Employment Status – What is the Nigerian perspective?

Background: Recently, I came upon a headline which read “Uber drivers sue their employer, Uber Technologies System Nigeria Limited for ripping off drivers” Uber is mostly known globally as a company which provides a smartphone app enabling passengers to book trips with an available private hire car driver and to pay Uber electronically (in some cases cash payments are accepted). Uber then pays the driver, after deducting its commission. Uber generally treats the drivers as independent, self-employed contractors, not employees or ‘workers’. Uber’s company’s relationship with its drivers has long been subject to lots of scrutiny and lawsuits with mixed results. In April 2016, Uber reached a potential settlement of $100 million in a class-action suit which included nearly 400,000 drivers in Massachusetts and California which let it to continue classifying them as independent contractors[1]. The settlement was subsequently rejected by a US district judge for failing to meet the parameters of being “fundamentally fair, adequate, and reasonable”, because it was substantially below the $854 million worth of total potential damages calculated by the plaintiffs. Reading further into the article, it stated that the drivers Originating Summons claimed for the following reliefs:

• a declaration that the claimants and members of their class are employees of the defendant;
• that by virtue of the nature of the defendant’s control over the claimants and members of their class, they are not meant to be classified as independent contractors;
• that the defendant is liable for the acts of the claimants and other members of their class while acting in the course of their employment with the defendant;
• an order mandating the defendant to provide all relevant benefits including but not limited to health insurance, pensions and other benefits to the claimants and members of their class and
• a perpetual injunction restraining the defendant, its officers, from further denying liability for the claimants’ acts done in the course of their employment with the defendant.

The article also made reference to the issues for the Court to determine, which were summarised as follows:

• Whether or not considering the circumstances of the facts of the case, the claimants and members of their class are independent contractors of the defendant
• Whether or not by the interpretation and construction of “worker” under Section 91 of the Labour Act, the claimants and members of their class are employees of the defendant.
• Whether or not the employment relationship between the claimants and the defendant has created an agency relationship?
• Whether or not, the defendant as the claimants’ employer ought to be vicariously liable for the claimants’ malfeasance?

A number of features of the article and the case particulars struck me as reminiscent of a class of cases recently going through the courts in United Kingdom, all concerned with employment status particularly in the ‘gig economy’[2], such as Pimlico Plumbers Ltd v Smith [2018] (awaiting judgment of Supreme Court), Aslam V Uber [2017], Addison Lee Ltd v Gascoigne [2017] to name but a few. The reliefs sought and issues to be determined strongly suggests to me that the arguments before the Nigerian Industrial Court (NIC) are likely to be very similar to those aired in English courts. Basically these cases invariably stand or fall depending on the ‘employment status’ of the claimant, because the benefits sought will only be available to a class of persons employed or engaged as employees or workers and not independent contractors, i.e. those in business for their own gain. What the UK experience tells us is that determining whether someone is an employee/worker or an independent contractor, in the context of gig economy, is not straightforward and often depends on a multi factorial assessment of the relationship. Thus, the nature and circumstances of the relationship as found by the courts is critical, so also is the courts willingness to purposively construe the relevant statutory provision, precisely because the law needs to adapt to the changing employment environment of the day as epitomised by the gig economy. The Law The Nigerian Labour Act, chapter L1, Laws of the Federal Republic of Nigeria 2004 (“Labour Act”) is the primary legislation which deals with the relationship between employer and an employee. Section 91 of the Labour Act defines “contract of employment” as any agreement, whether oral or written, express or implied, whereby one person agrees to employ another as a worker and that other person agrees to serve the employer as a worker. There is no separate definition of an employee and the Act defines workers as not including persons exercising administrative, executive, technical or professional functions as public officers or otherwise. This has the effect of exclusive persons with such functions from protection and benefits under the Act. By way of comparison the principal statute in UK statute books which deals with the relationship between employer and an employee is the Employment Rights Act 1996 (“ERA 1996”); and Section 230 therein provides a definition for both an employee and a worker in the following terms: an “employee” means an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment; and a “worker” means an individual who has entered into or works under (or, where the employment has ceased, worked under) — (a) a contract of employment, or (b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual. It is to the above unique and extended definition of a worker under UK law (described in some of the cases as ‘limb B worker’) that much of the UK employment status litigation has been focused upon. Recently in UK, in a similar case brought by two drivers against Uber (Uber v Aslam and Others (2017) UKEAT/005/17/DA), Uber argued that it was acting as their agent when dealing with potential passengers, not as their employer. This meant they were not allowed employment law rights such as the national minimum/living wage, paid annual holidays, rest breaks, maximum weekly working hours and auto-enrolment pension contributions. However, two Uber drivers claimed they were workers’ under UK law. In UK, workers are entitled to these basic employment law rights, even though they are not full employees. The UK Employment Tribunal (ET) found that:

