Regulating the Gig Economy: A Workers’ Rights Perspective - By Elisa Chiaro

Editor’s Note: Elisa Chiaro is a legal consultant focussing on Business and Human Rights and International Criminal Law. In 2016 she completed an LL.M. at SOAS, University of London. Before that she worked for five years as international corporate lawyer both in Italy and UK. She is admitted to the Bar in Italy.

  

1.      Introduction

In current discourse, the most pressing issues concerning human rights and business are often associated with the developing countries to which manufacturing is outsourced. However, the “western world” also faces new challenges as far as workers’ rights are concerned.

It is cheap and convenient for people to book a car ride or order their favourite takeaway meal at a few swipes of their smartphone. App-based service companies are thus very popular among consumers – and are consequently flourishing. Conversely, some doubts have been cast on the fairness of the working conditions of people contracted by these companies. A central issue in this respect relates to the status of their workers, who on paper are self-employed, but in reality are subject to the control of the company, a condition which clashes with being independent. This post aims firstly to analyse the labour conditions of gig economy workers in Europe, with a focus on some of the main service platforms, namely Uber, Deliveroo, Foodora, and Hermes Parcels: the majority of these companies, Uber in particular, are transnational, operating in many national markets and adopting the same business model based on flexible work and lack of security for workers in each market. Secondly, it will scrutinise how National and European institutions and courts are augmenting gig economy workers’ conditions for the better. The issue is crucial in the UK, especially following September’s decision by Transport of London (“TFL”) to reject Uber’s application for a new London license, but legal disputes have also started in other countries (in, among others, the UK, Italy and the USA). The UK Parliament is also discussing the matter, and the EU Commission has started a round table with trade unions and employers to find new solutions to address the issue.

 

2.      Gig economy: flexibility vs security

The development of new digital technologies, in particular ride-hailing and food delivery apps easily accessible to everyone who possesses a smartphone, has undoubtedly changed our lives. However this phenomenon also has some downsides which are clearly visible in the context of the gig economy. Despite the fact that, from the consumer’s point of view, these services are efficient (both in terms of time and cost) and convenient, they have created a new category of so-called workers “on tap”, as the The Economist labels them.[1] The term “gig work” was first used at the beginning of the 20th century for jazz musicians who got their wage (“gig”) every night after their performance. In 2009, the expression “gig economy” was adopted to describe those who, during the financial crisis, started to engage in numerous part-time jobs.[2]

A key company in the gig economy is Uber. Founded in San Francisco in 2009, it is a ride-hailing app, and now operates in 633 cities worldwide. The European subsidiary of the American company is incorporated in The Netherlands. The company maintains that in London, a focal hub of its business, it has around 3.5 million users (this number refers to anyone who has used the service in London in the period July-September 2017). Another important actor is Roofoods Ltd, operating as Deliveroo, a London-based food-delivery company founded in 2013 transporting restaurant orders by bicycle, motorcycle or car couriers. It operates in 12 countries and (as of September 2016) provides jobs to around 20,000 people.[3] Foodora, a German company similar to Deliveroo, is involved in food delivery in more than 260 cities worldwide and employs around 22,000 people. Other significant companies in this space include parcel delivery companies such as Hermes. The company runs a UK logistics and delivery business, with around 2,800 employees and a network of 10,500 self-employed delivery couriers who work on a day-to-day basis.[4]

These companies certainly appear to be creating jobs: in London around 40,000 drivers work for Uber and, in 2015, Uber cars in New York outnumbered traditional yellow cabs.[5] Moreover, most of the services offered do not imply extra costs; on the contrary, using these services can be cheaper than procuring them in more traditional and longer-established ways.

The motto of most of the companies mentioned above is “flexibility”, which is closely intertwined with the fact that all of the people that drive or ride for them are self-employed. However, where for some people being self-employed is a free and conscious choice motivated by “autonomy and flexibility”, for others it constitutes a “necessary choice” because they do not have another “traditional” job or, alternatively, because their traditional job’s income is insufficient.[6] Clearly flexibility is not negative tout-court, unless it is one-sided. It might be positive insofar as it allows for the creation of potential new job opportunities benefiting more people, but it might also become problematic if the model is adopted just to cut costs, and if the level of control the employer exerts over its workers becomes too great. As stated in the July 2017 Taylor Review of Modern Working Practices (“Taylor Review”), drafted by an independent panel of experts upon the UK Government’s request, “[b]eing able to work when you want is a good thing; not knowing whether you have work from one day to the next when you have bills to pay is not.”[7] The crucial point goes as follows: describing the employment status of gig economy workers as self-employed, while in reality their freedom is very limited, will deprive them of some fundamental labour rights, such as sick pay, holiday leave, and entitlement to the national minimum wage, among other rights.

