Gig Economy Law – Three Months Later

The deadline for implementing Spain’s new Gig Economy law, which should address the status of delivery drivers, has already passed, but the major players have shown no signs of complying. However, the Spanish ruling could pave the way for a slew of new laws across Europe.

Spain will be the first European country to legally recognize delivery riders as employees of platform companies and to guarantee them trade union representation in May 2021. The Spanish “Gig Economy Law” seeks to protect an estimated 17,000 vulnerable workers who lack basic employment protections such as a minimum wage, sick pay, and collective bargaining. The legislation, which was introduced by a coalition of the Socialist PSOE and Podemos, is an important test case for new European-wide legislation that could be introduced by the end of the year. 

Gig Economy law was announced with much fanfare in the media, but the platform companies’ response calls for a more measured approach. The Spanish example shows how difficult it is to regulate platform firms that are adamant about maintaining the status quo. To avoid fully complying with the law, these companies have already undermined and manipulated regulations and used various “workarounds.” 

This situation demonstrates the importance of regulation in protecting workers, strengthening their position against bosses, and laying the groundwork for a decent society. It is critical to organize from the ground up in order for these laws to be effective. However, viewing the problem of tech companies solely through the lens of legislation and lawsuits would be to overlook a critical opportunity for transformative change. In addition to fighting for tougher regulations on tech companies, we must strengthen workers’ collective power and imagine alternative systems that could replace corporate platforms with democratic alternatives. 

The deadline for Gig Economy law has come and gone

The final day of a three-month grace period for platform companies to adapt to the new rules of Gig Economy law in Spain was August 12. The law is the result of a Supreme Court decision in September 2020 that ruled in favor of riders for Glovo, the nation’s largest food delivery service. Due to the degree of control the company had over their work activities, the court determined they could not be considered self-employed. When a company exercises management and control powers, delivery and distribution riders are presumed to be employed under the new decree.

In theory, this means that companies such as Deliveroo, Uber Eats, and Glovo will be required to register drivers as employees and pay them a monthly social-security payment toward their pensions. The reality, however, is that only a few riders have been registered as employees of these companies in the last three months.

Deliveroo has already announced its intention to exit the Spanish market. As a minor player in Spain, the company believed that continuing operations would necessitate too much additional investment. This may be viewed positively by some. Perhaps the new regulations will put an end to an exploitative business model and demonstrate that these companies are simply unprofitable if their employees are not properly compensated. However, many of these riders will migrate to another platform where they will face similar issues.

Glovo has remained defiant, stating that it will keep 80 percent of its riders as self-employed, with plans to hire the remaining 20 percent (roughly 2,000 people) as employees by the end of 2021. The company’s lawyers have devised a new algorithmic management system designed to give workers more control while still allowing them to be self-employed. Given the continuation of what is essentially an employment relationship, critics such as Rubén Ranz, an organizer for the Spanish trade union UGT, are skeptical that this status is anything other than flagrant disregard for the new law.

Another workaround used by Uber Eats is to outsource its rider services to other companies, allowing it to avoid taking full responsibility for its employees. In the final days of negotiations, the platform companies negotiated a provision allowing them to use third-party subcontractor services under the new law. This is similar to a model widely used in China and other countries, in which riders are hired through external staffing agencies, so the platforms are not required to pay workers social security.

Gig Economy law has increased the costs for platform companies while benefiting some workers. However, the extensive carve-outs negotiated by the companies, as well as their unwillingness to fully comply with the law, indicate that more protracted legal battles will soon follow.

The passage of the Spanish Gig Economy law marks a watershed moment in the gig economy. Platform companies have largely lost a public relations battle in which they attempted to portray themselves as trendy start-ups disrupting established industries through tech-enabled innovation. Platform workers are now widely perceived as working in precarious and unprotected conditions, necessitating new regulations to end the “platform exceptionalism” that has allowed these companies to operate in legal limbo.

