Our international Employment Group takes a look at the uberization of the workforce across our jurisdictions
The Belgian employment market is struggling with disruptive economic systems such as the so-called platform workers (Uber, Deliveroo, Airbnb, etc.). Tensions are mainly caused by a legal framework that is not accommodating to these new business models. Stringent provisions requiring companies to comply with working schedules, minimum hours, minimum salaries and burdensome administrative procedures are in strict contrast to the flexibility created by the new economic models.
In order to escape the rigorous legal framework applicable to employment relationships, companies in Belgium seem to switch to self-employed freelancers to perform these services. However, recourse to self-employed contracts is not risk-free. In principle, parties are free to choose between an employment relationship and a self-employed relationship. This choice must correspond to the manner in which the work is performed. For example, in the case of a self-employed relationship, the relevant person should be free to organise their work and working time and there can be no hierarchical supervision. If this isn't the case, the contract is likely to be deemed an employment contract, which carries serious financial implications if breached.
Recently, Deliveroo, which formerly worked with day-contracts through an external service provider, switched to using freelancers. This led to employee protests, which were supported by the unions. Some of the workers even went on strike refusing, delivery requests and asking restaurants to disconnect from the popular takeaway app. Following this, the Belgian Minister of Employment assembled a commission to investigate whether the platform workers are indeed to be considered as self-employed freelancers. Prima facie, there seems to be no issues. However, underlying methods may restrict the freedom to organise work and working time e.g. requesting cyclists to work certain hours, algorithms aimed at piloting the cyclists by offering incentives, etc.
The Gig economy and other innovative economic models have the potential to significantly alter the Czech labour market. Because of this, the Czech Government has started to analyse the regulatory challenges of the sharing economy, including an assessment of the impact on Czech labour law. Aware of the huge opportunity the gig economy brings, the government is working to achieve a balance that would allow the coexistence of both traditional and new economic models.
According to the governmental analysis, a service provider (e.g. a person who walks a dog) is not seen as an employee of a service intermediary (i.e. the digital platform) because the services provided are primarily done so in the free time of such providers to earn extra money (not their regular income). Thus, the Czech government has classified service providers as freelancers rather than employees.
Nevertheless, if the service provider's activities exceed a certain level, regulation is unavoidable. One of the approaches considered by the Government is to establish exceptions from the Czech Trade Act that would define which activities of the gig economy are not considered to be a trade business activity. The regulation of activities of gig economy service providers exceeding the tolerated level would require either (i) adaption of the current legal framework and widening of the definition of a freelancer or (ii) new law generally regulating the area of sharing economy and subsequent adaption of current sector legislation (e.g. accommodation and transport). Both outlined regulatory changes are still subject to discussion as the economic impacts of both approaches have not yet been fully analysed.
By Martina Kopcova, Associate, Prague
In January 2018, the Eastern High Court in Denmark upheld a judgment stating that four Uber drivers were providing illegal taxi driving by providing services through the Uber app. One driver received a fine of approximately EUR 65,000. The drivers have now applied for leave to appeal to the Danish Supreme Court. There are also pending cases against 1500 other drivers who await the result of the trial case against the four drivers.
This judgment illustrates that in Denmark there is an increased focus on the legality of the so-called "gig-economy". In the last year an increasing number of "gig economy"- platforms have been rolled out in Denmark, including the well-known AirBnB and a cleaning service-app called "Happy Helper" where users can hire a private individual to clean their home.
The main issue under discussion in Danish employment law is whether the persons providing the services should be considered as "employees" or "self-employed". There are not as yet any categories "in between" these two under Danish law, though this has not yet been tested before the Danish courts and was not part of the aforementioned Uber case. The current position under Danish law for now is that the private persons providing the services are considered to be "self-employed".
In October 2017, the Danish Government presented a strategy for ensuring growth within the gig-economy. The Danish Government states: "The strategy includes a number of initiatives that will make it easier to be part of the economy and more attractive to consumers while ensuring tax payments". It is noted that the strategy only mentions the term "user" about the persons providing the service and thus does not go into any considerations on whether the persons should be considered as an employee or self-employed.
