The gig economy: time to rethink labour laws?

21 May, 2021

Spain has taken the lead in legislating that delivery riders are employees of the platforms they work with, not independent contractors. The global gig economy is watching how it plays out.

Disruption has been the characteristic of delivery companies, accommodation platforms and ridesharing services over the last decade as the gig economy soared around the world.

But disruption is now threatening the disruptors. 

Spain has become the first nation to legislate that riders for food companies, such as Glovo and Just-Eat, must be recognised as employees and companies affected have 90 days to comply. That came after Spain’s Supreme Court rule that food delivery riders are employees, not freelancers.

The implications are significant, not only for the employment of Spain’s estimated 30,000 delivery riders but other companies operating with digital in the country’s gig economy.

Cracking open the algorithms that determine how work is farmed out on digital platforms is also part of Spain’s new regulations. Companies are now required to explain to staff how the apps share incoming jobs and crucially, it applies to all digital platforms, not just delivery riders.

The world is watching Spain’s brave venture closely, including the European Commission which opened a public consultation period on potential EU-wide rules.

Across the world, there has been a wave of court and industrial tribunal rulings in recent months that are reverberating through the gig economy.

In Australia, the Fair Work Commission has just ruled that Deliveroo riders are not contractors, with the tribunal determining that a former rider for the food delivery company did have a claim to unfair dismissal because ‘the correct characterisation of the relationship between the defendant and Deliveroo is that of employee and employer.’

It dismissed Deliveroo’s argument that riders can work across multiple platforms at the same time and should therefore be seen as independent contractors. The digital platform intends to appeal as it faces the prospect of a wave of backpay claims.

In March, the UK Supreme Court determined that Uber drivers are ‘workers’ for the purpose of UK employment law, not contractors using Uber as a platform, as the US-based company claimed.

Uber argued that drivers were self-employed contractors and the smartphone app was a platform to connect drivers with users and process payments, but an appeal on those grounds was dismissed. The Court found that simply categorising staff as self-employed contractors does not determine their status if, in practice, those ‘contractors’ are treated as employees or workers.

Yet there is far from universal agreement among legal minds.

The UK’s decision came after a California judge last year ordered Uber and another ride-share platform, Lyft, to start treating their California drivers as employees. That decision was superseded by Californian legislation that classifies Uber and Lyft drivers as contractors, which has encouraged other employers to essentially ‘Uberise’ the workforce.

The Paris Court of Appeal confirmed in April that delivery riders in France are independent contractors and not employees, reaffirming the position it took previously in November 2017.

New Zealand initially ruled along similar lines as California but the UK decision has caused some to think this could change in the future, while South African Uber drivers are also interested in the outcome.

Flaws emerge in gig economy

The gig economy has been around for decades but it was digital platforms and in particular, the smartphone, that gave rise to how we understand it today.

Delivery rider services began to take off in Spain from around 2015, powered by start-ups such as Glovo, which gathered 100,000 sign-ups and €2 million in seed funding within months of launching its app. The company now has more than 10 million users.

But it didn’t take long for some workers and trade unions, as well as law experts, to question the true autonomy of the riders at the heart of the service, says Daniel López, a Partner at Baker Tilly Spain and an employment law expert.

“They could sometimes wait up to an hour to start receiving orders, were not allowed to negotiate the rates or had to book in advance the time slot in which they would work,” he says.

“Riders had a score that determines the allocation of orders, or if they refused an order, they ended up having less in the future, so they could spend hours loitering in the street, waiting for work to come in, and they had no right to negotiate the rates.

“They could even have their account disconnected at any time without any explanation.”

By 2017, disgruntled riders had formed a group called Riders for Rights, and legal action followed.

“Courts began to issue rulings from different parts of Spain and although most courts ruled the relationship between the riders and the platform was an employment relationship, there were some who considered the riders to be self-employed,” says Mr López.

“Faced with this lack of consensus, the Supreme Court decision that preceded this new legislation was eagerly awaited.”

With the Supreme Court ruling in late 2020 that riders were considered employees, the legislative wheels were set in motion to regulate digital platform work, and a dialogue between employers and trade unions was established, as well as with Riders for Rights.

“But they left out negotiation with other associations, the defenders of the riders to remain self-employed, and this is a very important point in the conflict,” says Mr López.

“Faced with this situation, a group of riders who want to maintain the self-employed model, the Association of Service Platforms, together with another association, held protests and demonstrations to try to stop the law, and to be heard.

“But the government would never meet with them, so delivery platforms and self-employed associations believed their demands have been ignored.

“Riders are divided, some want to be self-employed and others want to be employees. There is a division, I cannot say what is the percentage of each one but there is an important volume.”

The flexibility argument has been proffered by global platform Uber, who stated that regulation will hurt the thousands of riders who did not want to be classified as employees.

Time to rethink the labour model?

Trade unions and labour law experts had hoped that the law would regulate work in ride-share sector and across other digital platforms. But for the moment, only delivery drivers and riders are affected.

Delivery companies have 90 days from the passing of the law in mid-May to comply and the platforms are rethinking their business models in various ways.

Just-Eat has hired some of its riders, and covers peak demand with workers from transport companies, while Glovo has turned to employment agencies.

“The question I would pose is: Could there be a worker with the characteristics of the self-employed, but with labour guarantees similar or comparable to those of an employee?”

Daniel López
Baker Tilly Spain

Although the legislation makes it harder for companies to employ freelance couriers, several riders’ associations believe it does not completely resolve their legal situation, with further potential court battles anticipated.

Mr López believes that it may be time to redefine some points of labour law and create a model that better serves employers and employees seeking flexibility.

“Our substantial labour legislation is more or less the same since the 80s-90s. We’ve had some subsequent amendments and reforms, but in essence it’s basically the same,” he says.

“I believe that it will be necessary to adapt our labour legislation to a system in line with the current reality in which we live, where a system between employee and self-employed coexists to allow for this type of situation.

“Times are changing and the needs of employees and companies are changing. But labour legislation in most countries remains almost unchanged.

“The question I would pose is: Could there be a worker with the characteristics of the self-employed, but with labour guarantees similar or comparable to those of an employee?

“I don’t know the answer but from my point of view, this is an important point. This is a difficult situation and a complicated one to resolve, as we can see. But I believe that the jurists, together with the legislature, must confront and analyse.”

Meet the expert
Daniel Lopez
Baker Tilly, Spain

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