 

3.      The UK approach: TFL decision and UK Parliament enquiry

In the UK the debate surrounding on-demand workers’ rights is very lively, and reached its peak with September’s decision by TFL, openly supported by London Mayor Sadiq Khan, not to renew Uber’s operating licence in London. The decision was justified due to Uber’s “lack of corporate responsibility” but it focused specifically on issues linked to passenger safety.[8] However Sadiq Khan in his article published in The Guardian, supporting TFL’s decision, specifically stated that the “regulatory environment is critical in protecting Londoners’ safety, maintaining workplace standards for drivers […].”[9]The company, following the apology of the Chief executive Dara Khosrowshahi for its past actions, appealed against the decision and in any case will continue operating until the appeal decision is issued,[10] as provided for in The Private Hire Vehicles (London) Act 1998. Many criticisms were raised against TFL’s decision: on one side by consumers (a petition to save Uber was set up and in a few days obtained more than 800,000 signatures) and by some drivers on the other. They claimed that, instead of solving workers’ problems, the decision harmed Uber drivers and was just aimed at protecting Black cab drivers, the majority of which are allegedly white and English.[11]

The conditions of gig economy workers, and in particular Uber’s drivers, were analysed back in December 2016 in a report by MP Frank Field, titled “Sweated Labour: Uber and the ‘gig economy’” (based on submissions from 83 private hire drivers, the majority of whom worked for Uber). It concluded that despite being self-employed, “[d]rivers cannot set their own fares, or choose which jobs to undertake, for example. Many are totally dependent on Uber for their income and they all must meet certain conditions to continue receiving work.” Moreover the report stated that drivers are taking home around £2 per hour – less than a third of the national living wage – due primarily to the costs they have to bear, namely a vehicle that meets Uber standards, plus refuelling and maintaining it. Interestingly, one of the recommendations listed in the report was towards TFL, which was called on to consider the abovementioned elements of the report when it came to renewing Uber’s operating licence.       

Even if some positive results have been achieved (for example, in April 2017 Uber declared that its drivers could sign up to a security scheme with the aim to cover them in the event they were unable to work), working conditions are still inadequate. This is clear from the findings of the UK House of Commons Work and Pension Committee (“WPC”), which more recently scrutinised issues connected to the gig economy. The WPC held that, instead of flexibility, workers suffered “low pay, inflexibility in working times, long hours, instability, and difficulties in taking time off (such as for a holiday or for sick leave).”[12] Specifically referring to the Deliveroo contract, the WPC underlined how the company explicitly denied their workers the right to present any claim to challenge their employment status (Clause 2.2).[13] Moreover Clause 2.3 of the contract states that if, despite this Clause 2.2, the worker presents any claim against the company, he/she “[…] undertake[s] to indemnify and keep indemnified Deliveroo against costs (including legal costs) and expenses that it incurs in connection with those proceedings, and [the worker] agree[s] that Deliveroo may set off any sum owed to [the worker] against any damages, compensation, costs or other sum that may be awarded to [the worker] in those proceedings.” 

Finally, in October 2017 the representatives of Deliveroo, Uber and Hermes Parcels appeared before the UK Parliament Business, Energy and Industrial Strategy Committee (“BEIS Committee”) to give evidence and discuss, among other things, the Taylor Review. The three representatives of, respectively, Deliveroo, Hermes and Uber, argued that flexibility was crucial and benefitted riders and drivers. Specifically, Deliveroo’s UK managing director claimed that at least 50 per cent of their riders were students carrying out paid work alongside other activities, and further stated that the additional labour rights for workers (if self-employed contractors were to be recognised as employed) would lead to a company cost increase of around £1 per hour of rider/driver time. Hermes director of legal and public affairs asserted that the recognition of workers’ employment status would cost the company around £58.8 million (given holiday pay, sick pay and National Insurance contributions).[14]  

 