By Mia Boesen, Associate, Copenhagen
The societal trends of uberization have influenced the employment field in Finland. In addition to other flexible ways of working, platform work has increased in popularity. It presents itself in many forms with different levels of involvement from the companies providing the platforms. The amount of contact between the individual providing the work contribution and the party seeking services also varies.
The changes have raised new employment law issues. There is uncertainty among employees, employers and lawyers alike on who is considered an 'employee'. It is a struggle to draw the line between employee and self-employed in many cases, but there is no legal concept in between. The legal definition of an employee is statutory: if the actual situation fulfills the criteria of an employment relationship, the employer must comply with all applicable employment legislation and take care of many different payments and other responsibilities. Breaches may lead to serious sanctions.
Finnish employment legislation, which can be considered protective of employees and not very flexible, has not been prepared for uberization and the overall revolution in working life. However, some legislative changes to increase flexibility are under way, such as reforms concerning working time, annual holiday and so-called zero-hour contracts. It is doubtful if the changes are adaptive enough.
Other fields of law have also caused difficulties for people trying to utilize new forms of work. For instance, Uber itself has clashed with the traditional taxi business. Following an infamous Finnish case in 2017 where an Uber driver was criminally convicted by the Supreme Court, Uber was gradually pressured to cease its operation for a year and wait for the new Road Traffic Act of 2018 before reopening the business. Even though the case did not concern the driver's employee status, the judgment indirectly indicated that the driver was not considered an employee.
Many questions remain unanswered. Still, one thing is certain – continuing changes in working methods are inevitable. The legislative framework in Finland must adapt further to provide a balanced and predictable environment for different forms of employment to thrive.
By Nora Jaari-Hakola, Counsel, Helsinki
Independent workers and freelancers currently represent around 10% of the overall working population in France, or 2.8 million people in 2017.
While some professions have always preferred to operate under a non-employee status (e.g. sales agents, business consultants, agriculture, lawyers, doctors, accountants), other business sectors which traditionally had employees are increasingly now turning to freelancers (e.g. IT consultants, designers, translation services, drivers, construction, nurses).
Although we are still far from the “end of the employment agreement”, the uberisation of the French working population has led to similar concerns as elsewhere in Europe: namely, how can we ensure that independent workers benefit from the same rights and protection - especially in terms of health and safety - as employees, without jeopardising the agility and flexibility offered by these new types of collaboration?
This topic is one of President Macron's priorities and discussions are currently taking place regarding the eligibility of independent workers to unemployment benefits.
In parallel, private initiatives are taking place in France, such as the set-up of specific trade unions (e.g. a local union dedicated to food delivery bikers) or an increasing number of private platforms offering services to freelancers including health insurance or shared offices.
Finally, it is worth noting that the French Social security body (Urssaf) has embarked on a fight against independent work – which generates much fewer social contributions for the French State – and we can anticipate a rise in legal actions initiated by the French authorities rather than by the gig-economy workers themselves.
By Nathalie Devernay, Partner, Lyon
The term “gig economy” describes the changing model of traditional workplaces, which has a big impact on employment law. Work is no longer a “place to go”, "9 to 5" working times are history, reporting lines and organisational structures have evaporated and work is often outsourced to consultants.
German employment law uses the organisational unit of a business (“Betrieb”) as the main reference for several employee rights such as protection against dismissal or co-determination. This formerly clear understanding of what forms a business is now being challenged and needs to adapt. In this context, the long standing employee vs freelancer debate becomes increasingly relevant. In Germany the classification of employees is based on similar criteria to other jurisdictions (integration into the employer’s work organisation, subject to employer’s work directions, economically dependent on the employer, etc.). However, the legal consequences are much more severe and have an impact not only on the employment status but also on social security and tax laws, including relevant financial exposure and criminal liability for the “employer” in case of miss-classification. For example, in relation to working time, the German Working Time Act requires an 11-hour break between work days and non-compliance is subject to administrative fines of up to EUR 15,000. Such laws and fines contradict the idea of more agile working and moving away from traditional work forms.
