Gig economy workers to be considered employees under new EU legislation proposals

By Aban Ador, submitted on 14 February 2022

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I. Introduction

The European Commission in December 2021 announced a set of proposals with the aim of improving the working conditions of people working through digital labour platforms such as Uber and Thuisbezorgd[1]. These working people fall under the category of gig economy workers, a free market system in which jobs are available on a temporary basis (gigs). Consequently, the workers do not meet the threshold to qualify as employees in their respective workplaces but rather are considered self-employed contractors. In turn, workers are left legally unprotected and are barred access to basic employment rights such as medical leave, holiday pay, and pension schemes, among others.

II. About the Gig Economy

In the EU, about 28 million people work through digital labour platforms, and that number is predicted to increase to a whopping 43 million by 2025[2]. This sector of employment is rapidly expanding due to the increased dependence on technology[3] by workers that allow for flexibility of task performance, thus making the gig economy a far more desirable venture than traditional employment opportunities.

A new trend suggests that more people are taking positions in gig economy companies[4] because of the autonomy it affords workers in terms of flexibility[5], especially when it comes to workflow, compensation, growth, and control of one's own time. In the UK, 14% of millennials choose to work in the gig economy instead of pursuing full-time employment, and a further 14% work both full-time and in the gig economy to supplement personal development and income[6]. Comparatively in the Netherlands, only 0.4% of the working population classify as gig economy workers, with one-third of overall gig workers working in food delivery[7].

The gig economy seems to largely benefit and promote convenience for workers as referenced above, so why did the EU introduce laws to regulate the practice between gig economy companies and gig economy workers? An Economist by the name of Ronald Coase (1937) accurately predicted the gig economy in his Transaction Cost theory, stating that firms (corporations) are only willing to hire employees [and thus are obligated to provide employment benefits] when the cost of finding, supervising, and paying outside [freelancers] is higher than for in-house employees[8].

Due to the status of gig workers being based out-of-house, firms do not award said workers employment rights because of the temporary nature of the work that they are doing, no matter how long one works at a given company. This can lead to the disempowerment of workers who suddenly find themselves unable to access essential workplace labour rights such as fair pay, participating in pension schemes, health insurance, and receiving holiday pay. Meanwhile, corporations exploit the loophole[9] of the employment status of gig workers (as self-employed contractors) and pocket the money that should have gone into guaranteeing those workplace labour rights for the gig workers[10].

III. Existing and new proposed EU legislation on gig workers

The European Commission introduced three measures to address the gap in legislation at the EU level relating to gig economy workers after various EU member states have had to settle more than a combined 100 disputes[11] at national courts. Duly, the EU has deemed it worthy to introduce legislation on this emerging employment trend to address its application.

The first measure of the package proposed by the European Commission is a Communication[12] laying out a collective EU approach to platform work and calling upon Member States to put forward adequate measures to improve the working conditions of platform work. This is merely a working paper of the European Commission that covers preparatory policy and legislation; therefore, it is not binding in nature. It provides the Member States with the opportunity to introduce protective measures. Social partners and other relevant actors may also partake in this early stage of drafting legislation.

The next measure taken by the Commission is a directive proposal that would not only improve working conditions for gig workers in platform work, but also determine the employment status of people who work through a digital platform (and attribute them with the status of legal employment), leading to the recognition of new rights for both workers and self-employed people. The proposed Directive[13] lists criteria to determine whether a gig economy company meets the threshold to qualify as an 'employer,' which would automatically render workers employees, granting them the labour and social rights that come with the status of being a worker. If the threshold is not met, the Directive provides that workers without legal employment status are still entitled to compensation equality (the right to minimum wage), collective bargaining, working time and health protection, the right to paid leave or improved access to protection against work accidents, sickness benefits, etc.[14]

Additionally, the Directive will require digital platforms to make themselves accessible for the sake of transparency and traceability.[15] If the Directive is adopted, it becomes binding on Member States in accordance with Article 288 of the Treaty on the Functioning of the European Union.[16]

The last measure proposed are draft Guidelines to clarify the application of EU competition law when it comes to self-employed people, in the purest sense of the word. The draft Guidelines aim to ensure that competition law does not hinder efforts by solo self-employed people in improving their working conditions, such as when requesting remuneration. This arms them with the bargaining power to stand on their own and become less vulnerable to exploitation.[17] Guidelines are not legally binding on Member States of the EU.

IV. Impact of implementation of proposed legislation

The EU’s new proposed legislation would drastically improve the conditions of workers in the gig economy, as well as introduce rights to self-employed workers who have for long undergone challenges in navigating employment without protections in place. The following jobs constitute digital platform gig economy jobs: a freelancer (any remote work such as writing), delivery drivers (Uber, Deliveroo), independent contractors (it can range from being a plumber to an IT consultant), agencies with specialised skilled people who are deployed to work temporarily at different companies and so much more.

