Dangers ahead for the platform-work directive

The presumption of employment status for ‘gig’ workers has been diluted by the member states in negotiations.

Platform companies, such as Uber, Deliveroo or Airbnb, are facing a tumultuous future. They have grown at astronomical speeds without having to care about profitability, thanks to the venture capital of big investors. That fuel is however rapidly running out. Amid mounting political pressures for regulation of the companies, those investors want swiftly to see returns on their decades of sunk capital.

Just a year ago, Getir, a Turkish meal-delivery application popular in Germany, the Netherlands and the United Kingdom, could easily buy the German platform Gorillas for $1.2 billion; today the company is making massive cuts to avert sudden bankruptcy. Deliveroo is meanwhile leaving countries that reclassify its workers as employees. Uber, conversely, did secure its first profits this summer, appeasing its investors, but at the cost of heavy asset-stripping.

One of the main points of contention is the misleading classification of ‘gig’ workers as self-employed entrepreneurs. Trade unions have been fighting for employment status for years and have secured increasing support from courts and governments.

Final negotiations

The European Union is negotiating a platform-work directive to regulate the gig economy better. The initiative dates back to 2021 and the European Parliament and the Council of the EU are moving into the final negotiation phase. Once approved, member states will have two years to transpose the directive into national law.

The text addresses various aspects of the gig economy but the employment issue is by far the most controversial. The directive promises a presumption of employment status for gig workers, which platform companies can only countermand if they can prove that the workers involved do not meet a fixed list of criteria.

From the companies’ perspective, just when their financial support is becoming exhausted, the EU is threatening to increase their labour costs markedly. Indeed, Uber has warned, via the Financial Times, of dramatic labour-market consequences. Yet does the digital gig economy offer a viable business model at all, if minimal wages and social protections could easily bring it crashing down?

Unstable compromise

This is precisely why caution is in order, now the details of the directive are under negotiation. Before the summer, the council rushed into an agreement creating an unstable compromise between member states sympathetic to platform companies and others striving for firm action. The council tampered with the criteria for employment status to make it easier for platforms to circumvent the legislation.

The parliament’s text was more strict and it can tighten the final agreement again—but only insofar as the council agrees. If the proportion of member states sympathetic to platform companies increases in the coming months—new governments are awaited in Poland and the Netherlands, although continuity is anticipated in Spain—the directive risks losing much of its force.

The directive could turn into a gingerbread house, as in the Hansel and Gretel folktale. On the outside, it would look nice and appetising, granting employee rights to gig workers, finally tackling infamously exploitative practices. But those who allowed themselves to be seduced by appearances would sooner or later end up in a Silicon Valley witches’ cauldron.

Thanks to in-built exemptions and legal shrewdness, platform companies could manage to wriggle out of regulatory scrutiny. Only new and smaller platforms would be bridled, while the big players perpetuated their monopolies while making minor adjustments to app designs to avoid the employment presumption. Gig workers might receive freedoms barely sufficient to fall outside the employment criteria while exploitative practices would continue unabated, as the European Trade Union Confederation fears.

Warning from Belgium

Belgium can serve as a warning. In the ‘Labour Deal’ of 2022, the Belgian government imposed employee status with a similar list of criteria to those envisaged by the council. Its practical impact has been minimal: hardly any platform company has modified the status of its workers. The companies claim the new legislation is not about them, while the labour inspectorate lacks the resources to enforce the law properly. So it may seem Belgium has regulated the gig economy but that says little about the real conditions of its gig workers.

Many union victories in this arena, in countries such as the UK or the Netherlands, have been the outcome of successful court cases—this is how, for example, Deliveroo couriers have been reclassified as employees in the Netherlands, where a similar case is pending for Uber drivers. If the directive were to be too soft, member states in their transposition could render those prior court decisions obsolete. Existing legislation, such as the Spanish Ley Rider, could also come into question, with pressure for a watering down in line with the European directive.

The directive as finalised should reject the lax list of employment criteria put forward by the council in favour of the parliament’s position. But whatever comes out of the ‘trilogue’ negotiations, the real balance of forces will depend on a political coalition organising for better labour rights and working conditions in Europe.

Relying only on court cases or European legislation, without also promoting public support for enhanced labour rights, platform co-operatives and tax justice for Big Tech, is a political risk. Only a broad coalition of governments, civil-society organisations, trade unions and others can aggregate the resources required to shift the balance of power more durably in favour of gig workers.