4.      The judicial response

So far many cases against Uber have been brought before national courts on unfair competition claims: for instance in Italy, UberPop (the equivalent of UberX in the UK, one of the services offered by Uber, which connects unlicensed drivers with consumers) was banned for unfair competition in 2015 by the Milan Tribunal (in two decisions: on 25 May and confirmed on 2 July), decisions also upheld by the Turin Tribunal in March 2017, while in May 2017 the Rome Tribunal lifted the ban on UberBlack (Chauffeur-driven service), which it had previously imposed in April 2017. It is also worth noting that some cases relating to Uber have been brought before the CJEU. In the case C-434/15 (Asociación Profesional Elite Taxi v. Uber System Spain SL), despite the fact that the case was brought before the Spanish Court to cease Uber unfair competition acts, the Advocate General (“AG”) Szpunar’s Opinion of 11 May 2017 dealt also with labour law issues. The AG held that Uber could not be treated as a “mere intermediary between drivers and passengers. Drivers who work on the Uber Platform do not pursue and independent activity that exists independently of the platform.” (para. 56). In the case C-320/16 (Uber France SAS) the AG reaffirmed the same position in his Opinion of 4 July 2017 (paras. 16-17).

More interestingly in relation to the issues dealt with in this post are the legal disputes that gig economy companies have to face following challenges based on workers’ labour rights.

Hermes  is facing, on the one hand, an on-going dispute over employment status of some of its self-employed drivers, which should lead to a judgment at the beginning of 2018, and, on the other, is under the scrutiny of the UK Tax Authority (HRMC) on the employment status of the self-employed couriers who work for the company.

In October 2016, the London Employment Tribunal (“ET”) found that Uber drivers, when (i) the app is switched on, (ii) they are in the territory in which they are authorised to work, and (iii) they are willing/able to accept assignements, are working for Uber under a “worker” contract (para 86). The judges expressed their scepticism towards Uber’s claims to the contrary (para 87), stating that “[t]he notion that Uber in London is a mosaic of 30,000 small businesses linked by a common ‘platform’ is to our mind faintly ridiculous” (para 90). Moreover the tribunal held that the Uber driver’s right to be paid “does not depend on his achieving set unit of production, […] the Uber driver performs ‘unmeasured work’. The hours of the unmeasured work in any pay reference period are to be computed in accordance with NMWR [The National Minimum Wage Regulations 2015], reg. 45. In the ordinary case, the relevant hours are the ‘hours worked’ […].” (paras. 126-127). Uber has appealed this judgment and on 10 November 2017 the Employment Appeal Tribunal (“EAT”) dismissed the appeal confirming the ET’s findings. Uber declared that it will appeal the EAT decision.[15]

Also crucial was the February 2017 UK Court of Appeal decision on ‘self-employed’ plumbers, who, having worked for several years exclusively for Pimlico Plumbers, were entitled to workers’ rights. The case is now before the Supreme Court. Legal disputes are taking place also in other European Countries: early this month (October 2017) six Foodora riders took the company to the Turin Tribunal (Employment Section) in Italy, arguing that they were not self-employed and were instead entitled to proper workers’ rights. These riders were fired following their protests against bad working conditions, in particular low salary.[16] 

In the USA, litigation is helping the cause of gig economy workers. A 2015 Seattle City Council legislation (which allows drivers of app-based company such as Uber, to form unions and to have collective representation over fair working conditions) has been challenged twice in August this year: firstly by the US Chambers of Commerce, of which Uber is member, because it would stifle competition, and, more recently, by a group of 11 drivers, on the ground that it is against federal labour law and the right to free association. In both cases the US District Judge dismissed the challenges, but the parties declared they would appeal.[17] Moreover, a North Carolina Federal Court granted, in July this year, preliminary class action status to a minimum wage and overtime lawsuit filed by drivers working for Uber under the Fair Labour Standards Act. The main aim of the class-action is to challenge Uber misclassification of drivers as independent contractors. Around 18,000 drivers who opted out of arbitration are eligible to join the class-action.[18]

 

5.      The EU approach

The gig economy workers’ quest for rights reaches beyond national law. The EU Commission declared on 25 September that, in order to modernize legislation on employment contracts, it has started consultation with trade unions along with employers. The EU Commission is also moving forward the so-called European Pillar of Social Rights (“EPSR”), which consists of 20 key principles relating to equal opportunities and access to the labour market, fair working conditions, and social protection and inclusion.

