IN recent days two decisions were rendered relating to the status of gig /platform workers. Both relate to the cab hailing App Uber. One of them rendered by the UK Supreme Court is path breaking and is making waves across the world. The other rendered by an Indian Tribunal follows the beaten path. Although the context of the decisions was different, they do show different approaches to interpretation in assessing the realities of the changing models of doing business.

Coming to the UK decision, the question before the Court was whether drivers working for Uber were entitled to the various labour protection laws that apply to workers. Considering that there is growing outsourcing of work model, the judgement is important for establishing a modicum of protection to the increasing number of workers engaged in the informal work.

Getting around the tax laws and taking advantage of the unworkable rules of international taxation is the hallmark of the new digital multinationals and has been exposed over the years since the financial crisis resulting in the yet-to be finalised rules on digital taxation. The UK decision lays bare that these companies are equally adept in circumventing laws and regulations in other areas as well.

In the Uber UK case, the judgement of the Supreme Court was delivered in the context of claims filed by certain Uber drivers asking for minimum wage and protection under the labour laws of the UK. While adjudicating the claim, the factual matrix and the business model followed by Uber in the UK was examined by the first-tier fact finding tribunal as also by the appellate court that decided against the company and the Supreme Court has finally upheld the verdict of the lower courts.

Uber is a US based company that essentially operates an App that facilitates contact between those wanting to take a ride and the drivers. However, as in the case of other tech companies, there is a Dutch subsidiary involved that is the owner of the right to exploit the license in respect of jurisdictions outside of the USA.

Most of us have used Uber or a similar App. It is therefore instructive to note the structure and the basic agreements as lucidly brought out in the judgement since these are more or less the same in almost all jurisdictions with perhaps a few modifications here and there. As stated in the order of the UK SC, Uber BV, is a Dutch company which owns the rights in the Uber app. Uber London Ltd is a UK subsidiary of Uber BV which, since May 2012, has been licensed to operate private hire vehicles in London.

As stated by the Court, Uber's business model is simple. Prospective customers download the Uber app for free to their smartphone and create an account by providing personal information including a method of payment. They are then able to request rides. To do so, they open the Uber app on their phone and make a request. The Uber app identifies the passenger's location through the smartphone's geolocation system. Using the same technology, the app identifies the nearest available driver who is logged into the app and informs him of the request. At this stage the driver is told the passenger's first name and Uber rating and has ten seconds in which to decide whether to accept the request. If the driver does not respond within that time, the next closest driver is located and offered the trip. Once a driver accepts, the trip is assigned to that driver and the booking confirmed to the passenger, who is sent the driver's name and car details.

At this point the driver and passenger are put into direct contact with each other through the Uber app, but this is done in such a way that neither has access to the other's mobile telephone number. The purpose is to enable them to communicate with each other in relation to the pick-up, for example to identify the passenger's precise location or to advise of problems such as traffic delay. The passenger can also track the driver's progress on a map on their smartphone.

The driver is not informed of the passenger's destination until the passenger is collected. At that point the driver learns the destination either directly from the passenger or through the app if the destination was entered when the ride was requested. When the driver presses "start trip" on his phone the Uber app incorporates route planning software and provides the driver with detailed directions to the destination. The driver is not bound to follow those directions but departure from the recommended route may result in a reduction in payment if the passenger complains about the route taken.

On arrival at the destination, the driver presses "complete trip" on his smartphone. The fare is then calculated automatically by the Uber app, based on time spent and distance covered. At times and places of high demand, a multiplier is applied resulting in a higher fare. Drivers are permitted to accept payment in a lower, but not a higher, sum than the fare calculated by the app. Drivers are at liberty to accept tips but are discouraged by Uber from soliciting them.

The fare is debited to the passenger's credit or debit card registered on the Uber app and the passenger is sent a receipt for the payment by email. Separately, the Uber app generates a document described as an "invoice" addressed on behalf of the driver to the passenger. Uber BV makes a weekly payment to the driver of sums paid by passengers for trips driven by the driver less a "service fee" of 20% of the fare retained by Uber BV. Drivers are prohibited by Uber from exchanging contact details with a passenger or contacting a passenger after the trip ends other than to return lost property. Uber operates a ratings system whereby, after the trip, the passenger and driver are each sent a message asking them to rate the other anonymously on a scale of 1 to 5,

To become an Uber driver, a person can sign up online. They must then attend and present certain documents at the offices of the local Uber Company This process is referred to by Uber as "onboarding".

