The growth of tech companies, through which an ever growing number of platform workers provide services (commonly referred to as the 'gig economy'), has led to an increased focus on this business model. The model is frequently predicated on the individuals being engaged as 'self-employed' independent contractors. This has at least two consequences compared with employee status: significantly reduced work-related rights for the individual, and lower overall tax exposure to the State.
Challenges to the legality of this type of working relationship have been made in countries around the world on behalf of the individuals and the State, with varying degrees of success. The EU is now limbering up to step into this fraught arena to try to bring some harmonization of the position across Europe.
What does the Draft Directive do?
On 9 December 2021, the European Commission introduced a proposal for a Directive on improving working conditions in platform work (Draft Directive). The Draft Directive seeks to introduce harmonized measures to determine the employment status of individuals working through digital labor platforms and new rights for such workers. The intention, amongst other things, is to improve working conditions by ensuring that there is the 'correct' determination of their employment status.
The Court of Justice of the European Union has historically interpreted the EU concept of 'worker' very widely, and has always emphasized the need for legal 'subordination' or control and direction of the worker. The Draft Directive provides that when a digital labor platform 'controls' the work of the platform worker, there will be a presumption that an employment relationship exists - i.e. the onus will no longer be on, for example, the individual to prove that this is the case.
A platform will be presumed to be controlling the work when it meets two of the following (currently very broadly drafted) criteria:
'(a) effectively determining, or setting upper limits for the level of remuneration;
(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;
(c) supervising the performance of work or verifying the quality of the results of the work including by electronic means;
(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;
(e) effectively restricting the possibility to build a client base or to perform work for any third party.'
It is not yet clear how it is envisaged that either the platform or the individual would go about having the presumption overturned, and it may be the case that the parties would need to fall back on trying to navigate the existing quagmire of local law employment classification tests.
Qualifying platform workers will be entitled to a minimum wage, personal leave benefits, and pension entitlements. Various entitlements under applicable collective agreements throughout the EU will also apply.
What is next?
The Draft Directive is still subject to discussion and review within the EU. If it is adopted in its current form, EU Member States will then have two years to transpose the directive into national law. This means that, at the earliest, the proposed rules will come into force in 2024.
What should affected companies do now?
The Draft Directive has the potential to impose a significant cost and administrative burden on platform businesses if implemented. Given the lead in time, now is a good time to start considering various options on how to react. Those options could include, but may not be limited to:
Lobbying
- Lobbying against the Directive arguing that: it should be watered down generally or that exemptions need to be made specifically; that it will be economically damaging for European economies as it might, for example, stifle growth and innovation and/or result in the EU becoming uncompetitive with other jurisdictions; that other options are available which do not have these effects but achieve similar outcomes to those that the EU wishes to achieve, etc.
Changing now
- This could mean implementing and reviewing operational models now. There are many household-name platform companies that have seemingly resigned themselves to inevitable changes to the gig economy model. Such businesses may have made changes in response to losing their own high-profile local court or administrative disputes or because they have seen their competitors lose and decided to keep at bay the threat of challenge/reputational damage by adapting now.
Planning for future change
- This could mean starting to plan now for the implementation of the regime so as to either (a) determine (and rollout) ways to preserve the existing model and avoid (or at least minimize) the misclassification risks associated with it or (b) be ready to absorb the inevitable cost and administrative burdens that will be imposed.
Concluding comments
The EU Draft Directive will probably lead to greater rights for workers in a couple of years, but should also give platform companies greater legal certainty than is currently provided by the general trend of local court decisions in Europe.
We suspect that the most prudent course of action is to plan for seemingly inevitable changes to the EU legal landscape and to keep a close eye on the progress of the Draft Directive during its progress through the EU legislative machinery.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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