The European Union is poised to regulate the gig economy, the economy of jobs that includes home deliveries, chauffeured rentals and other jobs performed under algorithms. EU governments have agreed on a draft directive which is now being discussed with the European Parliament with a view to final adoption. The regulation provides that if at least three of the seven identified criteria are met, platform workers are to be considered employees and no longer self-employed, with all associated legal, social security and remuneration guarantees applied. The proposed regulation also includes transparency and monitoring obligations for platforms regarding the use of artificial intelligence and other automated systems in the administration of employment relationships.

The gig economy sector in Europe

Employment in the gig economy has risen hand-in-hand with the growth of companies like Deliveroo, Uber, Glovo and JustEat, which have nearly quintupled their revenue from $3 billion to $14 billion in five years. Today, digital platforms employ 28.3 million people in Europe and the EU estimates that number will rise to 43 million by 2025. Ultimately, this rapid growth has resulted in regulation being overwhelmed, or at least preempted. With the proposed directive, the EU governments want to make up for this delay, which particularly affects the contractual framework conditions for employees. Currently, 90% of European platform workers are self-employed, every other case earning less than minimum wage and are not paid for the hours they wait for a job (41% of the total hours). However, the EU suspects that one in five workers is misclassified: In other words, five million workers in the gig economy are actually employees. How do you recognize them?

The seven subordination criteria

The draft directive sets out seven criteria for identifying “bogus self-employed”: Three are sufficient to trigger a legal presumption of subordination, which the platform is responsible for refuting. Otherwise, the employee will be considered an employee in all respects, with all the necessary protections and increases in costs. The seven notices include the platform setting maximum wage limits, specifying specific attire, monitoring work, restricting the ability to choose working hours and days off, restricting the ability to refuse orders and build your own customer base or to provide Services for Competitors. It is not difficult to imagine that many deliverers and drivers will end up working for the platforms under the guise of this regulation. With what consequences?

What is changing for the platforms

The reclassification from self-employed to employee risks a significant economic impact on gig economy balance sheets. “The text voted on today does not provide the necessary legal certainty to ensure that genuine self-employed people are not forced into employment,” Uber said in a statement. Platform staffing costs are expected to increase, which will reduce the investment margin in marketing initiatives and likely encourage further mergers between operators in different markets. However, the platforms could also be tempted to pass on the cost increase to end users or to the companies that use their services. For example, according to a survey of 40,000 businesses conducted by Inapp, grocery delivery platforms charge an average commission of 18.2% from the approximately 19,000 Italian establishments that use them for the collection and home delivery of orders. For every third restaurateur, the costs for the service via app exceed the 20 percent limit.