Europe lays out a plan to flip the odds on gig economy exploitation

EU lawmakers have formally proposed legislation for the gig economy they hope will improve conditions for platform workers across the bloc — including by establishing a framework to tackle the problem of bogus self-employment.

The Commission’s overarching goal is to a create a level playing field between traditional businesses and gig platforms, as well as between different gig platforms (or “digital labor platforms” as its draft text calls them) — by enforcing minimum standards for platform workers in areas like pay, conditions and social protections.

EU lawmakers also want to improve visibility and “traceability” of platform work by bringing in obligations for platforms to declare work to authorities at a national level — to support enforcement of legal requirements across the bloc, and ensure social security contributions are being paid where the work is actually taking place.

They are taking steps to drive algorithmic accountability and fairness on the sector too — with a package of transparency measures.

Commenting in a statement, EVP Margrethe Vestager, said: With more and more jobs created by digital labour platforms, we need to ensure decent working conditions for all those deriving their income from such work. Our proposal for a Directive will help false self-employed working for platforms to correctly determine their employment status and enjoy all the social rights that come with that. Genuine self-employed on platforms will be protected through enhanced legal certainty on their status and there will be new safeguards against the pitfalls of algorithmic management. This is an important step towards a more social digital economy.”

The directive will need the backing of the European Parliament and Member States’ governments, via the European Council, before it can become EU law. But at a press conference today the Commission noted widespread support from MEPs for  legislation to protect gig workers.

It also pointed out that a number of Member States have been pressing for it to act. While the text of the draft highlights one incentive for governments to get on board, predicting: “Member States will enjoy increased revenues in the form of additional tax and social protection contributions.”

Once adopted, the Commission is allowing two years for Member States to transport the rules into national law — meaning application and enforcement won’t happen before 2024 at the earliest.

While, by 2025, the Commission expects some 43M people in the EU to be working through digital labor platforms — up from around 28M now. And accelerating growth of the gig economy is a key reason why it’s decided to act.

Presumption of employment

Most notably, the proposed directive (PDF) sets out a presumption of employment for workers on digital labor platforms — based on a set of defined criteria related to the facts of how work is controlled by a platform, rather than whatever relationship contracts might try to claim.

(And, as it happens, we’ve just seen another litigation on gig platform contracts play out in the UK courts — where earlier this month Uber lost an attempt in the High Court to have a claimed bypass from contactual liability legalized, with industry-wide ramifications for London-licensed ride-hailing platforms in that (non-EU) market.)

An impact assessment in the EU proposal suggests the change could result in between 1.72M and 4.1M people providing services through platforms being reclassified as workers.

At a press conference announcing the reform this morning, Valdis Dombrovskis, the Commission EVP responsible for trade and social protections for workers, appeared to suggest an even larger number of platform workers may be reclassified as as result.

“Of 28 million platform workers [in Europe currently] there may be up to 5.5M whose contractors describes them as self employed but in reality they are regularly checked and supervised — this effectively makes them employed workers,” he said. “They should have the labor and social rights that correspond to this status, such as working time and health protection, minimum wage, unemployment, sickness and old age benefits.”

“Our proposal address the mis-qualification of these vulnerable workers and introduces the principle of rebuttable presumption [of employment] based on a range of control criteria,” Dombrovskis added.

On-demand platforms such as those offering ride-hailing and food delivery have faced numerous legal challenges over how their classification of workers’ employment status in Europe in recent years.

Concern over the issue has also led some Member States to consider or pass national legislation — such as Spain’s ‘riders law’ which was passed earlier this year and recognizes delivery platform workers as employees. Portugal has also said it’s looking at similar legislation.

The passing of national laws is a typical trigger for the EU’s executive to come forward with pan-EU rules to try to avoid fragmentation of the bloc’s single market.

Although, in this case, the EU’s legislative push is more about ensuring platforms abide by minimum standards across the region to prevent a race to the bottom on labor standards.

Commission president, Ursula von der Leyen, signalled an intention to dial up scrutiny of the gig economy as she took office at the end of 2019, saying she would look at ways of improving the labour conditions of platform workers, initially suggesting the approach would focus on skills and education.