Individuals accepted as drivers are given free access to the Uber app through their own smartphone or may hire a smartphone for £5 a month from Uber BV configured so that it can only be used to operate the Uber app. Drivers must also bear all the costs of running their vehicles, including fuel, insurance, road tax and the cost of obtaining a private hire vehicle licence.

Individuals approved to work as drivers are free to make themselves available for work, by logging onto the Uber app, as much or as little as they want and at times of their own choosing. They are not prohibited from providing services for or through other organisations, including any direct competitor of Uber operating through another digital platform. Drivers can also choose where within the territory covered by their private hire vehicle licence, they make themselves available for work.

Drivers whose acceptance rate for trip requests falls below 80% - receive warning messages reminding that being logged into the Uber app is an indication that the driver is willing and able to accept trip requests. If the driver's acceptance rate does not improve, the warnings escalate and culminate in the driver being automatically logged off the Uber app for ten minutes if the driver declines three trips in a row. A similar system of warnings, culminating in a ten-minute log-off "penalty", applies to cancellations by drivers after a trip has been accepted. The driver's ratings from passengers are also monitored and the drivers who have undertaken 200 trips or more and whose average rating is below 4.4 become subject to a graduated series of "quality interventions" aimed at assisting them to improve. If their ratings do not improve to an average of 4.4 or better, they are "removed from the platform" and their accounts "deactivated".

In the typical case where "Customer" is an individual driver, the nature of the relevant services and relationships as characterised by the Services Agreement is that Uber BV agrees to provide electronic services to the driver, which include access to the Uber app and payment services, and the driver agrees to provide transportation services to passengers.The agreement states that Customer acknowledges and agrees that Uber BV does not provide transportation services and that, where Customer accepts a User's request for transportation services made through the Uber app, the driver is responsible for providing those transportation services and, by doing so, creates a legal and direct business relationship between Customer (driver) and the User, to which neither Uber [BV] nor any of its affiliates is a party.

The agreement also states that the fare is determined by Uber BV but describes it as charged by the driver and as "a recommended amount" which the driver may choose to reduce (but not increase) without the agreement of Uber BV. The clause further provides that Uber BV agrees to remit to Customer on at least a weekly basis the fare less a "service fee", calculated as a percentage of the fare.

British employment law distinguishes between three types of people: those employed under a contract of employment; those self-employed people who are in business on their own account and undertake work for their clients or customers; and an intermediate class of workers who are self-employed but who provide their services as part of a profession or business undertaking carried on by someone else. Some statutory rights, such as the right not to be unfairly dismissed, are limited to those employed under a contract of employment; but other rights, apply to all "workers,

Uber argued that when a request to book a private hire vehicle made through the Uber app is accepted, a contract is created between passenger and driver, to which no Uber entity is a party and under which the driver is solely responsible for providing transportation services to the passenger. It also relied on terms of the written agreements which state that the only role of Uber BV is to provide technology services and to act as a payment collection agent for the driver and that the only role of Uber London (and other Uber UK companies) is to act as a booking agent for drivers.

The Supreme Court however found the argument flawed for the simple reason that there is no written agreement between Uber London and drivers and therefore the nature of their relationship has to be inferred from the parties' conduct, considered in its relevant factual and legal context and the only contractual arrangement compatible with the licensing regime is one whereby Uber London as the licensed operator accepts private hire bookings as a principal and, to fulfil its obligation to the passenger, enters into a contract with a transportation provider (who) agrees to carry out the booking for Uber London.

In this regard, Uber had relied on its contractual Rider Terms whereunder Uber contracts with passengers include a term which states that Uber London accepts private hire bookings acting as disclosed agent for the Transportation Provider as principal and that such acceptance gives rise to a contract for the provision to the rider of transportation services between the rider and the Transportation Provider. Rejecting the same, the Court pointed out that it is trite law that a person (A) cannot create a contract between another person (B) and a third party merely by claiming or purporting to do so but only if A is (actually or ostensibly) authorised by B to act as B's agent. If at all, the Rider Terms establish a contract between drivers and Uber London and there is no evidence that drivers were ever sent the Rider Terms let alone consented to them.

