Bogus self-employment: European Commission tackles platform work (gig economy)
Platform work has long since become part of our everyday lives. Platform-based work, whether the delivery of meals, food or groceries or the provision of domestic help or tradesman services, is becoming increasingly established in our working environment and our daily lives.
This can also be seen in the relevant figures. The European Commission assumes that the platform economy has grown by no less than 500% in the last five years. Platform operators range from large international companies to small national or local start-ups. It is currently estimated that there will be 43 million platform workers in the EU in 2025. Presently, most platform workers are self-employed. In the light of this increasing significance and the often addressed lack of social security of self-employed individuals without employees it is not surprising that the European Commission now takes the initiative to get a grip on the potential risks associated with this development by means of its proposal for a Directive on improving working conditions in platform work (COM(2021) 762 final).
While the initiative published by the European Commission is only a proposal (for the time being), it already deserves a closer look at this point in time. That is because the publication of the proposal marks the beginning of a legislative procedure and, given extensive overlaps with the endeavours outlined in the key issues paper on fair work in platform economy (“Faire Arbeit in der Plattformökonomie”) by the German Federal Ministry of Labour and Social Affairs (Bundesministeriums für Arbeit und Soziales) it is presently to be assumed that it will not take long for the regulations ultimately agreed to be implemented in national law.
It is therefore worthwhile keeping a close eye on the proposed Directive and its development in order to not be surprised by difficulties relating to its implementation.
I. Objectives of the proposed Directive
The proposed Directive on improving working conditions in platform work which was published on 9 December 2021 is intended by the Commission to contribute to increased social security and better working conditions of platform workers in the EU in the future by setting minimum standards.
The proposed Directive essentially has the following objectives:
- determining the employment status of platform workers based on a defined set of criteria, thereby granting them access to employee rights such as minimum wage, collective bargaining, working time regulations, occupational safety and health protection, and the right to paid leave, but also social benefits such as unemployment and sickness benefits and old-age pensions;
- creating more transparency, rights and obligations with respect to algorithmic management, e.g. by providing for an obligation to inform about automated monitoring and evaluation of work performance, requiring at least partial disclosure of the parameters taken into account in algorithm-based decision-making, and a possibility to monitor and contest such decisions;
- improving enforcement and enhancing traceability in platform work – including in cross-border situations – by requiring platforms to declare the work in the country where the work is performed;
- promoting collective bargaining and social dialogue.
II. What forms of platform work are to fall under the Directive?
Pursuant to Article 2(1), platform work exists where (i) a natural or legal person provides a commercial service and (ii) all of the following requirements are met:
- the service is provided at least in part at a distance through a website or a mobile application, for example;
- the service is provided at the request of a recipient of the service;
- the service involves, as a necessary and essential component, the organisation of work performed by individuals, irrespective of whether that work is performed online or in a certain location.
This broad wording makes it clear that the scope not only covers typically tech-savvy fields of work such as the IT sector but can also include traditional tradesman work. However, it does not encompass platforms simply listing supply and demand for services or displaying available service providers in a certain area. It will be interesting to see whether direct crowd-working forms will also be covered by the scope. The current draft suggests that there are good reasons to assume they will not be covered.
III. What are the main components of the proposed Directive?
- It is to be determined based on a set of criteria whether the platform exerts control over a person. If two of the set’s five criteria are met, the legally valid but rebuttable presumption applies that the legal relationship between the platform and the working person is an employment relationship.
- Platform workers and their representatives are to be granted special rights enabling them to obtain information subject to the platform’s “algorithmic management”. This is intended to make comprehensible and controllable how work and contracts are assigned, evaluated, terminated and how incentives are provided, if any. The skilled workers are to provided with the right in this context to be given reasons for an algorithm-based decision from a real person and the possibility to contest and rectify the decision.
We already know similar rights from data protection law: Decisions which are solely based on the automated processing of personal data (including profiling) and have any legal or similar effect on the data subject are generally prohibited and allowed only in exceptional cases; plus, a minimum of transparency must be ensured, e.g. by informing about the logic involved in any automatic personal data processing and the parameters of the decision (Article 22, Articles 13 and 14 GDPR). The new draft specifies these requirements for platform work and extends them. Unlike Article 22 GDPR, it in particular also addresses the algorithm-based preparation of certain decisions which is so important in practice (Article 6 in the draft: “automated decision-making systems which are used to take or support decisions […]”).
- Platforms must declare the work in the country where it is performed and provide the national authorities with information about the platform workers and their terms and conditions.
- Stakeholders are to be allowed to assert claims of several persons which will probably result in platform operators having to face class actions.
IV. Criteria for presuming employment and possibility to rebut this presumption
One core element of the proposal is the rebuttable presumption of an employment relationship where two of the five criteria below are fulfilled (Article 4(2)):
- determining, or setting upper limits for the level of remuneration;
- supervising the performance of work by electronic means;
- restricting the freedom to choose one’s working hours or periods of absence, to accept or to refuse tasks or to use subcontractors or substitutes;
- setting specific binding rules with regard to appearance, conduct towards the recipient of the service or performance of the work;
- restricting the possibility to build a client base or to perform work for any third party.
In deviation from the previously applicable principles, the focus is not to be on the work of the individual platform worker in the future but on the platform itself. If the platform meets two of the five criteria it is presumed that there is a sufficient degree of control and an employment relationship therefore exists. Consistent with the previously applicable principles (section 611a(1) sentence 6 German Civil Code (BGB); section 12(1) sentence 2 German Temporary Agency Workers Act (AÜG)), however, it is not decisive in the context of this assessment what the contract defines. What matters is the existing factual situation, i.e. the actual performance of the work.
It will be interesting to see how national lawmakers intend to implement these very vague criteria in practical, workable legislation. There is probably no hope of any noticeable relativisation, considering that the proposal is in line with the above-mentioned key issues paper of the German Ministry of Labour and Social Affairs. The latter states, among other things, that the intention is to introduce a shift of the burden of proof in processes to clarify the status of employees and thus lower the inhibition threshold for platform workers to assert their rights.
From today’s perspective, the solution provided by the proposal in Article 5, which requires the Member States to ensure a possibility to rebut the legal presumption, would not appear to be very practical. It requires that the platform or the person concerned proves in an individual case that they do not have a dependent employment relationship as defined by national law. In practice, in the majority of cases, the platforms will be facing a high burden of proof while in other cases, they will have cooperation obligations.
The European Commission’s proposal for a Directive may very well be understood as a straightforward attack on the platform economy as it exists today. With the fiction of employment relationships, the information and disclosure obligations regarding the algorithms used and the strengthening of organised representation of self-employed persons, the proposal contains some profound changes. In particular, it remains to be seen what effects the criteria listed in the proposal will have on the existing criteria applied to differentiate between dependent and self-employed work and the weight of each criterion in the set. This means that not only persons who are potentially directly affected should keep a close eye on the (supra)national legislation procedure and start reviewing potential effects on (planned) business early on. It will also be interesting to see how the regulations in the proposal regarding transparency of “algorithmic management” will be implemented in national law and find their place in the existing system of regulations (such as the GDPR) also in view of the enforcement of rights.
We will in any event closely observe these developments and keep you posted on this “platform”.
Any questions? Please contact: Daniel Happ, Yannick Bähr or Dr David Nink
Practice Groups: Employment & Pensions, Digital Business