However the coronavirus pandemic sharpened the bloc’s concern over conditions for gig workers, as the lack of social protections for many platform workers were brought into stark relief — highlighting a slew of risks around delivery services that were suddenly being relied upon in the midst of lockdowns and mobility restrictions. So the Commission appears to have stepped up its action.

A consultation phase on the reform took place earlier this year but failed to lead to agreement between the two sides (platforms and unions) — hence the EU’s executive now stepping in with a legislative proposal.

The proposed framework for determining the presumption of employment has been tightly drawn by the Commission — covering factors such as whether a platform sets the level of pay for the work; puts conditions on conduct/performance; supervises the performance of work or verifies quality; puts restrictions on when/whether a worker can work; and restricts a worker from building a client base or working for third parties.

Here is the full list of proposed criteria:

  1. (a) effectively determining, or setting upper limits for the level of remuneration;
  2. (b)  requiring the person performing platform work to respect specific binding rules with regard to appearance, conduct towards the recipient of the service or performance of the work;
  3. (c)  supervising the performance of work or verifying the quality of the results of the work including by electronic means;
  4. (d)  effectively restricting the freedom, including through sanctions, to organise one’s work, in particular the discretion to choose one’s working hours or periods of absence, to accept or to refuse tasks or to use subcontractors or substitutes;
  5. (e)  effectively restricting the possibility to build a client base or to perform work for any third party.

Just two of the five criteria need to be met for the presumption of employment to kick in, per the proposal. And — at a glance — it looks like many ride-hailing platforms especially will see their workers fall under the presumption of employment.

Taking press questions, the Commission denied it’s trying to kill off the gig economy business model — arguing that platforms that do not want to have to reclassify scores of workers will be able to adapt their systems and tweak their models to reduce the level of control they apply so workers can be deemed genuinely self employed.

“Platforms may react to this by adjusting their relations with their contractors if they prefer to keep self employment status — but it means less systemic control over those independent contractors,” said Dombrovskis. “Or if they think that their specific circumstances merit it they may still challenge this presumption but at least it sets clear criteria which would be uniform criteria across the EU.”

As well as switching the burden of proof vis-a-vis employment status off workers and onto platforms, the proposal stipulates that any legal challenges platforms bring to try to rebut the presumption “shall not have suspensive effect on the application” — meaning that they must treat workers as employees during any period they are trying to overturn that status.

Algorithmic transparency

The draft directive also includes a very interesting package of measures focused on algorithmic transparency and fairness that goes further than current EU legislation (such as the GDPR) which provides citizens with some protections vis-a-vis automated decisions — putting ongoing obligations on platforms to provide workers with information about the algorithms that are used to control their labor.

This has also been an active area for litigation in Europe — where, for example, ride-hailing drivers and unions have been challenging Uber to provide detailed information on how its algorithms profile and performance-manages them; and over its use of algorithms in account terminations.

Ola has also faced similar legal challenges in the EU. While, in Italy, the data protection regulator has taken action under existing EU law: This summer it fined a food delivery platform owned by Glovo over a slew of breaches of EU privacy legislation, including around issues of algorithm management of couriers, such as via a rider rating system.

Spain’s rider law already includes a package of measures around algorithm transparency. And the strategic importance of claiming data rights for platform workers has led to the formation of new associations, such as Worker Information Exchange, which was founded by James Farrer — a former Uber driver who successfully challenged its employment classification under UK law — with the goal of cracking open algorithmic blackboxes to reset the power imbalance between platform giants and the labor providers whose activity not only enables the service to function but generates data that’s fed back and used to tightly manage and control them.

The Commission’s proposal would accelerate this cause by requiring gig platforms to provide workers and/or their representatives with information about all AI systems and algorithms used to monitor, supervise and evaluate them; and about any automated decision-making systems that could significantly affect their working conditions (such as by terminating their account or determining the distribution of jobs etc).

While the GDPR (Article 22) already includes a right to information in relation to automated decisions that have a legal or similar effect on individuals, this proposal goes further in the case of platform workers — as it covers decision-making systems used to “support” decisions, rather than being limited to solely automated decisions.

That looks important as platforms have sought to evade legal challenges to automated decisions under the GDPR by claiming AI systems used for processes such as fraud detection (which can lead to account terminations) do not take decisions alone — arguing there’s always a layer of human review. But the question then is what constitutes a meaningful human review of an AI decision (vs a person employed to rubberstamp algorithmic assessments)?

