Uber Technologies (NYSE: UBER) is being forced to reclassify its drivers as workers in the U.K. following last month's decision by the Supreme Court of the United Kingdom. Uber's reclassification gives its drivers the typical benefits guaranteed to workers in the U.K.
Under the reclassification, Uber's drivers are now entitled to the minimum wage (roughly $12 an hour), holiday pay, a pension plan, as well as still being able to receive the typical incentives and bonuses offered by Uber.
The decision will likely have widespread implications for Uber, both within the U.K. and worldwide. The most obvious implication for Uber is the uptick in the company's overhead costs, which might not pan out well for a company that is still struggling to attain profitability. There also remains the risk that the U.K.'s decision may cause similar decisions to be made in other countries, both within the European Union and elsewhere.
"One can say that this will bring taxis and Uber to the same field to compete, with the difference between the two being based solely on technology and not on legal loopholes. This may cause Uber to adjust its growth strategy and exit markets that are less profitable," said Professor Pinar Ozcan of Oxford University, quoted by CNBC.
Uber had already seemingly won the battle to prevent gig worker reclassification, at least in California, where the firm successfully rallied enough support to pass a ballot measure exempting them from reclassification. Similar tactics don't appear to be working overseas, however. Traditionally, the E.U. and U.K. have been more stringent against major firms, having taken firms such as Alphabet (NASDAQ: GOOGL) and Apple (NASDAQ: AAPL) to task in the past, so it's no surprise that Uber realized its first defeat in the United Kingdom.
Investors seemed spooked by the decision, based on Uber's downward trend over the last few days. Uber stock slipped during after-hours trading on Tuesday, starting Wednesday lower and spending the next two days trending downward. By market close on Thursday, Uber was down 5.3% since Tuesday close.