• The terminology in Uber’s contracts – such as ‘interviews’, ‘providing job opportunities’, ‘on- and off-duty’, ‘Uber drivers’ and ‘our drivers’- inferred that it was also operating a transportation business.
• The drivers’ contracts with Uber prohibited them from providing driving services directly to customers. Uber must therefore have been providing driving services for its own benefit, which implied it must be providing transportation services.
• The paperwork involved contained ‘fictions’, i.e. it did not reflect what actually happened on the ground. For example, the invoices generated on behalf of drivers were ‘fakes’ that were never sent to customers.
• Uber’s argument that it was simply providing the drivers with leads was not sustainable since the drivers had no leeway to negotiate the terms on which they provided their services to passengers. Both driver and passenger were bound by Uber’s terms.
• Uber exercised significant control over its drivers, inconsistent with their being independent, self-employed contractors:
  • It could accept (or refuse) bookings at its ‘sole and absolute discretion’
  • It recruited and interviewed drivers before allowing them onto the app
  • Valuable marketing information, including passengers’ names and destinations, belonged to Uber. Drivers were not allowed to give passengers their contact details
  • Drivers had to accept 80% of jobs, and could not cancel them. Drivers who refused a fare three times were ‘disciplined’ by being logged off the app for ten minutes by Uber
  • Uber set the route to be taken for each passenger
  • Uber set the fares and prohibited driver and passenger from agreeing a different fare. Uber could make deductions from the sum paid to drivers if passengers claimed they had been overcharged
  • Drivers had to follow Uber’s processes and procedures which regulated how they did their jobs and controlled their behaviour in a number of ways
  • Uber rated drivers in a manner akin to a performance management procedure
  • Uber at one point guaranteed drivers’ earnings, akin to a basic salary
  • Uber was responsible for handling complaints
  • Uber had power to change drivers’ terms and conditions unilaterally, similar to an employment contract

The ET therefore ruled that Uber was not a client or customer of business undertakings run by the individual drivers. Instead, the drivers were workers in Uber’s transportation business during the periods when they were using the app and able and willing to accept fares from it within their local area. Uber was not acting as their agent to negotiate trips with potential passengers, but their employer. They were therefore entitled to the employment law rights they claimed. The Employment Appeal Tribunal (EAT) and the Court of Appeal, agreed with the ET that when drivers had the Uber app switched on, they were workers entitled to certain important employment law protections, including the working time (rest breaks, paid holidays, etc) and national minimum wage regulations. Uber was not acting as their agent but their employer. Conclusion and Implications Returning to the headline it was instructive to note that the case is premised on Uber Technologies System Nigeria Limited (“UTSNL”) being their ‘employer’. No doubt UTSNL would argue that the case is founded on a false premise. In absence of the unique and extended definition of a worker under UK law, it remains to be seen whether the NIC would construe section 91 of the Labour Act to the same or similar effect as the UK courts. Whatever, the legal outcome of the case, it seems to me that a review and reform of the Nigerian Labour Act is well overdue, so as to bring the primary law dealing with the relationship between employers and employees in line with the ever evolving employment practices of the day and the future. Furthermore, given the gargantuan level of damages that will flow from a successful claim, this case and Uber experience worldwide is also perhaps a timely reminder for those businesses with similar employment model as Uber, of which there are many – i.e. that utilises so called ‘independent contractor’ for the delivery of its service – to ensure that its contractual documents and policies truly reflects the practical reality of the relationship. We would advise all such businesses to undertake a comprehensive review of their policies and practices. If this article raises any issues for you or your organisation please speak with your legal adviser or a member of Charles Anthony LLP Labour & Employment Law team. Benjamin Uduje, Partner and Head of Labour & Employment law team at Charles Anthony LLP, with over 25 years of Employment law practice at UK Ba [1] https://www.theverge.com/2016/4/21/11485424/uber-suit-california-Massachusetts-drivers-employee-contractor [2] A gig economy is an environment in which temporary positions are common and organizations contract with independent workers for short-term engagements]]>