The EU’s gig reform proposal looks intended to circumvent that workaround by applying far broader transparency requirements to algorithmic control systems used by gig platforms — meaning they will be obliged to keep workers informed of the systems being applied to them on an ongoing basis.

Notably, the proposal also includes an explicit ban on platforms processing any personal data of workers that is not “intrinsically connected to and strictly necessary for the performance of the contract between the platform worker and the digital labour platform” — including an outright ban on processing data on “the emotional or psychological state of the platform worker”; and on data relating to the health of the platform worker (with some limited exceptions).

The Commission also specifies that platforms must not surveil the private conversations of platform workers, including exchanges with workers’ representatives.

Nor must they collect any personal data while the platform worker is not offering or performing platform work — implying they cannot repurpose their workforce as a freebie training pool for other AIs they might aspire to build.

No cap on standards

The draft directive will not prevent Member States from passing (or amending) national laws that seek to further raise standards for platform workers — so it’s definitely intended to set a floor not impose a ceiling on standards in the gig economy.

The Commission argues the proposed directive will introduce “very clear criteria” and “more legal security” to a heavily litigated business model, adding that it’s expecting the legislation to reduce the number of legal challenges brought over gig platform working conditions.

“We based — especially our criteria — on concrete experience,” said Dombrovskis, responding to a journalist’s question raising an immediate critique of the proposal by the BusinessEurope industry lobby group. “These are the criteria which came up in hundreds and more cases in different European jurisdictions.

“That responds also to the question on fragmentation. We have now a set of common rules, of common criteria. If a platform clearly abides by the rule applicable to self employed, well, there is no problem.”

The commissioner also denied the proposal will prevent platforms from providing more benefits to genuinely self employed workers if they wish — saying the reform makes it clear doing so would not risk those workers being reclassified as employees.

“I think we have brought more clarity and that we — I would not exclude that there will be some cases in the future — but we will limit the cases because we have this objective legal criteria,” he added.

Incoming EU rules for high risk applications of AI — proposed by the Commission earlier this year — are also set to apply to algorithmic systems used in employment, worker management and access to self-employment.

And the draft gig worker directive confirms that platforms which are providers of high risk AI systems will also need to “test and document their systems appropriately” under that additional incoming pan-EU law. So there will likely be additional layers of compliance for gig platforms under the AI Act.

Unsurprisingly, platforms have been lobbying hard against the proposed reform — led by some of the largest ride-hailing and food delivery platforms which are likely to face the most disruption to their businesses.

Uber, for example, has been accused of lobbying the EU to lower employment protections — after it published a white paper earlier this year calling for a “new standard” for platform work which critics decried as an attempt to push for a ‘Prop-22′-style outcome to carve out gig work from European employment rights.

Spain’s on-demand delivery platform Glovo also pre-empted the Commission’s proposal by announcing what it couched as a “Couriers Pledge back in October — committing its business to “fairer” standards for gig workers and tacitly accepting there are problems with conditions currently offered.

That may have been a last ditch attempt to try to water down the Commission proposal. Or recognition that the loophole which gig economy platforms have exploited — and which Dombrovskis referred to as “a sort of gap or lack of precision in our laws” vis-a-vis social protection and self employment — is now inexorably closing.

During today’s presser, the commissioner suggested that at least one large platform had written to him saying it could support the employment presumption reform. He also pointed out that a number of platforms already employ workers or operate a hybrid model with some employees and some contractors.

“Far from [planning to kill the gig economy model] I’ve said that there are large platforms already operating today employing people, employing workers, they’re working quite well,” he suggested. 

“Of course we recognize the role of the platform economy which can bring to the economy — both in terms of innovation, new business models, new and better services to customers. We recognize the important role the platform economy has for employment — already 28M people working in the platform economy. At the same time we want to ensure the protection of European social model also applies to those who are working in the platform economy.”

“There should not be a difference if a person works in a classical economy or a platform economy that there is a possibility to contribute to and access social protection systems,” he added.

Asked about the risks of platforms circumventing the rules via subcontracting, Dombrovskis pointed out there is already an EU directive setting standards for temporary/agency work — and arguing that if platforms seek to evade the requirements via agencies it will still lead to better conditions for workers owing to existing regulations that apply to those types of businesses.