By Catharina Klumpp, Counsel, Dusseldorf
While Hungary may not be in the frontline of revolutionising the workplace by utilising the sharing economy model, the number of freelancers is ever increasing, especially among fresh graduates and older, more experienced professionals who have become somewhat disillusioned by the frames of the traditional employment relationship.
The legal issues with the uberization of the workforce in Hungary are similar to that of other countries. Workers are not recognised as employees and therefore are stripped of the minimal protective requirements that Hungarian labour law provides, including a statutory minimum wage (a monthly gross amount of approximately EUR 445 / EUR 520 depending on the position), a restriction on working hours (a maximum of 40 hours weekly), and social security contributions (partially paid by the employer).
Freelancers are mainly "employed" in alternative types of employment by different types of civil law agreements including mandate, consultancy or service agreements. Parties are not entirely free to choose the applicable legal relationship however, as Hungarian authorities, especially the Tax Authority, retain broad powers to reclassify such agreements into employment relationships depending on several aspects of the relationship (e.g. right to give instructions, place of work, working hours etc.). While not necessarily the most frequently used by the sharing economy, Hungarian law recognises temporary agency work as well and such workers qualify as 'employees'.
Freelancers usually mention flexibility as one of the key benefits of working as a freelancer. Indeed, such high degrees of flexibility are unimaginable in a traditional employment relationship, however the Hungarian Labour Code creates opportunities for employers and employees to somewhat ease the boundaries and restrictions of the employment relationship. Examples include the possibility of tele-working (full-time home office) and flexible work schedules (employees are free to allocate all working hours).
The emerging importance of the Hungarian sharing economy is evidenced by the establishment of the Hungarian Sharing Economy Association (HSEA) in March 2017. The aim of the HSEA is to create a professional platform that supports the development of the sharing economy. Members of the HSEA include Oszkar the telecar company (also known as Motar) and more traditional companies like Vedd Bérbe.hu (renting various types of items) and Barion (smart payment provider and issuer of electronic money) etc.. Uber is not present on the Hungarian market since suspending its activities in July 2016 after changes were made in the applicable legislation with the intent to regulate Uber drivers and to protect the drivers of traditional taxi companies.
By Karim Laribi, Associate, Budapest
Technological innovation is leading to rapid changes in the labour market, giving birth to new forms of work which were unimaginable until a few years ago. Like every revolution, the fast tech and IT development is changing our social environment and, therefore the way we work.
Italian labour law is not able to keep up with the pace of these rapid and in some way unpredictable changes, and is stuck with the traditional types of employment relationships: subordinate or autonomous.
Gig employment relationships do not fall within these prescribed categories, creating a number of problems.
The first issue relates to insurance and social security. In the absence of specific rules, the worker is considered as autonomous and, therefore, he/she – and not the employer – must pay for sickness and maternity leave, for disability and for his/her own pension. On top of this, the worker must also pay for the fulfilment of these burdens, which in contrast are borne by the employer in the case of subordinate employment.
It goes without saying that this liability may work for certain independent contractors (like lawyers, architects and accountants) but it does not suit those who deliver food for a few euros per day.
Secondly, the Italian legal frame for trade union activities was created with only the traditional subordinate employment relationship in mind and therefore these "new" workers are excluded from any kind of protection and do not have any collective agreement in force.
Whilst several problems exist, flexible working models do create opportunities and there are many benefits: the ease of matching supply and demand of work, the reduction of the costs of transactions, the flexibility of working-time and, not least, the new opportunities for people who lost jobs that are no longer available in the new economy. Providing an innovative set of rules for these new scenarios will be the most difficult challenge for the Italian legislator.
By Giulia Bianchini, Associate, Milan
How should the Netherlands deal with the move towards a gig economy in which employees are often replaced by independent contractors? For a few years, a debate has been ongoing about striking an acceptable balance between allowing proper independent contractors to provide their services, while ensuring that quasi-independent contractors will be regarded as employees.
The legislator clearly struggles with this subject and one attempt to provide clarity, a new law introduced in 2016, has failed. Currently discussions are focused on what a suitable alternative would be. Part of the latest proposal from the government is that the main focus of the protection is aimed at independent contractors with a low hourly rate (probably between EUR 15 and 18); they will in most situations be considered as employees.
