As many as 4.1 million gig workers in the European Union edged closer to full employment status on Thursday, when the European Commission, the executive branch of the EU, released draft legislation that would effectively grant them employee rights.
Currently, the burden of proof of employment status in the EU rests on the gig workers themselves, which has forced them to go to court in order to prove that they are employees. But under the law proposed by the commission, that burden would be shifted to gig companies like Uber (NYSE: UBER) or Deliveroo (OCTUS: DROOF), one of Europe’s largest food delivery platforms.
“In legal contexts, in countries where being an employee under law has a lot of benefits, a lot of legal advantages, a lot of legal protections — that’s huge,” Erin Hatton, a sociology professor at the University of Buffalo and an expert on labor and social policy, told Modern Shipper.
If the law is approved, which sources say could take years, gig workers would be classified as employees, not independent contractors, if their employers do any two of the following: set their pay; enforce rules on conduct and appearance; supervise their work electronically; prohibit them from working for other companies; or limit their choice of responsibilities or working hours.
“With more and more jobs created by digital labor platforms, we need to ensure decent working conditions for all those deriving their income from such work,” said Margrethe Vestager, the commission’s executive vice president of A Europe Fit for the Digital Age. “Our proposal for a directive will help false self-employed working for platforms to correctly determine their employment status and enjoy all the social rights that come with that.
“Genuine self-employed on platforms will be protected through enhanced legal certainty on their status and there will be new safeguards against the pitfalls of algorithmic management. This is an important step towards a more social digital economy.”
Gig workers in the EU who are granted full employment status would become privy to a host of benefits not available to independent contractors. Those include provisions like a guaranteed minimum wage, collective bargaining power, working time and health protections, paid leave, improved protections against work accidents, unemployment and sickness benefits and more.
Watch: Getting into the gig economy
In order to deny those benefits and protections to their workers, gig employers under the proposed legislation would have to legally prove that their workers do not fall under two of the five aforementioned criteria. If they cannot, then those workers are presumed to be employees.
“We must make the most of the job-creating potential of digital platforms. But we should also make sure that they are quality jobs that don’t promote precariousness, so people working through them have security and can plan for their future,” commented Nicolas Schmidt, the EU commissioner for jobs and social rights. “The commission’s proposal sets clear criteria to establish whether a platform is an employer, and if so, their workers are entitled to certain social protection and labour rights.”
When faced with challenges to their workers’ independent contractor status in the U.S., gig companies like Uber, Lyft (NASDAQ: LYFT), DoorDash (NYSE: DASH) and Grubhub (NASDAQ: GRUB) have pushed back, and they’ve been successful so far. But Hatton believes that the going might be tougher across the Atlantic.
“In the U.S. context, what we’ve seen is companies such as Uber and Lyft simply following the law and continuing to do business as usual,” she explained. “I am not sure that they will get away with that in the European context in the same way that they have in some places in the U.S.”
But there are other ways to protect profits besides fighting to deny workers greater protections. One thing the companies could do is thin their workforces to offset the additional cost of protections and benefits.
“I could imagine that they would, in fact, have to pare down their workforce to pay them decent wages and ensure work stability and security,” said Hatton, who thinks consumers could also feel some of the impact. “It may be that they will have to charge more for their services, because what they’ve been doing is undercutting the costs of, say, rides or deliveries by underpaying their workers and also by relying on venture capital.”
Uber pointed to these as flaws in the proposed legislation: “We are concerned the commission’s proposal would have the opposite effect — putting thousands of jobs at risk, crippling small businesses in the wake of the pandemic and damaging vital services that consumers across Europe rely on,” an Uber spokesperson told CNBC.
But the CEO of Just Eat Takeaway, which owns Grubhub and several European food delivery platforms that would be affected by the proposed EU law, said on Twitter that the company supports the “proposals to improve conditions for workers and help them access social protections.”
While the law would only impact operations within the EU, European Commission Executive Vice President Valdis Dombrovskis noted in a press conference there are some parallels between the European Commission and policymakers in the U.S., who are weighing similar proposals.
“It must be said that the question of operation of online platforms, especially this question of employment status, is very much contested also in the U.S., and there are also many court rulings in different states in the U.S. addressing this very same question,” said Dombrovskis.
Some are bearish on the prospects for U.S. gig workers, though, predicting that companies like Uber, Lyft and others will be unaffected and continue to spend hundreds of millions of dollars in support of provisions that keep their workers as independent contractors.
“They will very likely stay the course,” Mark Warnquist, CEO and co-founder of gig economy insurance platform InShare, told Modern Shipper in an email statement. “This means opposing efforts to reclassify or classify independent workers as employees and where appropriate proposing and supporting legislation comparable to Prop 22 in California.”
But if a law like the one proposed in Europe ever did make its way through U.S. courts, Hatton believes it could have an even greater impact because even more protections and social safety nets are tied to employment status here. She’s also a bit more bullish than Warnquist that it could happen.
“It’s a little hard to imagine, for the U.S. context, that we would see the type of from-above change mandating this in the way that we’re seeing the EU,” she cautioned. “But I think it should happen. I think it’s necessary and, at least coming into office, Biden’s Pro Act certainly set out to prohibit the misclassification of workers as independent contractors. So that’s certainly on people’s radar, it’s certainly on an agenda.”
It’s possible that all the EU proposal does is reignite the conversation in the U.S. and cause more gig worker strikes and protests, which so far have borne little fruit. But it can also provide a potential blueprint for flipping the gig economy model on its head.
“It’s both simple and genius, and obvious, that it should be the burden of employers to demonstrate that their employees are not employees under law,” Hatton remarked.