Support and opposition

Asked specifically whether Uber was one of the platforms that had expressed support for the directive, Dombrovskis declined a clear answer, saying: “I had a lot of discussions also with Uber — I do not remember that Uber expressed a direct support.”

But in a public response today the ride-hailing giant answered the question itself — raising concerns that the proposal will put “thousands of jobs at risk, crippling small businesses in the wake of the pandemic and damaging vital services that consumers across Europe rely on”.

Uber is committed to improving the working conditions for the hundreds of thousands of drivers and couriers who rely on our app for flexible work. We have worked with national governments across Europe and the rest of our industry on ways to strengthen platform work without risking the flexibility independent workers say they want,” its statement added, arguing for an approach that’s being taken in France.

“As countries including France have demonstrated, there is a better way and 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,” Uber added.

Speaking ahead of the Commission’s presentation of the proposal today, as a leaked draft was circulating, European ride-hailing startup Bolt also told us it does not support the plan to apply a presumption of employment — similarly claiming this component will lead to thousands of “job losses”.

Albeit, pressed on its paradoxical choice of terminology, Bolt’s head of public policy for Western Europe & EU, Aurélien Pozzana, conceded it was referring to “earnings opportunities” rather than jobs in the traditional understanding of the word.

“Tomorrow if we had this — basically — full time employment framework we’re going to need much less drivers than today,” Pozzana predicted, arguing that more than half of the ride-hailing drivers in Europe would “not be needed anymore” — aka “close to 140,000 people”.

“Those who would still keep their job they actually would lose revenue,” he also claimed. “If you are employed tomorrow as a driver by a platform that’s going to be close to minimum wage. Whereas today… [drivers] are maximising revenues by working on multiple platforms.

“So, in the end, everybody’s losing — it’s not productive. It goes against the will of the very people who are the most impacted by hitting drivers. It’s going to be harmful for platforms and especially European ones such as Bolt trying to compete with the biggest giants… And it’s going to be negative for the European citizens who are the passengers or the clients who get deliveries.” 

Asked how much more tax Bolt’s business would have to pay if the reform went ahead — meaning it was required to switch to employing drivers — Pozzana said he did not have a figure to hand for that.

“The core concern as we speak and the focus is on the fact that generally speaking this is going to destabilize the whole industry, it will harm the drivers, it will harm the service, it will harms the clients and it goes against the will of the silent majority of the drivers,” he instead said.

“We strongly support what the Commission’s goal was which was to improve platform workers’ working conditions,” Pozzana added. “We’ve made some proposals to the Commission — more social protection and so on, better revenues — we’re very open to discuss this… We think already ride-hailing provides decent revenues to drivers throughout Europe but of course things can always be improved and there are cases where you need definitely to find solutions to issues which apply but this is not what this proposal is doing. It’s only focusing on the status of employment.”

TechCrunch also sought Fairwork‘s reaction to the Commission proposal.

The Oxford Research Institute project benchmarks gig platforms against a set of fairness principles to encourage them to improve conditions for workers. Fairwork’s Mark Graham and Alessio Bertolini told us the proposal for a presumption of an employment relationship will make it easier for platform workers to be reclassified as employees and therefore easier for them to enjoy the same rights as other (dependent) workers — “creating a long overdue level playing field in the platform economy”.

But they warned the proposal is unlikely to go far enough in ensuring that platform workers receive “adequate rights and protections.

“As many court cases in Europe and beyond have shown, platform companies have been able to amend their contracts and slightly change their working models in response to court trials in order to circumvent current regulations and avoid their workers being reclassified as employees. It is very likely that this practice will continue in the future, leaving it again to workers to play a cat and mouse game for their rights in national courts,” they predicted.

They also highlighted growing use by platforms of “often complex networks of subcontracting in order to avoid employer’s responsibilities, as is also the case in many other precarious and low-paid jobs across Europe and beyond”.

“Even platforms which classify their workers as employees, can make use of intermediaries, including large multinational employment agencies, which dilute their direct obligations as employers and make it more difficult for workers to claim their rights. The EU proposal does not contain any relevant clause in relation to subcontracting, de facto not offering platform workers any protection against those practices, which are likely to become increasingly more common as more and more platforms move away from the independent contractor model.”

