Legal and business news analysis - Global Insight December 2021/January 2022

Gig economy: Rider revolution forcing changes in legislation

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 startup 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’.

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.

Header image: MikeDotta/ Shutterstock.com

Brexit: UK assesses implications after failing to accede to Lugano Convention

Lucy Trevelyan

In late June, the European Commission formally blocked the UK’s accession to the Lugano Convention. The Convention would have offered a similar framework to the Brussels Regulation (recast), which ceased to apply in the UK post-Brexit. Both ensure that parties’ contractual choice of jurisdiction is enforced and that judgments from EU Member States’ courts are enforceable across the EU.

Commercial parties engaging in UK-EU litigation will now have to navigate the requirements of different national regimes on jurisdictional and cross-border enforcement issues. The 2005 Hague Convention on Choice of Court Agreements offers some protection to exclusive jurisdiction clauses, though not to any other kind of jurisdiction clauses. Whether it applies to contracts entered into before 1 January 2021, when the UK rejoined independently, is also uncertain.

‘The door is not yet shut on Lugano, although it seems that any chances of accession in the short term are slim to say the least’, says Elizabeth Williams, a partner at Simmons & Simmons in London.

Practical problems caused by the UK’s rejection will be added time and expense, and increased scope for error, says Lucinda Orr, Chair of the IBA Young Litigators Forum and a partner at Enyo Law in London.

Previously, if a defendant preferred to defend a claim in the UK, but was sued in an EU or Lugano state, it was reasonably certain the foreign court could be convinced to decline jurisdiction in favour of the UK, says Leigh Crestohl, a partner at Zaiwalla & Co in London.

‘Now, in the absence of any international obligations on foreign courts to decline jurisdiction in favour of the UK, UK parties litigating on the continent will be subject to the domestic private international law rules of the foreign court, as applied to any other third country’, he explains.

‘The delay and additional legal costs occasioned by satellite disputes over jurisdiction will be a significant risk to which parties in the remaining EU member states are now exposed when sued in England or, for that matter, suing a defendant in England that may have a compelling argument in favour of another forum’, adds Crestohl.

Jurisdiction clauses could be enforced via anti-suit injunctions, however. These are orders from courts or tribunals which prevent a party from commencing, or continuing, proceedings in a jurisdiction or forum other than that agreed in the contract.

‘The return of the anti-suit does offer some potential advantages to English litigants – eg, ensuring a contract setting out exclusive jurisdiction of English courts cannot be circumvented or undermined, and preventing abusive and vexatious proceedings from being issued in a foreign court, as well as enabling a pre-emptive strategic move of preventing enforcement of an overseas judgment’, says Orr.

Additionally, says Crestohl, international parties looking to litigate in the UK court may find it easier to do so than under the previous, rigid Brussels Regulation (recast). ‘Many may find that to be an advantage which outweighs the risk or costs of a subsequent dispute over jurisdiction.’

A party holding a UK judgment who now wishes to enforce it in a foreign state will have to comply with the rules of that foreign state which apply to any third country.

‘Where the holder of a foreign judgment seeks to enforce it in the UK, the procedure can be challenging’, explains Crestohl. ‘The UK has bilateral agreements with a small number of common law states which ease the process of enforcing judgment internationally, however this does not include any of the members of the [Brussels Regulation (recast)] regime.’

To enforce a foreign judgment in the UK at common law, a party will have to issue a fresh claim in the UK to sue on the judgment, but only judgments for a final and definite sum of money may be enforced in this way. This is not available for a judgment for a sum to be assessed, nor for non-monetary remedies such as an injunction.

The foreign judgment must also have been made ‘on the merits’, which excludes judgment given in default where a defendant has not engaged with the foreign court, says Crestohl. ‘It may be possible for the judgment creditor to obtain summary judgment once it has issued its UK claim, but there will always be more opportunities for a judgment debtor to raise issues and create delays.’

An alternative for the UK is to opt for international arbitration as a means of resolving international commercial disputes, given that arbitration is not affected by any EU rules.

‘Arbitration allows [parties] to have [English] law applied without having to be concerned about matters of jurisdiction in a private international law sense’, Crestohl says. ‘Arbitration awards are also readily enforceable around the world, since virtually all significant trading nations have signed the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.’

In the future, the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters, concluded in 2019, will, once ratified, establish an international framework for the recognition and enforcement of judgments.