The platform economy is growing rapidly: According to the EU Commission, more than 28 million people in the EU already work for Internet platforms which broker orders via apps. According to estimates this will grow to 43 million by 2025. Alongside drivers for new mobility providers such as Uber, or bike couriers for food delivery services such as Delivery Hero, this also includes copywriters, designers or translators. The problem: The Commission estimates that 5.5 million workers are incorrectly classified as freelancers. Approximately 55 percent of platform workers earn less than the minimum wage in their respective countries. According to the commission, this is due to the fact that crowdworkers spend 8.9 hours per week on average on unpaid activities, such as looking for work or waiting for their next job. In comparison, 12.6 hours of their work is paid.
The gig economy bears the burden of proof
In view of this, Margarethe Vestager, Executive Vice President of the EU Commission, has introduced a proposal which aims to stop pseudo self-employment by reversing the burden of proof. In the future, the authorities of the member states will be able to utilize fixed criteria to determine whether employees work for a platform as freelancers, or whether they are entitled to regular employee rights such as paid leave, regulated working hours and continued payment in the event of illness. If two of the following five criteria are fulfilled, the platform will be regarded as an employer under the proposed directive, and must employ the freelancer accordingly:
- The platform determines the amount or upper limit of the remuneration,
- monitors the performance of work electronically,
- specifies the work clothing and conduct towards customers.
- The platform employee only has limited freedom to determine their own working hours and absences.
- They cannot freely decide whether to accept or reject the jobs or whether to pass these jobs on to their own workers.
The platforms have the right to object to or refute this classification. To do so, they have to prove that an employment relationship does not exist. Up until now, employees have been forced to take legal action against the platform in order to be classified as employees.
Humans must monitor algorithms
The Commission also intends to improve the transparency of the algorithms used. In doing so, they aim to achieve better monitoring of how jobs are awarded and the pricing. Platform workers will be able to know how their work is tracked and analyzed. Ultimately, the goal is to ensure that humans monitor automated decisions.
Protest from trade associations and platform providers
According to Business Europe, a European business association whose members include the Confederation of German Employers’ Associations (BDA) and the Federation of German Industries (BDI), the proposal fails to address the true situation, given that many platform workers actually want to work as freelancers. The Director General, Markus Beyrer, stated in a Press release: “The proposed presumption of employment is likely to have a chilling effect on the opportunities for individuals to conduct business as self-employed persons, and have a negative impact on provision of services in the internal market.”
Platform workers value flexibility
According to a study published by Copenhagen Economics in November last year, the delivery services sector in Europe alone had a value of 20 billion euros in 2020, and included approximately 375,000 active couriers per week. The study stated that as many as 250,000 of these couriers would stop working if laws limited their flexibility, in particular with regard to their working hours and schedules. This is due to the fact that this employment serves as an additional source of income for 72 percent of those surveyed. Two-thirds of the workers regard flexibility as a key reason for working in the industry. The survey was commissioned by Delivery Platforms Europe, an association of platforms such as Bolt, Deliveroo, Delivery Hero, Uber, and Wolt. The association argues that regulation should not contradict the core principles of the gig economy. In November last year, the delivery service Deliveroo ceased its operations in Spain as a consequence of a new law which stipulated that more couriers were entitled to permanent employment.
Conversely, trade unions such as the DGB regard the EU’s plans as an important milestone towards protecting the rights of allegedly solo freelancers and towards improving working conditions. As we reported in Part 1 of our series on crowdworking, the Federal Labor Court has already reached important landmark rulings regarding employee status and necessary work equipment in favor of crowdworkers.
Creating greater flexibility for the new and old economy
The new German government intends to discuss work by mouse click with all stakeholders, and “constructively support” the EU Commission’s initiative to improve working conditions via platforms. Examining the situation in other countries could well prove worthwhile: The Center for European Policy Analysis (Cepa), a nonpartisan U.S. think tank, describes Estonia as a positive example of constructive regulation which takes into account the different stakeholders’ perspectives. Estonia was the first European country to regulate and legalize carpooling and ride-sharing. The new mobility services were given the same legal foundation as classic taxi services. Both sides benefit, for example with regard to the required approvals or quality requirements. The results have been positive – for businesses, the government and consumers alike. Tax revenues have increased as a result while waiting times have decreased and the Estonian ride-hailing platform Bolt has become a European unicorn that now operates worldwide.
The platforms’ offers and crowdworkers’ jobs vary widely and span the range from food delivery and driving services to copywriting and data research to IT services. Consequently, it is questionable whether the EU Commission’s proposal allows adequate flexibility for innovative digital business models. The risk of court cases before the national labor courts is looming. This time by the platform providers themselves, who are taking legal action against the classification of their workers as employees. Furthermore, the Commission itself also admits that the gig economy provides opportunities for young and poorly educated workers to earn a living and gain a foothold in the labor market. The objective of the new German government should be to allow greater flexibility for both the new and old economies. Until then, the risk of pseudo self-employment remains a key risk factor that every HR compliance management system needs to monitor.