Price hikes and job losses – What could happen if Uber drivers become employees in South Africa

South African Uber riders could soon be paying more for trips available from a fewer number of Uber drivers.

This may happen if a class action lawsuit being prepared by Mbuyisa Moleele Attorneys and Leigh Day seeking to classify South African Uber drivers as employees is successful.

The claim is based on the drivers’ entitlement to rights as employees under South African legislation and will seek compensation for unpaid overtime and holiday pay.

This lawsuit comes after the company faced similar legal action for employee recognition of its drivers and driver partners in the US and the UK.

In the UK, the Supreme Court found that Uber drivers should be legally classified as workers rather than independent contractors. As such they, were entitled to similar – but not all – employee benefits.

Leigh Day represented the UK Uber drivers in the case in which the lower courts, including the English Court of Appeal, also ruled in favour of the drivers.

Uber responded by saying that the ruling was based on an older version of its app and services, which had been improved.

“We’ve already made significant changes to our app to ensure we support this, including through partner injury protection, new safety features, and access to quality and affordable private healthcare cover for drivers and their families, voluntarily,” it said.

Uber South Africa told MyBroadband that it has always been upfront about its model, and drivers had signed up to use the app for this reason.

“In every driver and courier survey over the last decade, the vast majority of platform workers have consistently said they don’t want to be employees because of how much they value flexibility and the ability to choose if, when and how they work.”

Fewer drivers

The company has previously claimed that employee recognition could have a severe impact on the number of drivers it is able to sign up.

In the US in particular, Uber CEO Dara Khosrowshahi previously claimed that “hundreds of thousands of drivers” would lose work opportunities overnight.

“Before COVID-19, nearly 1.2 million drivers in the U.S. were actively earning income on Uber’s platform each quarter,” Khosrowshahi  said.

“According to our research, if Uber instead employed drivers, we would have only 260,000 available full-time roles – and therefore 926,000 drivers would no longer be able to work on Uber going forward.”

“In other words, three-fourths of those currently driving with Uber would be denied their ability to work,” he added.

Uber South Africa did not respond to questions from MyBroadband about what the relationship between part-time and full-time drivers was in South Africa.

However, Mbuyisa Moleele Attorneys has pointed out that in the company’s own submissions to the 2020 SA Competition Commission Inquiry into metered taxis and e-hailing services, Uber said its local operations were different from countries like the United States.

According to the firm, drivers in South Africa tend to be predominantly full-time on the Uber platform and their work for Uber is equivalent to full-time employment, and not just a way of earning supplementary income.

Increased prices and reduced driver numbers

Economics Research Associate Brad Chattergoon previously penned a piece with regards to Assembly Bill 5 (AB5) in California and its impact on Uber.

This piece of legislation came into effect in the US state at the start of 2020 and stipulated that companies hiring independent contractors must reclassify them as employees under certain terms.

Chattergoon stated that it was important to understand that Uber could not yet afford to pay drivers employee benefits without significant changes in its operating model.

“Uber is not profitable so they definitely do not have this excess profit margin that can be redistributed to employees by higher wages. They will have to rethink their business operations in response to dramatic cost changes,” Chattergoon stated.

According to him, Uber will likely have to implement two changes in the event that its drivers are granted employee status:

  1. Increase prices to consumers to account for the higher cost of providing transportation services.
  2. Reduce the number of drivers Uber has on its platform and instead of offering flexibility, will have to rely more on standardised scheduling and primarily full-time employment, i.e. drivers no longer work when they want, but when they’re told.

He explained that this would drastically change the company’s character.

“While Uber has been operating as a market maker and supply and demand can freely choose to engage in transactions on the market, it allowed drivers to choose whether to drive or not, but in forcing Uber to consider its drivers as employees, you are also forcing drivers to be employees,” Chattergoon said.

“Uber will basically become a taxi service with better operations infrastructure than the taxi operators of old, and this is indeed how they will likely have to respond to continue operating,” Chattergoon stated.

Such changes could potentially have an enormous impact on Uber’s operations in South Africa, with consumers turning to alternatives like Bolt due to greater price discrepancies and fewer drivers being available at any given time.

The legal perspective

Mbuyisa Moleele Attorneys said South African legislation relating to employment status and rights is very similar to UK employment law.

However, South African law firm Adams & Adams has told MyBroadband that there was a fundamental difference between the employment laws of the two countries.

Whereas the UK differentiates between an employee and a worker, South Africa distinguishes between employee and independent contractor.

Even though Leigh Day won the case in the UK, drivers were afforded the title of workers and not employees.

“In terms of the UK employment legislation, a worker will not be entitled to all the protection, rights and benefits afforded to employees. However, a worker will be entitled to basic employment rights such as the national minimum wage and holiday entitlements,” Adams & Adams said.

“In terms of South African employment legislation an independent contractor is specifically excluded from the definition of an employee and will accordingly not be entitled to any protections, benefits, and rights of an employee,’ Adams & Adams stated.

The firm added that should Uber drivers be declared employees of Uber South Africa, a flurry of litigation may ensue within the gig economy with workers approaching the courts to be declared as employees.

Although each matter would be decided on a case-by-case basis, it may also lead to the acceleration of legislation regulating the performance of work within the gig economy or the possibility of the minister of labour exercising his powers in terms of section 83 of the Basic Conditions of Employment Act to by deeming certain workers within the gig economy to be employees for purposes of certain labour legislations.

Now read:  UberGo budget ride service now available across South Africa

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Price hikes and job losses – What could happen if Uber drivers become employees in South Africa