Addressing regulatory gaps in the booming platform economy : A look at the social and economic implications of the EU proposal on platform workers
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Addressing regulatory gaps in the booming platform economy :
A look at the social and economic implications of the EU proposal on platform workers
It is undeniable that the global health crisis has placed an even greater emphasis on the booming platform economy due to the increased reliance on platform workers in a plethora of activities such as transportation or home deliveries. While platform work might drive innovation and increase labour market access in the years to come, platform companies have also pioneered a new model of organising and managing work which challenges existing labour and social law framework.
On 9 December 2021, the European Commission unveiled its new proposal on better protecting platform workers. The proposed directive is expected to set a precedent across Europe following a spate of national courts’ rulings that have added to the confusion over the employment status of people working through digital platform as evidenced by the recent ruling of the Labour Court of Brussels.
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It is undeniable that the global health crisis has placed an even greater emphasis on the booming platform economy due to the increased reliance on platform workers in a plethora of activities such as transportation or home deliveries. While platform work might drive innovation and increase labour market access in the years to come, platform companies have also pioneered a new model of organising and managing work which challenges existing labour and social law framework.
On 9 December 2021, the European Commission unveiled its new proposal on better protecting platform workers. The proposed directive is expected to set a precedent across Europe following a spate of national courts’ rulings that have added to the confusion over the employment status of people working through digital platform as evidenced by the recent ruling of the Labour Court of Brussels.
Ensuring a level playing field in the platform economy
Platform work features a triangular relationship between the platform, platform workers, often called independent contractors, and clients through online intermediation. This umbrella term covers heterogeneous forms of economic activities determined by location (online or on-location work), complexity of the tasks (high or low-skill requirements) and flexibilities in the allocation of work.
It is estimated that 24 million individuals have provided services via digital platforms at least once in the EU-27, or 11% of the EU’s workforce. Although a vast majority of them are self-employed, up to 4.1 million of this group are considered to be at risk of misclassification, which means they are factually employed but for regulatory reasons have a self-employed status. False or ‘bogus’ self-employment is particularly frequent among low-skill on-location platform work such as app-based ride-haling and food delivery apps. This misclassification precludes their access to all collective rights under national law such as pay levels, access to social security schemes (parental leave, paid annual leave, or rights on working time), health-and-safety practices, collective-bargaining rights, and non-discrimination laws. Therefore, misclassification is the most crucial regulatory gap to be tackled by the Commission’s proposal. Additionally, the proposal aims at providing more transparency and shared responsibility towards algorithmic management, a relatively new unregulated phenomenon highly specific to platform work.
So far, Members States have tackled the regulatory “grey areas” of platform work in diverse ways. Some Member States have introduced a third category falling between employees and self-employed to provide employee-like self-employed with more rights, while dozens of national court rulings went in different directions, from reclassifying to confirming self-employed status. This fragmented regulatory framework prompted the EU to act in order to avoid a case-by-case national approach on access to rights for employment status as developed by national courts.
Bringing clarity to the status of platform workers
In its proposal, the Commission sets a combination of measures to ensure platform workers can obtain the correct legal employment status in light of their relationship with the platform and, ultimately, gain access to the corresponding labour and social protection rights. Article 4 of the Commission’s proposal establishes a presumption of an employment relationship where the digital platform company controls the performance of work. To determine whether a platform company is actually controlling the performance of its workers, the employment relationship must meet at least two of the five criteria listed in the proposal, such as remuneration setting, algorithmic management, or limiting the freedom of tasks performed by the platform worker. It can be expected that most digital platforms based on low-skill on-location work (e.g., food delivery, home care or ride-hailing apps) will be impacted by a presumption of employment.
While this presumption can be rebutted, it will fall on the responsibility of the digital platform. This would certainly bring more legal certainty by moving the burden of proving misclassification from the ‘independent contractor’ to the company. For trade unions, a massive reclassification of the false self-employed would end the discussion on whether platform workers are prohibited from collective bargaining as self-employed who set price collectively might infringe on EU competition law. Meanwhile, the Commission is currently examining changes to EU antitrust policy to allow some self-employed individuals to bargain collectively.