Gig Economy law in Europe

The origin of the Spanish gig economy law could be traced to a landmark UK Supreme Court decision ruling that a group of Uber drivers were employees rather than independent contractors. In a significant victory, Uber reluctantly agreed to treat its UK drivers as “workers.” The catch is that they will only pay a minimum wage for time spent accepting a trip and not for the entire time logged onto the app, thus underpaying drivers by 40 to 50 percent.

The UK Parliament has shown no signs of following Spain’s lead in enacting new laws for the gig economy, but there is significant momentum across Europe to take regulatory action and codify rights for precarious workers. In Denmark, Just Eat and the Danish trade union 3F have reached a national sectoral agreement for its delivery riders, which includes hourly wages, sick pay, and pension contributions. Just Eat has also decided to enroll Italian riders in a national contract designed for workers in the transportation, delivery, and logistics industries, which provides them with similar rights and protections.

These developments indicate that new divisions may be forming among various versions of the gig economy around the world. While the rest of the world remains in a fully precarious model, Europe may be moving toward a new presumption of employee status, while American states drift toward California-style “independent contractors with benefits.”

We should be wary of these companies’ recent indications of willingness to shift to a new paradigm. Platform companies operate most freely in regulatory environments that allow them to circumvent existing worker protections. At the same time that they recognize the inadequacy of independent contractor status in parts of the Global North, they exacerbate the precarious position of workers in Latin America, Africa, and parts of Asia.

In South Africa, for example, the Fairwork Foundation discovered that gig economy platforms benefit from a legal loophole that restricts labor rights to workers classified as “employees,” leaving most gig workers unprotected. When workers attempted to file a legal claim against Uber in 2017, they discovered they had contracted with a company based in the Netherlands, and their case was dismissed.

Following the decision of the UK Supreme Court, human rights attorneys have filed a new class action lawsuit against Uber in the Johannesburg Labour Court, seeking to have drivers declared employees of the company.

Resisting Regulators Platform companies fight legal cases and new regulations with such zeal because they are all part of a global battle — after all, Uber Eats operates in 45 countries, Just Eat in 24, and Deliveroo in 13. Every new law and court case must be opposed, because unfavorable regulations in one jurisdiction are likely to be replicated in others.

In order to outmaneuver regulators, these companies form strategic alliances with one another. In California, businesses banded together to raise more than $200 million in order to pass Proposition 22. This ballot measure denied workers full labor protections and effectively created a new employment category that is neither an employee nor an independent contractor, depriving workers of rights and benefits. They now intend to replicate this model in other states, offering minor benefits in exchange for avoiding more extensive legislative oversight.

When confronted with strong opposition, the companies’ preferred strategy has been to provide certain benefits to workers in exchange for avoiding classification as employees. In New York, Uber and Lyft are attempting to reach an agreement with labor organizations in order to support new legislation that would grant gig workers the right to unionize while not defining them as employees. Under the proposed legislation, tech companies would be exempt from city and county minimum-wage laws, as well as state labor discrimination laws.

Platform companies have aggressively lobbied for favorable regulations, subverted or ignored those they do not agree with, and dragged precarious workers through the courts rather than proactively addressing issues. They are masters of “regulatory entrepreneurship,” as their entire business model is based on operating in a shady zone of partial legality and betting on changing the laws as they go. Regulations are important, but they have been a slow and inefficient mechanism for countering the power of tech companies, which can move quickly to undermine attempts to rein them in.

There are alternatives, such as the recently launched “Wings” — a food delivery cooperative in London that pays riders a living wage, operates a zero-emissions service, and attempts to shift customers away from the exploitative model of the major food-delivery platforms.

Workers’ cooperatives face a difficult uphill battle against existing platforms, as well as limitations in terms of raising capital and competing with corporations. However, public authorities can also play an important role in assisting cooperative and social enterprises in their operations.

© Gig Economy Law – Three Months Later –
Get some more Long Reads like  Gig Economy Law