In accordance with basic principles of contract and agency law, therefore, nothing stated in the Rider Terms is capable of conferring authority on Uber London to act as agent for any driver nor of giving rise to a contract between a rider and a driver for the provision to the rider of transportation services by the driver.

The UK Supreme Court rightly observed that the Services Agreement was drafted by Uber's lawyers and presented to drivers as containing terms which they had to accept in order to use, or continue to use, the Uber app. "It is unlikely that many drivers ever read these terms or, even if they did, understood their intended legal significance. In any case there was no practical possibility of negotiating any different terms. In these circumstances to treat the way in which the relationships between Uber, drivers and passengers are characterised by the terms of the Services Agreement as the starting point in classifying the parties' relationship, and as conclusive if the facts are consistent with more than one possible legal classification, would in effect be to accord Uber power to determine for itself whether or not the legislation designed to protect workers will apply to its drivers."

The remuneration paid to drivers for the work they do is fixed by Uber and the drivers have no say in it other than by choosing when and how much to work. Uber exercises a significant degree of control over the way in which drivers deliver their services. The fact that drivers provide their own car means that they have more control than would most employees over the physical equipment used to perform their work. Nevertheless, Uber vets the types of car that may be used. Moreover, the technology which is integral to the service is wholly owned and controlled by Uber and is used as a means of exercising control over drivers.

The UK SC also compared Uber's method of operation and relationship with drivers with digital platforms that operate as booking agents for suppliers of hotel or other accommodation. The accommodation offered is not a standardised product defined by the platform. Here the customers are offered a choice among a variety of different hotels or other types of accommodation, each with its own distinctive characteristics and location. Suppliers are also responsible for defining and delivering whatever level of service in terms of comfort and facilities etc they choose to offer. Apart from the service fee, it is the supplier and not the platform which sets the price. The platform may operate a ratings system but the ratings are published in order to assist customers in choosing among different suppliers; they are not used as a system of internal performance measurement and control by the platform over suppliers. Nor does the platform restrict communication between the supplier and the customer or seek to prevent them from dealing directly with each other on a future occasion. The result of these features is that suppliers of accommodation available for booking through the platform are in competition with each other to attract business through the price and quality of the service they supply.

As for Uber's argument that the drivers when logged onto the Uber app are under no obligation to accept trips, the Court pertinently observed: The fact, however, that an individual has the right to turn down work is not fatal to a finding that the individual is an employee or a worker and, by the same token, does not preclude a finding that the individual is employed under a worker's contract. What is necessary for such a finding is that there should be what has been described as "an irreducible minimum of obligation". Uber London in the Welcome Packet of material issued to new drivers referred to logging onto the Uber app as "going on duty" and instructed drivers that: "Going on duty means you are willing and able to accept trip requests" Logging onto the Uber app was thus presented by Uber London itself to drivers as undertaking an obligation to accept work if offered.

Although the UK SC judgement was rendered in the context of labour laws (the National Minimum Wage Act 1998 and the Working Time Regulations 1998) and the interpretation adopted by the UK SC may not apply in tax cases, what is important to note is that unquestioning adoption of the terms of a written contract may not meet the ends of justice. It is also interesting to note that in this case itself, the taxpayer had relied on a decision rendered by the British Supreme Court in the context of the VAT legislation to interpret the tripartite relationship between a company, its workers and the users. In that case, a company that marketed hotel rooms and holiday accommodation through a website reserved many hotel rooms in its own name, for which it paid in advance. The issue was whether, for the purposes of assessing liability for VAT the company was purchasing accommodation from hoteliers and supplying it to customers as a principal or whether it fell within a category of persons who act solely as intermediaries to whom more favourable tax treatment applied. In analysing the relationship, the Court pointed out that the right starting point is to characterise the nature of the relationship between the company, the customer, and the hotel, in the light of the contractual documentation, that one must next consider whether that characterisation can be said to represent the economic reality of the relationship in the light of any relevant facts, and if so, the final issue is the result of this characterisation.