The text for a new proposal for a law is expected later this year, so it remains unclear whether this will be the way forward. If so, it will affect many of the companies that currently are eager to only use independent contractors. One example of such a company is the food-delivery company Deliveroo. Deliveroo is highly criticised at the moment for no longer employing employees, but only independent contractors. A former employee whose contract was terminated and who was only able to continue working for the company if done so as an independent contractor has started court proceedings to claim an employment contract. The discussion is thus going on at many different levels at the moment, but no workable long-term solution has yet been found.
By Hanneke Senden, Associate, The Hague
In Slovakia, the popularity of the gig economy can be seen by the multiple independent platforms providing opportunities to exchange goods and services. These platforms include debt/lending based crowdfunding, tutoring, home help and equipment hire amongst many other services. For such goods and services, it is not mandatory to receive a monetary reward, but in many cases, such as Uber, there is a possibility to earn some extra cash.
Slovakia, as with most Central European countries, is taking a rigid position regarding this issue, distinguishing between two positions:
It is necessary to take into consideration the fact that the discussion about creating a new regime – hybrid employment - is coming at a time when Member State governments are reacting to the proposal for a Directive of the European parliament and Council on transparent and predictable working conditions in the European Union.
Currently only a proposal of this Directive is available, there are no further responses or suggestions that could at least indicate the direction the Slovak Republic will take regarding the gig economy.
By Bibiana Mozolova, Associate, Bratislava
New forms of rendering services based on digital platforms, which create the basis of the growing gig economy and contribute to the so-called uberisation of work, have opened a new chapter in the discussion about self-employment in Poland.
There is no reliable data on the number of self-employed individuals (freelancers) in Poland, but according to statistics published by the European agencies and the Polish Central Statistical Office (GUS), approximately 18-20% of professionally active individuals in Poland work based on service agreements and B2B contracts (the third highest figure among EU countries). Some professions are dominated by freelancers (e.g. IT, translation services, taxi drivers, healthcare and legal services), while in other sectors employers have tried to cut operating costs by forcing their staff to transfer to B2B contracts.
Over the years, Polish governments have introduced regulations to reduce the level of self-employment in favour of employee relationships. This stemmed from the government's aim to secure a steady flow of social security contributions to the State budget.
On the other hand, Polish court decisions do not provide any clear answer as to who should be considered as freelancers. The views of the Polish Supreme Court on what the characteristics of an employment relationship are have evolved and now the line between self-employment and non-traditional working patterns is more blurred than ever.
Poland may soon face a turning point in the above dispute as the government prepares revolutionary changes to Polish labour law. One of the crucial issues will be completely new forms of rendering services, i.e. new types of employment contracts, which will address the need for more flexible working arrangements (including employment contracts similar to "zero hours" contracts). It's likely these will replace the more popular service agreements, reserving self-employment for only highly-specialised services. Another change is likely to be the introduction of the statutory rule that an individual is considered an employee unless the company or the alleged employee proves otherwise.
In recent years, the business model known as "crowdsourcing", which allows clients and freelancers to connect through digital platforms, has made a significant impact on a number of sectors and markets.
This has led to a revolution of the organisational forms in which the companies operating under this business model render their services, and the hiring of their workforce, which relies heavily on the use of freelancer arrangements instead of traditional employment agreements.
These new relationships imply a number of specific features, such as higher degree of independence from the workers and blurred lines of supervision and management from the company. Moreover, the traditional indicators of existence of an employment relationship (such as the company receiving the direct benefits from the workers' services) may not be fully applicable to these new ways of provision of services. This reflects a shift away from the classic concept of employee, which makes it harder to determine whether we are in front of an employment relationship, or not.
In Spain, this matter has gained special attention due to recent events, such as the strike by Deliveroo's riders in June 2017, or the actions taken by the Spanish Labour Inspectorate in the Catalonia region against Uber's drivers qualifying as freelancers. Preliminary rulings by the Spanish Courts have not been in favour of the interests of these new players so far. We will see how this evolves and whether the Spanish employment laws deal with new ways to render services.
