted for the use of the vehicle.

Importantly, the definition excludes independent contractors. It has been the line between independent contractors and employees that our courts and arbitrators have grappled with.

The Commissioner made a significant observation that in so-doing, several tests have been developed to indicate the existence or not of an employment relationship. These include:

i) the control test;

ii) the organizational test;

iii) the economic dependence test;

iv) the dominant impression test.

“In my view, the tests used to distinguish between employees and independent contractors have become largely unhelpful, and in many instances, key aspects of the tests point to employment, and others point to independent contracting.” [At 39].

No single test is decisive, nor even consistently preferred by our courts, although control or supervision have repeatedly emerged as the most helpful determinants. The Code of Good Practice: Who is an employee? endorses the dominant impression test.

The Code identifies various factors to be taken into account, and these factors are actually an embodiment of the various tests. Similarly, most of the factors in section 200A embody the same tests, and the presence of any one (along with earnings below the threshold) triggers the presumption of who is an employee in terms of the LRA.

[In this matter, the parties agreed that the presumption did not apply to each of the drivers and, as it is essentially a tool to determine onus rather than determinative of the relationship, the objection to the CCMA’s jurisdiction was heard first, followed by the answering and replying heads of argument.]

The drivers accordingly bear the onus of proving that they are employees for the purposes of the LRA.

A further significant finding was that ‘although not stated in so many words, the Code introduces a new comprehensive test, which includes as factors the past tests.

This is the “reality of the relationship” test. This requires that, despite the form of the contract, a person deciding whether someone is an employee or an independent contractor must consider the real relationship between the parties.

Item 52 states: “Courts, tribunals and officials must determine whether a person is an employee or independent contractor based on the dominant impression gained from considering all relevant factors that emerge from an examination of the realities of the parties’ relationship.” [Emphasis added].

The Commissioner then proceeded to consider and make findings on the various factors identified in the Code of Good Practice:  Who is an Employee?

Drivers render personal services.

They must be on-boarded personally with the necessary personal details, licenses and applications. They drive in their own name and may not out-source driving to someone else. The relationship between Uber and the driver would terminate on the death of the driver.

The relationship is indefinite as long as the driver complies with requirements.

For example, the driver is required to electronically sign new policies and contracts before she may drive. The relationship is not dependent on the achievement of a specific outcome.

Drivers are subject to the control of Uber.

Drivers choose their hours of work and they may accept, decline or ignore a list request. However, Uber controls the manner in which they work by setting clear standards and performance requirements, (such as contained in the Deactivation policy).

Uber has control in that it may suspend and deactivate access to the app, thereby depriving the driver of the opportunity to work and earn an income.

Even though there is no direct or physical supervision, control is exercised through technology, to the point that even the movement of the cell phone can be detected, indicating reckless driving.

If the driver does not meet the required standards, the driver is effectively dismissed.

Uber also argued that each rider contracts with each driver for each trip. This is a fiction and is not a reflection of the real relationship between the parties.

Riders choose Uber to provide them with a lift through one of its drivers. The rider has no interest in or say over which driver arrives. The driver has no say over the fare and is not aware of the destination until the rider is picked up. The driver has minimal knowledge of the rider’s personal details and is prohibited from further contact in terms of the service agreement.

The Commissioner found that in the light of the above factors it could not be argued that the driver is independent or running her own transportation business.

The driver is very much at the mercy of Uber, and economically dependent on the ability to drive for Uber, an infinitely more powerful juristic person than the individual drivers.

Uber drivers are the essential part of Uber’s service. The app is a tool to request and provide lifts but it is the drivers who provide the riders with what they want. Riders want rides, not technology, and app merely provides an extremely convenient and accessible tool for riders to get a lift and for drivers to provide one.

As such, drivers are an essential part of the organisation which is Uber. If a customer complains, the complaint goes to Uber.

