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UBER Loses Battle as U.K. Top Court Rules Drivers Are Workers

In a major blow to Uber TechnologiesUBER business model, the U.K. Supreme Court on Friday ruled that the ride-hailing company’s drivers are workers entitled to minimum wage, holiday pay and rest breaks.

Classifying drivers as workers would invariably raise labor costs for Uber, which currently considers its drivers self-employed and does not provide them with minimum wage or other associated benefits. Besides being a threat to Uber’s U.K. business model, this re-classification could have a huge impact on Britain’s gig economy.

Supreme Court judges unanimously dismissed Uber’s appeal against the ruling. According to a CNBC report, Uber and a group of former drivers claiming that they are workers and should be given employment rights like a minimum wage and holiday pay, have been embroiled in a five-year-long legal battle. In 2016, an employment tribunal ruled in favor of the group of drivers, who were led by Yaseen Aslam and James Farrar.

Uber Technologies, Inc. Price

Uber Technologies, Inc. Price

Uber Technologies, Inc. price | Uber Technologies, Inc. Quote

 

Uber defends its stance on the ground that it acts as an agency connecting drivers with passengers through an app. It further contends that drivers prefer to work as independent contractors rather than employees since it gives them flexibility.

Per the CNBC report, Farrar, general secretary of the App Drivers & Couriers Union, stated, “This ruling will fundamentally re-order the gig economy and bring an end to rife exploitation of workers by means of algorithmic and contract trickery.”

Regarding the ruling, Uber said, that it applied only to the 25 drivers who brought the case against the company in 2016. It further added that it will consult with all its drivers in U.K. to “understand the changes they want to see.”

The CNBC report quoted Jamie Heywood, Uber’s regional general manager for Northern and Eastern Europe, saying, “We respect the Court’s decision which focused on a small number of drivers who used the Uber app in 2016.”

“Since then we have made some significant changes to our business, guided by drivers every step of the way. These include giving even more control over how they earn and providing new protections like free insurance in case of sickness or injury.”

In a similar legal battle with Californian regulators last year, Uber was exempted from classifying its drivers as employees in accordance with the state law, after Proposition 22 passed in the state.

Zacks Rank & Key Picks

Uber carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Internet - Services space are Baidu BIDU, Shopify SHOP and Facebook FB, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

While shares of Baidu and Shopify have rallied more than 100% each in a year’s time, Facebook shares have gained more than 30%.

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