Negotiating the algorithm
By definition, digital platform work is driven by the use of software algorithms which replace organisational functions usually carried out by human managers. Commonly known as ‘algorithmic management’, it has enabled digital platform companies to deploy an overarching surveillance of productivity or behaviour of their workers. Studies have shown that automated decision-making may accelerate precarious employment relationships and working conditions due to the opacity on how the assignments are allocated, how prices are set, how workers’ digital accounts are ranked, suspended, or terminated.
To improve human oversight, the second part of the proposed directive contains important decisions on algorithmic control addressed to both employees and the genuinely self-employed. The proposal recognises algorithmic management as a risk for workers’ rights. Moreover, digital platforms will be required to provide information to their workers on how automated decision-making impacts working conditions, hiring and layoffs decisions, or the elaboration of workers’ profile. While the proposal gives workers the right to obtain an explanation for a decision taken by automated systems and ensure workers’ consultation if the algorithmic decision-making system is modified, a ‘human-in-control’ approach can only be ensured through a more active participation of platform workers in the governance of the technology. Therefore, establishing communication channels among platform workers and improving their collective voice through representation is paramount.
Reducing precarious work or killing a business model? Lessons learned from the Spanish riders’ law
On 12 August 2021, the Spanish riders’ law, which recognises food delivery riders as employees, entered into force. Drawing on lessons learned from the regulation of this specific market, four different corporate practices are likely to be adopted by digital platform companies operating in the EU-27 if the directive is introduced.
First, some digital platforms will employ the people working for them. Consequently, labour rights such as minimum wage, sick leave or working time arrangements would apply. In the meantime, abandoning a flexible work model would have a negative impact for many platform workers, especially those exercising platform work as a secondary or sporadic activity who might lose their additional revenues. While the Commission foresees that most of the costs of these measures will be at the charge of digital platforms, such as increased wages and non-wage costs, the financial burden might be passed on to the final consumers by an increase of prices and, eventually, revenue loss for sectors relying on platforms in their daily operations like restaurants.
Second, some companies will ensure platform workers with genuine self-employment status. Nevertheless, platforms have used complex networks of outsourcing its workers to third party employment agencies to comply with court rulings, as it is the case for Uber eats in Spain. The use of intermediaries is one of the shortcomings of the proposal. An EU directive that would address the issue of misclassification in all types of non-standard forms of work, from part-time to temporary agency work, would make it more difficult for platform companies to circumvent the law.
A third option could be that a number of platforms would operate a hybrid model with a core workforce of employees and independent contractors to cover peaks and surplus workloads. It would be the preferred option for platforms which cannot organise work under genuine conditions of self-employment and are pushed by binding legislations to switch to employment contracts. From a platform worker perspective, this would give them more freedom to choose a status according to their preferred balance between flexibility and social protection.
Ultimately, the entry into force of the directive could prompt some digital platform companies to leave a national market, focusing their activities on the most profitable or liberal labour markets. It was for instance the case for Deliveroo, a British online food delivery company, which blamed the disproportionate investments needed to adapt their business to the riders’ law for pulling out of the Spanish market. However, the British company was already facing tough market penetration in Spain and withdrew from Germany for similar reasons in 2019. New regulatory measures are likely to push out of the market companies whose commercial viability was already difficult and for whom the price of legality is not profitable.
Upcoming negotiations
The bold position adopted by the Commission is unlikely to be effective before the end of 2024. The new rules will first have to be discussed by the European Parliament and the Council through the ordinary legislative procedure. Although we can anticipate a strong support from the Parliament and some Member States in the Council, the proposed directive will be fiercely opposed by platform companies, which can count on considerable resources to nip the EU’s proposal in the bud. Finally, the business model of the platform economy is evolving and adapting rapidly. Between now and the entry into force of the proposed directive, platforms have a lot of time to find innovative ways of circumventing the law.
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