The real relationship between drivers in South Africa is that Uber SA is the employer. Uber SA appoints them and assists them to obtain the necessary licenses. Uber SA approves the vehicle they will drive.

The relationship between drivers and Uber BV is distant and completely anonymized. Uber BV provided the legal contracts, the technology, the collection and payment of monies, but it is Uber SA, the subsidiary and local company, that appoints, approves and controls drivers, and Uber’.

The Commissioner rejected Uber’s argument that the partner is the driver’s employer, or that the rider contracts the driver directly as an independent service provider. The partner or vehicle owner merely provides a vehicle for a driver to drive and takes a fee in return.

This is akin to a lease agreement, and examples of vehicles being leased to potential drivers on Gumtree demonstrate that there is no employment relationship. Furthermore, the partner has no say over the driver’s deactivation or other controls implemented by Uber.

The Commissioner reiterated that in applying the Code of Good Practice, in particular, the realities of the relationship test, there is sufficient basis for finding that Uber drivers are employees of Uber SA.

The Constitution provides that everyone has the right to fair labour practices. An interpretation which is in line with the Constitution and promotion of social justice is one which promotes the Constitutional values and the rights contained in the Constitution.

“Promotion of social justice involves the balancing of power between those with resources and those who are in a weaker position in society. It involves protecting the rights of the weak and making it accessible to them to enforce their rights.”

An interpretation which promotes social justice must favour the drivers, who are in a considerably weak position when compared to Uber. Drivers’ ability to earn an income is dependent on access to the app and the ability to drive.

It was determined or then so found by the Commissioner that the Uber drivers were not independent contractors in any true sense and they were in fact highly dependent on Uber for work.

The contract they “sign” using the technology required arbitration in The Netherlands to enforce any dispute arising from the contract. A social justice or Constitutional interpretation of section 213 of the LRA would not support such a dispute resolution process nor a construction which makes Uber BV in the Netherlands the employer.

The right to fair labour practices is worth nothing if it is not enforceable, and dispute resolution processes in The Netherlands make it effectively impossible for a driver based in South Africa to challenge the international company.

Uber BV provides technology but the real relationship between drivers in South Africa is with Uber SA.

Uber referred to the company agreement between the holding company BV and the subsidiary based in South Africa. Despite the agreement, it is clear that Uber SA is the contact point for all drivers and dealings with Uber BV are limited to those generated by the app.

Engagements on operations and even queries regarding deactivation are done with Uber SA. The Commissioner agreed that the local subsidiary of an international company must be regarded as the employer to avoid severe disadvantage to South Africans working for foreign companies.

The Commissioner concluded that even though Uber BV provided the app and generated the contracts, Uber SA is, for all intents and purposes, Uber in South Africa.

Uber SA directs operations in the country and the city in question. Insofar as Uber BV was the party that concludes contracts with drivers, it was of no relevance for drivers. [See August Läpple (South Africa) v Jarret & Others [2003] 12 BLLR 1194 (LC) at par 48].

‘I have considered whether a finding that Uber drivers are employees is detrimental to economic development. The consequences for Uber of a finding that the drivers are employees for the purposes of the Labour Relations Act are not dire.’ [At 60].

If one equates deactivation with dismissal, Uber already has a policy setting out the reasons for deactivation, much like a company’s disciplinary policy. It already monitors performance, gives warnings and suggestions for improvement even though this is apparently structured in a way so as to avoid the appearance of enforcing discipline.

The right to challenge one’s dismissal by referring a dispute to the CCMA may result in time spent defending itself at CCMA processes, but employers with far fewer resources manage this as part of the cost of doing business.

Uber presents itself as fair and reasonable in its treatment of drivers and if this is so, there is no reason why fairness should not be tested.

RULING

‘The CCMA has jurisdiction to determine the dismissal disputes referred by Uber drivers as they are employees of Uber SA for the purposes of the Labour Relations Act, 66 of 1995 (as amended.)

 

Johann Scheepers

August 23, 2017.

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