The nature of these jobs could create undesirable situations that leaves gig workers vulnerable to mistreatment. In some cases, gig economy companies are deliberate in their predatory practices to lobby for excluding labour and social rights for workers in legislation, such as California's Proposition 22. Private transportation services such as Uber and Lyft, want workers' employment status to remain as independent contractors, because that is cheaper and benefits the profit margins of such companies. California's law has previously established that workers are considered employees[18] however, the app-based companies refused to implement those laws and proposed Prop 22, a ballot initiative that favoured their stance and won 58% of the vote.[19] This clear power imbalance between the gig economy companies and workers has led to disproportionate laws in place that protect the interests of corporations more than guaranteeing social and labour rights to workers, and by extension, infringing on their fundamental rights. That is why it is significant that the EU proposed legislation to protect low-paid workers and will enforce those laws on corporations to act accordingly.

In closing, the EU's proposal for legislation that categorises gig economy workers as employees and provides solo self-employed people rights of bargaining was introduced in three measures: a Communication, a proposed Directive, and draft Guidelines. These laws would guarantee the workers access to social and labour rights such as employment benefits in the form of medical leave, fair pay, holiday pay, pensions, etc. Since this sector of employment has emerged relatively recently, legislation regulating the conduct of gig economy companies and workers is scarce, which is why this is a ground-breaking initiative by the EU.

[1] Takeaway delivery platform based in the Netherlands (known regionally as “Just Eat Takeaway”).

[2] Jennifer Rankin, ‘Gig economy workers to get employee rights under EU proposals’ The Guardian `(Brussels 9 December 2021) Available at: <https://www.theguardian.com/business/2021/dec/09/gig-economy-workers-to-get-employee-rights-under-eu-proposals> accessed on 13 February 2022.

[3]BBC Newsnight, ‘How to fix the gig economy’ (23 October 2018) <https://www.youtube.com/watch?v=NNOHbWiege4 > accessed 13 February 2022.

[4]ibid.

[5] Brian Underwood, ‘Why more people are choosing the gig economy’ USA Today (Louisville, 1 September 2021) <https://eu.usatoday.com/story/sponsor-story/ascend-agency/2021/09/01/why-more-people-choosing-gig-economy/5650195001/> accessed 14 February 2022.

[6] BBC (n 3).

[7] Ministry of Social Affairs and Employment, The rise and growth of the gig economy in the Netherlands (SEO Report No 2018-37, SEO Amsterdam Economics 2018) pg. i. https://www.wur.nl/en/show/The-Platform-Economy-Promises-Practice-Bas-ter-Weel-30-March-2021.htm

[8] BBC (n 3).

[9] Alexia Fernandez Campbell, ‘The recession hasn’t ended for gig economy workers’ Vox (Washington DC, 28 May 2019) Available at: <https://www.vox.com/policy-and-politics/2019/5/28/18638480/gig-economy-workers-wellbeing-survey> Accessed 14 February 2022.

[10] Mike Bebernes, ‘The gig economy: Opportunity or exploitation?’ Yahoo!News (Sunnyvale, 25 August 2021) Available at: <https://news.yahoo.com/the-gig-economy-opportunity-or-exploitation-194706864.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAHH-zlYPP4AgW-K3PwFXks0WwiOhwf4YBUmQrRFinzXtQLANNBCEUC7ikqo3k92IWxW1pnYTR2hcLnbtYj-GGcSEVjKDLXeCQX7YM6GGlLtO6Q6jlywKWRQzrKBjVk4kJvCAxCc2EgmL_d-Yrxs-hCAT2D_DGG0IQZ53xj5iERXp> accessed on 14 February 2022.

[11] Rankin (n 2).

[12] Commission, ‘Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of Regions- better working conditions for a stronger social Europe: harnessing the full benefits of digitalisation for the future of work’ COM (2021) 761 final.

[13] Commission, ‘Proposal for a Directive of the European Parliament and the Council on improving working conditions in platform work’ COM (2021) 762 final.

[14] European Commission, ‘Commission proposals to improve the working conditions of people working through digital labour platforms’ (2021) <https://ec.europa.eu/commission/presscorner/detail/en/ip_21_6605> accessed 12 February 2022.

[15] ibid.

[16] Treaty on the Functioning of the European Union, art. 288.

[17] European Commission, ‘Commission proposals to improve the working conditions of people working through digital labour platforms’ (2021) <https://ec.europa.eu/commission/presscorner/detail/en/ip_21_6605> accessed 12 February 2022.

[18] ABC10, ‘California Prop 22 explained: App-based Contractors, including Uber, Lyft & Doordash’ `<https://www.youtube.com/watch?v=o4A4mcZg-rk> accessed 14 February 2022.

[19] Suhauna Hussain, ‘Prop. 22 was ruled unconstitutional. What will the final outcome be?’ Los Angeles Times (Los Angeles, 25 August 2021) Available at: < https://www.latimes.com/business/technology/story/2021-08-25/after-prop-22-ruling-whats-next-uber-lyft> accessed 14 February 2022.