Another shortfall Fairwork’s researchers highlighted is around the lack of improvements in the rights and protections for workers who will continue to be classified as self-employed (regardless of whether genuinely or not), noting: “As Fairwork, we want to make sure that all workers, regardless of employment classification, enjoy some basic labour standards, in line with the ILO Decent Work Agenda.

“As it stands, all platform workers which will continue to be classified as self-employed including, most likely, most platform workers in the domestic and care sector as well as cloud workers, will continue to be denied basic rights, including the right to a minimum wage, health and safety protection, transparency, due process and collective representation. More needs to be done to ensure that even those workers, who are among the most vulnerable among platform workers, are adequately covered by rights and protections and enjoy decent labour standards.”

They welcomed the inclusion of an article in the proposal clarifying that platforms using self-employed workers will not be at risk of employment reclassification if they offer training, health and safety and social protection to their workers — “thus overcoming an important existing regulatory barrier for platforms in introducing measures to improve protections” — however here again they warned the draft legislation leaves measures “to the good will of platforms”, rather than seeking to enforce a standard. 

“The on-demand model can be fair only as long as minimum labour standards are guaranteed for all workers,” they also told us. “The on-demand model should be re-conceived and re-organised in a way that guarantees workers the basic rights and protections they should be already entitled to. This is what courts across the world have already tried to address and what some platforms are already providing in a number of countries.”

Fairwork have also published a blog post with a fuller response here.

On those gig industry claims…

We also asked Fairwork to respond to some of the ride-hailing industry’s main lobbying arguments against the reform — such as the claims that it will lead to widespread “job” losses and reduced earnings for drivers, as well as their framing that employment automatically means reduced flexibility.

On earnings Fairwork queried a claim by Bolt that driver “revenues” are consistently higher than the local minimum wage.

“Our ratings of ride-hailing platforms across the world show that most of them are currently unable to provide adequate evidence its workers are paid above the minimum wage, once taken into account of work-related costs, in their active hours (which should also include waiting time, according to our definition and that of many courts across the world, including the recent UK Supreme Court case against Uber),” they told us. “For details see our ratings.”

Fairwork also pointed out that platforms frequently choose to talk about “average earnings” — which excludes those who fall below the minimum wage from the discussion, emphasizing: “The point of a minimum wage… is to ensure a wage floor: To ensure that nobody can earn below the legal minimum. Even if only 5% of workers are earning below the minimum wage, it is still an exploitative system. All workers deserve decent wages.”

On the ride-hailing industry predictions of mass “job” losses following employment reclassification, Fairwork pointed out the same sorts of claims surfaced before the UK introduced its minimum wage — and resurface every time there’s debate about raising it — adding: “None of these things, of course, transpired. Research in labour market policy across the world consistently shows that the introduction of minimum pay thresholds when previously there was none, do not only help raise the pay of those previously paid below the minimum, but also of those paying closer but above that minimum, contrary to what Bolt [and Uber] is claiming.”

While, on the industry’s framing of flexibility vs employment, Fairwork said its research shows that it’s possible for platforms to reconcile flexibility with fair working conditions — although it noted that only a minority have been doing so, so far.

We don’t see any inherent contradiction between a model which guarantees flexibility and fairness at the same time,” it said. “Platforms have often claimed to refrain from providing workers with more rights and protections for fear 1) of being seen as employers, and therefore being more at risk of seeing their workers being reclassified 2) being at disadvantage compared to other platforms, and have instead engaged in a ‘race to the bottom’ in labour standards.

“Now that the proposal at least partly addresses these two concerns, removing the issue of reclassification and creating a level playing field which all platforms should abide to, this should also reduce the barriers for platforms in providing ‘fairer’ working conditions.”

Fairwork also agreed that platforms’ claims of flexibility need far closer scrutiny — given how tightly they manage and control workers through the application of algorithms.

Our research and that of many other scholars has shown that flexibility is often fictitious for many workers, especially those relying on platform work for a living. Though workers can appreciate the freedom to decide to work when they want (which is something they should be able to continue to do in the future), many of these workers feel often obliged to work long hours or accept any job in order not to earn a living or for fear of seeing their ratings reduced, and with it, future job opportunities. More importantly, we want to reiterate that there should not be, at least in principle, any reason why workers can work flexibly, but being guaranteed at least some security.”