One of the concrete aims of the EU Commission is to extend the scope of the directive on employment contracts (Council Directive 91/533/ECC, also known as the Written Statement Directive, which sets an obligation on the employer to provide, within two months from commencement, essential written information about the contract or employment relationship) to on-demand, voucher-based and platform workers.[19] Moreover the EU Commission would propose a new rule, which could “establish some basic rights such as the right to a degree of predictability of work for workers with very flexible contracts or the right to a maximum duration of a probation period.”[20] It has been noted that, on the one hand, the Commission proposal might raise costs for companies like Uber but, on the other, the protection for workers might not be applicable to self-employed workers, creating “a loophole for employers such as Uber and Deliveroo.”[21]

 

6.      Concluding remarks

The technology-driven economy has brought numerous advantages to our everyday lives. It is however crucial that these advantages for consumers are not to the detriment of workers involved in the service offered. Similarly, flexibility at work is not tout-court a negative aspect, if independence is a genuine choice rather than an imposition by the employer, and provided a certain floor of rights is guaranteed. As we have seen, through litigation and action by major political stakeholders, new solutions are on their way and will hopefully bring fair and decent working conditions to people involved in the gig economy.


[1] The Economist, "Workers on Tap", 30 December 2014.

[2] Leslie Hook, "Year in a word: Gig economy" (The Financial Times, 29 December 2015).

[3] Sarah O’Connor, "When Your Boss is an Algorithm" (The Financial Times, 8 September 2016).

[4] Business, Energy and Industrial Strategy Committee, Meeting (10 October 2017).

[5] Cecilia Saixue Watt, "‘There’s no future for taxis': New York yellow cab drivers drowning in debt" (The Guardian, 20 October 2017). See also BBC, "Uber cars outnumber yellow taxis in New York City", 19 March 2015.

[6] McKinsey Global Institute "Independent Work: Choice, Necessity, and the Gig Economy" (October 2016) p. 7-8.

[7] Matthew Taylor and others, "Good Work: The Taylor Review of Modern Working Practices" (July 2017), p. 42.

[8] Transport For London, "Notice 13/17: Licensing decision on Uber London Limited" (22 September 2017).

[9] Sadiq Khan, "Londoners’ safety must come first" (The Guardian, 22 September 2017).

[10] Gwyn Topham, "Uber Launches appeal against loss of London licence" (The Guardian, 13 October 2017).

[11] Katrin Bennhold, "London’s Uber Ban Raises Questions on Race and Immigration" (The New York Times, 2 October 2017).

[12] House of Commons, Work and Pensions Committee, "Self-employment and the gig economy" (1 May 2017) para 13.

[13] As far as the fist point is concerned, the Deliveroo representative held that, practically speaking, that is a clause that they would not enforce, However the Report points out that “[…] to an average worker with little or no understanding of employment law, the intended deterrent effect is clear.” See House of Commons, Work and Pensions Committee, "Self-employment and the gig economy" (1 May 2017) para17 and fn 15.

[14] Business, Energy and Industrial Strategy Committee, Meeting (10 October 2017).

[15] Sarah O’Connor and Aliya Ram, “Uber loses appeal in UK employment case” (The Financial Times, 10 November 2017).

[16] Federica Cravero, "Torino, sei rider fanno causa a Foodora: Eravamo dipendenti, licenziati illegalmente" (La Repubblica, 18 October 2017).

[17] Gene Johnson, "Federal Judge clears way for Seattle Lyft, Uber drivers to unionize" (The Seattle Times, 25 August 2017). See also Jeremy B White, "Judge dismisses lawsuit seeking to block law allowing Uber and Lyft drivers to form unions" (The Independent, 2 August 2017).

[18] David Streitfeld, "Uber Drivers Win Preliminary Class-Action Status in Labor Case" (The New York Times, 12 July 2017).

[19] EU Commission press release, "Moving forward on the European Pillar of Social Rights: Commission continues work on fair and predictable employment contracts", 25 September 2017.

[20] EU Commission Fact Sheet, "Commission continues work on fair and predictable employment contracts – Questions and Answers", 25 September 2017.

[21] "EU seeks more protection for Uber-style jobs", (Reuters, 24 September 2017).

 

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