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Deliveroo shares jump as court rules its riders are not workers

Deliveroo
Deliveroo

Deliveroo has won a lifeline for its business model after the Court of Appeal ruled that its riders are self-employed and do not have the right to form a union.

Judges sided with the takeaway company in the final stage of a long-running courtroom battle against the Independent Workers of Great Britain union (IWGB), which had sought to grant Deliveroo riders the right to collective bargaining.

Investors seized on the victory following a dismal three months for Deliveroo's stock, which is languishing almost 30pc below its float price in April.

Shares rose more than 9pc in trading on Thursday, adding £420m to its market cap. The decision spares Deliveroo from having to grant more benefits such as pensions and sick pay to its staff.

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Rivals were also boosted by the decision, with shares in Just Eat up 2.6pc in London. New York-listed shares in Uber, which owns Uber Eats, rose 2pc in early trading before falling back.

The judges' ruling ends a row which began before the Central Arbitration Committee in 2017, before being appealed by the unions to the High Court and then taken to a judicial review in 2018.

Lawyers for the IWGB argued that Deliveroo’s takeaway riders had the right to organise under the European Convention on Human Rights, but these claims were dismissed and taken to the Court of Appeal.

As part of its ruling, the court found that Deliveroo riders enjoyed a “virtually unlimited” right to substitution, where they could give their work on the takeaway app to other riders.

Lord Justice Underhill said that this was a decisive factor in determining whether riders are self-employed - with greater freedom to choose their hours - or employees, who have more obligations to their employer and correspondingly stronger protection.

The judgment also blocked the union from appealing the decision again to the Supreme Court.

It is a blow to activists who had hoped the case would swing in their favour following a Supreme Court judgment against Uber in February which found that its drivers are employees.

But in a crucial difference, the court found that Deliveroo riders who sign up to its app are able to offer their work to others with almost no penalty. By contrast Uber drivers are required to perform the work themselves.

Lord Underhill wrote: “There was no issue about personal service: Uber did not rely on any substitution clause.”

Deliveroo has faced legal clashes across Europe over its “gig economy” model, which pays an army of 110,000 riders for every delivery they make.

Deliveroo rider
Deliveroo rider

In Italy, prosecutors have demanded fines totalling €733m (£630m) from four food delivery firms, including Deliveroo, over their working conditions for riders and demanded the apps hire another 60,000 couriers.

The Spanish government has introduced new laws ordering all food delivery companies to treat their couriers as staff.

Alex Marshall, president of the IWGB, said: “The judgment recognises that riders would benefit from organising collectively to represent their interests and admits the conclusion reached in the judgment might seem counter intuitive. We will now consider our legal position.”

A Deliveroo spokesman said: “Deliveroo’s model offers the genuine flexibility that is only compatible with self-employment, providing riders with the work they tell us they value. Those campaigning to remove riders’ flexibility do not speak for the vast majority of riders.”