Global Taxes

Gig economy: Rider revolution forcing changes in legislation

Ruth Green, IBA Multimedia JournalistThursday 18 November 2021

As courts across Europe continue to grapple with employee classification rights in the gig economy, some jurisdictions are legislating in a bid to resolve this contentious issue in the food delivery sector.

In May, the Spanish Parliament passed legislation that compels food delivery platforms like Deliveroo, Uber Eats and Barcelona-based start-up Glovo to classify all their riders as employees instead of self-employed freelancers. Companies were given until 12 August to comply with the new so-called ‘Rider Law’, which entitles riders to receive social security protections and other benefits like holiday and sick pay that are not normally afforded to self-employed workers.

The legislation was introduced in the wake of a Supreme Court judgment in September 2020, which ruled that riders for Glovo should be treated as employees. This decision followed a series of cases in Spain’s regional courts regarding the employment status of independent contractors working in the food delivery sector.

Apart from gleaning revenue from an increase in social security payments, the legislation was designed to prevent further litigation in this area, says Juan Bonilla Blasco, Co-Chair of the IBA Employment and Industrial Relations Law Committee and a labour and employment partner at Cuatrecasas in Madrid. ‘There was a misclassification case that went to the Supreme Court, but there were also tonnes of cases that were still looking to go to the higher-level court,’ he says. ‘The government enacted this legislation to avoid thousands of cases that might come up in the future after the Supreme Court decision.’

However, Bonilla Blasco says it may prompt new claims over historic misclassification and is likely to lead to ‘significant business decisions’ for food delivery platforms. Deliveroo has already announced plans to exit the market. In a statement two weeks before the law came into force, the company said that ‘a disproportionate level of investment’ would be required to remain in a market with ‘highly uncertain long-term potential returns’. The company is undertaking an ongoing collective consultation process with its Spanish workforce.

The legislation requires platforms to be transparent with trade unions about the algorithmic formula they use to manage riders, assign orders and set fees for delivery services. However, there have been reports that some companies are modifying their algorithms to force riders into a bidding war over delivery fees. In September, Pepe Álvarez, the General Secretary of Unión General de Trabajadores – one of Spain’s leading trade unions – said the ‘need to regulate algorithms’ presented ‘a new challenge for the defence of workers’ rights.’

In late October, Portugal edged closer to approving similar legislation as part of a package of bills to regulate temporary and informal work, including via digital platforms and the gig economy. However, a week later Portugal's president announced plans to dissolve parliament after the national assembly rejected the government's proposed 2022 budget. The bill now awaits final parliamentary approval, which will only resume after the results of the general election on 30 January.

Like Spain’s Rider Law, if approved, the bill would bring another part of the workforce under social security protections, but there are concerns about its broader impact on Portugal’s employment landscape. ‘This will be left for the next government to legislate on,’ says Nuno Ferreira Morgado, co-head of the employment and labour practice at PLMJ Advogados in Lisbon, ‘but I can't exclude the possibility of many of these companies leaving the Portuguese market.’

The government enacted this legislation to avoid thousands of cases that might come up in the future after the Supreme Court decision

Juan Bonilla Blasco
Co-Chair, IBA Employment and Industrial Relations Law Committee

He says there’s little market appetite for legislative change in Portugal, where to date there has been no contentious litigation in this area. ‘My concern is also that we don't actually need this legislation to apply the employment status to these employees because we already have the legislation in the Labour Code that covers all this and establishes legal presumptions sufficient enough to assess or assert whether or not these are employees or independent contractors,’ he says.

Ferreira Morgado views the bill as an ‘imported trend’ from European countries like Spain and The Netherlands, where the growing litigation caseload has even prompted the European Commission to launch a public consultation on the ‘working conditions of platform workers’. He argues that, instead of enacting sweeping legislation, the UK’s case-by-case basis approach provides a ‘more balanced’ assessment of the needs of workers.

In June, Deliveroo General Counsel Chantelle Zemba told the IBA’s In-House Perspective magazine that she welcomed the UK’s Court of Appeal’s approach – which differed from other jurisdictions by classifying the company’s workers as self-employed. The judgment contrasted with a UK Supreme Court ruling four months earlier, which upheld a 2016 employment tribunal ruling that classified Uber drivers as workers, not self-employed contractors. Zemba says Deliveroo’s priority was about ‘operating the best model for our riders’ and ‘the model that gives them the most flexibility.’ Many digital platforms suggest that workers relish the freedom of working flexibly.


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