LONDON – A new European Union plan to improve conditions for the growing number of gig economy workers could mean millions more of them are classified as employees entitled to benefits, the latest setback for digital platforms that rely on independent contractors to deliver food and offer rides.
The draft rules outlined Thursday aim to clarify the labor status of people employed by app-based companies like ride-hailing service Uber and food delivery business Deliveroo and would add oversight for the algorithms they use to manage workers.
Gig economy workers and platforms have fallen between the cracks of existing employment legislation, and the measures being considered by the 27-nation bloc, which would take years to come into force, are aimed at clearing up those gray areas.
App-based gig work platforms have boomed in the digital economy, especially during the COVID-19 pandemic when demand for food delivery services mushroomed. While the apps provide short-term work for millions of people, their rampant growth has upended traditional labor and business models, resulting in showdowns between companies and regulators worldwide. Gig work's flexibility is a selling point for many, but workers also complain that they end up making less than minimum wage after expenses or waiting time are accounted for.
Under the EU rules, which still need approval by the European Parliament, a platform that meets at least two criteria will be deemed an “employer" and people working for that company will be reclassified as “workers" with the right to a minimum wage, paid vacation, pensions and unemployment and sickness benefits.
The criteria include whether an app decides pay levels; electronically supervises work performance; restricts a worker's freedom to choose work hours, accept jobs or use subcontractors; dictates a worker's appearance and conduct with customers; or limits the possibility for workers to build their own client bases or work for anyone else.
Uber says it's committed to improving work conditions but worries about the EU proposal “putting thousands of jobs at risk, crippling small businesses in the wake of the pandemic and damaging vital services that consumers across Europe rely on."
“Any EU-wide rules should allow drivers and couriers to retain the flexibility we know they value most, while allowing platforms to introduce more protections and benefits,” a statement from the ride-hailing service said.
Amsterdam-based Just Eat Takeaway, which operates in 25 countries and owns brands including GrubHub, said it “welcomes and fully supports” the proposals and hopes they will provide companies across Europe with “clarity and a level playing field.” Unlike other food delivery platforms, the company's riders are employed as staff, which it says “proves that providing flexibility doesn’t have to come at the expense of workers’ rights.”
The European Commission, the EU's executive branch, estimates some 28 million people on the continent are self-employed on digital platforms, rising to 43 million by 2025, but predicts as many as 4.1 million could be reclassified as employees under the rules. The EU has taken a leading global role in cracking down on tech companies to ensure everything from workers' rights to online safety.
Platforms can challenge the classification, but the burden will be on them to prove they are not employers, the commission said.
“No one is trying to kill, to stop or to hamper this growth of the platform economy,” EU Jobs and Social Rights Commissioner Nicolas Schmit said at a press briefing in Brussels. But “it comes down to ensuring that these jobs are quality jobs. ... We don't want this new economy just giving low quality or precarious jobs.”
The proposed EU rules are another blow for gig economy companies in Europe. New laws or recent court rulings in Spain, the Netherlands and Britain require food delivery riders and ride-service drivers to be given employee status rather than classified as self-employed freelancers.
There have been more than 100 court decisions across Europe on the issue, with most judges ruling that independent contractors are employees — something the commission took into account as it drafted its directive.
In contrast, Uber and other app-based services avoided an attempt in California to classify workers as employees, though the battle continues in the courts.
The European Commission also wants to force gig work platforms to be more transparent about the algorithms used to manage workers so they can better understand how jobs are assigned and pay is set. People should oversee the algorithms and workers should be able to appeal any automated decisions, it said.
In Spain, gig worker Sebastián Honorato, who makes deliveries by motorbike, said a new national law introduced this year hasn't resulted in the benefits the government promised. He said it's unfair because it only regulates food delivery riders, while others like Amazon package delivery drivers aren't covered.
And instead of hiring gig workers directly, foreign tech platforms in Spain resorted to temporary staffing agencies. Honorata, a spokesman for the Association of Freelance Riders, said he used to bring in over 1,600 euros ($1,800) a month after paying his social security costs but now makes 900 euros in a good month.
Honorata, who lives in the southern Spanish city of Granada, said delivery workers should be regulated the same way across Europe but worried Brussels' approach could produce results similar to Spain's model.
“What we wanted was not to be an employee, nor completely freelancers. We wanted an intermediate model, like they have in California," Honorata said. Before the Spanish law, gig work “was an economically viable model, even if it it had a murky legal status. We wanted to give it a legal framework, but not lose any of its viability. Now, it is a disaster.”
Associated Press writer Joseph Wilson in Barcelona contributed to this report. Follow Kelvin Chan on Twitter.
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