EU Goes After Gig Economy, Pushes Legislation to Ensure Classification of Gig Workers As Employees

The tide is increasingly changing for Uber, Deliveroo and other companies operating the gig business model in Europe. In a new move, the European Union is building on court rulings in Europe to mandate gig economy players to give workers employee treatment.

This means, Uber and Deliveroo are expected to ensure that workers get the minimum wage, access to sick pay and holidays. The EU is working on a new law that will tackle what has been described as ‘fake self-employment’ that has become a lingering problem between gig companies, their workers and the authorities.

To permanently put to rest the controversy, the European Union on Thursday, published a draft legislation. It is meant to give workers’ rights and benefits to ride-hailing and delivery drivers, who have been asking courts to compel gig companies to recognize them as employees.

In the U.S., the state of California had in January last year, enacted the AB5 law. Designed to compel Uber, Lyft and other companies in the state, to declassify their drivers as independent contractors. Though President Joe Biden has hinted on a possible U.S. government’s action against the gig business model, Congress has not considered legislation that will change the status quo.

Like in antitrust cases, where the European Union leads in holding the Big Tech accountable, the bloc is stepping forward against the gig economy.

Nicolas Schmit, EU commissioner for jobs and social rights, told the Guardian and other European newspapers that internet platforms “have used grey zones in our legislation [and] all possible ambiguities” to develop their business models, resulting in a “misclassification” of millions of workers.

The Guardian reports on the draft-legislation.

Companies that did not allow people to work for other firms, or had rules about appearance and how to carry out tasks, could be classed as employers, under the proposals, under criteria used to determine employment status. The new rules would not apply to genuinely independent contractors.

In the EU’s 27 member states, about 5.5 million workers are misclassified as self-employed, when they should be treated as employees with benefits and protection, such as accident insurance, according to the commission. Firms would only have to pay minimum wages, where they already exist. About 28 million people work for platforms in the EU, but this is expected to reach 43 million by 2025.

The proposals are an attempt to provide legal certainty, after European courts have been asked to settle about 100 disputes relating to gig economy companies. France, Italy, Spain, Greece and Portugal tightened up domestic laws, but EU officials believe no government has fully addressed the problem.

Since Brexit, the UK government has no obligation to follow EU laws, while judges have been left to clarify employment law for a new generation of internet companies. In 2016 an employment court found that Uber drivers are not self-employed and should be paid the minimum wage, a verdict upheld by the Supreme Court in February.

Tim Sharp, senior employment rights policy officer at the Trades Union Congress, said there had not been any “significant government intervention in the UK” to address what unions see as abusive and problematic aspects of platform working.

“If the European Union is seen to be taking a robust approach on platform operators, I think there will be more pressure on the government here to take measures to protect vulnerable workers,” he said.

The EU proposals will be amended by national ministers and MEPs before they become law.

Schmit, a former labour minister in his native Luxembourg, said some services might cost “a bit more”, but argued consumer convenience should not be at the expense of workers.

Services, such as food delivery, were not free, he said. “I cannot consider if somebody brings the pizza at 11 o’clock in the evening to my home … that I have not to pay for that. This is a service. And if it’s a service, the guy who performs the service also has rights.”

Under the directive, workers would also gain rights over algorithms, to stop situations where people are denied jobs, working hours or even fired as a result of machines’ decisions. Instead, workers would have the right to receive explanations for and contest automated decisions, while companies would have to ensure access to a human contact for anything that would have a significant impact on the person.

The European Trade Union Confederation’s Ludovic Voet said the directive should “signal the end of the free for all” for companies such as Uber, Deliveroo and others. “For too long platform companies have made huge profits by dodging their most basic obligations as employers at the expense of workers while peddling the lie that they provided choice to workers,” he said.

Companies in the gig economy have taken different approaches. Just Eat Takeaway, a Dutch company that is one of the world’s biggest food delivery firms, announced last year that gig workers would become employees with benefits.

MoveEU, a body representing ride-hailing apps, such as Uber, has argued EU action could cost jobs. “Platform work is very diverse, and a one-size-fits-all approach could carry weight on the business model of platforms and ultimately negatively affect the many independent workers relying on them,” it said in a recent paper.

George Maier, a specialist on digital technology at the London School of Economics, said companies would have to adapt to stay in markets. “For a lot of these platforms, because they are realizing their model is not profitable, there is a big question over what change they can do and what change they can’t do.”

“We have seen some evidence of platforms trying to get around the tightening grip of legislation by changing their business model. The alternative is to pull out of a country where they don’t see a profitable future.”

If the legislation becomes law, it will likely set a precedent that may compel countries outside Europe, especially the U.S., to take a legislative approach in addressing the matter.