In that connection, the UK SC observed that in the matter of characterisation for VAT purposes, the taxable persons are generally free to choose the organisational structures and the form of transactions which they consider to be most appropriate for their economic activities and for the purposes of limiting their tax burdens, although that this is subject to an exception for abusive transactions . Thus, in the hotel case, a customer who subsequently booked one of the rooms would not contract with the company, but would contract through it with the hotelier.

The Indian case: Uber India Systems Pvt Ltd v JCIT [2021-TIOL-489-ITAT-MUM]

The Indian case does not relate to labour laws but to income taxation – not of Uber per se but relates to its liability as the withholding agent in respect of payments to the drivers. Before discussing the case, we may note that after having been set up as Uber cab in the USA in the year 2009 , Uber entered the Indian market in 2013 and has since slowly expanded and diversified its operation. When it entered India for the first time, it followed the same card only model but subsequently since 2015 also allowed the hirers to pay in cash. As in other countries, there is an Indian subsidiary Uber India Services Private Ltd, set up on 16 th August, 2013 that is supposed to provide advertisement and other support services to Uber BV, Netherlands to which the intellectual property was licensed. For its services, it was apparently remunerated on a cost+ basis.

Uber having disrupted the traditional cab business; it is only natural that it has faced and will continue to face legal challenges in different parts of the world. It is obvious from the assessment order that the assessing officer was aware of the developments since he has relied on some cases from such other jurisdictions where the challenge was relating to the status of the drivers under the labour laws.

Taking a cue from some of the findings including the one that was recently decided by the UK Supreme Court for which the lower court's decision was available at the time, he took the position that Uber exercises full control over the selection of the Drivers and on determination of ride fare and issuance of invoices and making payment to the Drivers.

Uber recruits the Drivers, provides training, sets the quality standard, provides rating and has a right to register and deregister and has full control over the drivers; that the so-called Agreement with the Drivers cannot be relied upon as they have no real negotiatingpower. All the clauses of the agreement show that Uber is actively involved in rendition of transportation service by Driver for example issuing invoices, resolving driver complaints, fixing of price, registering or de-registering driver, conditions of vehicle, etc.

We may note that under the Indian ITA, there is an obligation to withhold tax from the payments made to the cab drivers under section 194C of the ITA. We may also note that in the initial phases, Uber gave generous offers/payments to the drivers and it was also reported in mainstream media that some of the Uber drivers were making around INR 80-90,000 per month which is much above the basic exemption limit for the charge of income tax and it is natural that the tax department, ever on the lookout for expanding the tax base through the withholding route, would bestow its baleful gaze to this area. Due to the lockdown and subsequent disruption, the state of such drivers is dismal at present but that is a different story. The tax department, however, did not treat the drivers as employees of Uber in which case also there would have been a liability of withholding but, treating the drivers as independent contractors, latched on to the provision of section 194C that casts an obligation to deduct tax at source on the part of the payer.

The tribunal however relied solely on the agreements and in particular emphasised on the fact that users in India can pay in cash directly to the drivers and that it is only in the case of digital payments that Uber makes payments subsequently after retaining its commission. The tribunal also referred to the fact that in 2014, the RBI had issued a Circular which provided that if the transacting parties are in India, payment could not be collected by Uber B.V in a bank account outside India and subsequently after consulting the business model permitted the Indian subsidiary to collect the fares on behalf of Uber BV by opening an account in India for the collection and disbursement function.

To that extent, the Indian model certainly differ but in almost all other aspects the model followed in India is the same as that followed in the UK. Thus, in India also, the drivers have to register giving all the details including their bank accounts, character certificate, list of family members, police verification etc. There is also the onboarding exercise and training given to the drivers as discussed in the UK SC order.

The tribunal also observed that when the user directly makes cash payment to the driver, the company is not even made aware of the same. This may not be correct as Uber deducts its commission even in case of cash payments. The cash collection is actually adjusted and only the net amount is paid to the drivers. It is mainly in that view of the matter, the tribunal held that the Indian subsidiary could not be held to be the person responsible for payment of hire charges to the drivers. But the analysis of the contractual terms as done by the UK SC shows that perhaps some deeper examination of the same could have been done by the tribunal. Even thereafter, whether the outcome would have been different is a different issue.