By Miguel Pastur, Partner, Madrid
Gig economy – a challenge to Swedish employee protection legislation and the so called "Swedish Model"?
In Sweden, the trend of a new and more flexible gig-economy is emerging, with an estimated 12% of Swedes working within this "new" type of economy. Locally developed platforms include pod taxi service Bzzt, transport service BagHitch, and food delivery service Foodora. Interestingly, parallel to this, membership rates of Swedish trade unions are declining.
Internationally, employment protection in Sweden has a reputation of being very strong, largely due to the so called "Swedish Model" (entailing that conditions for each labour sector are determined by the trade unions and employer associations). However, while the concept of the gig-economy is moving forward in Sweden, the current Swedish Model and employment legislation is not.
However, Swedish trade union Unionen is trying to adapt to the changing labour market with an online portal that could serve as a model for others: “We propose creating a platform institution tasked to create digital standards and guidelines for firms wishing to abide by the rules and norms established by [the Swedish] society”. This would be owned by the relevant trade unions and (platform) companies bound by collective agreements, but is still a work in progress.
By Dasha Gafur (Associate) and Madelene Ackheim (Paralegal), Stockholm
The growth of the gig economy has raised new questions in the debate as to whether someone is genuinely self-employed. We are increasingly seeing businesses balance a blended workforce including employees with non-traditional working patterns: consultants, zero hours workers and individuals providing services via intermediaries such as personal service companies or employment businesses. The key question that has arisen in cases like those against Uber, CitySprint UK Ltd and Pimlico Plumbers Ltd is whether people providing services have "worker" rights, even where they are described in their contracts as self-employed.
The majority of the high profile cases in the UK have so far ruled in favour of the workers. This means they have additional rights, including entitlement to national minimum wage, paid holiday and rest breaks and, in some cases, pension rights. The Supreme Court is currently considering an appeal by Pimlico Plumbers Ltd against lower courts' decisions that a plumber, Mr Smith, engaged by the company was a worker. So far, the Employment Tribunal and Employment Appeal Tribunal have deemed that his fettered right of substitution meant Mr Smith had to provide his services personally and his integration into the company was inconsistent with the argument that Mr Smith was self-employed.
Case law is evolving at a greater pace than we have seen previously, as the law tries to keep pace with the changing nature of working practices. It is hoped that the Supreme Court's decision will provide some clarity and it seems legislative changes may well follow. In response to the recommendations of the Taylor review (the independent review commissioned by the government) published in summer, the government has launched four separate consultations to seek views on agency workers, employment status, employment rights and transparency in the UK labour market and has indicated that it intends to codify the employment status test to make it easier to correctly categorise individuals as employees, self-employed contractors or workers.
By Kate Hurn, Senior Associate, London
In December last year, there was an important legal development in the employment law/gig economy space.
The Fair Work Commission (FWC), Australia's employment tribunal, decided that a former Uber driver was not an employee and could not therefore bring an unfair dismissal claim against the ride sharing behemoth.
In Kaseris v Rasier Pacific V.O.F , the FWC considered how to interpret gig economy work within the traditional and well-established parameters used to determine whether a worker is an employee or a contractor. The FWC went through the process of considering the common law multi-factorial test, where no single factor is solely determinative and considered factors such as control, risk, right to delegate work, and provision of tools and equipment.
Despite this consideration, the FWC was most persuaded by Uber's argument that the contract of employment, at its core, is about a work-wage bargain, and that the relationship between a driver and Uber lacked this fundamental element. The work-wage bargain can best be described as the contractual exchange, whether express or implied; in which there is an offer of a wage, in exchange for which the worker agrees to work.
In reaching his conclusion, the FWC Deputy President was clear in his view that until legislation changes to keep pace with the gig or digital economy, the courts will have no choice but to continue to apply the same "outmoded" criteria.
The gig economy is booming in China. In 2017, online food delivery platforms provided services to 256 million people with the market estimated to be worth over 37 billion US dollars. Ride-hailing giant, Didi has accumulated some 21 million licensed drivers on its platform, while its rival, Uber, had 7 million worldwide. Despite its momentum, the gig economy itself and those participating in it are facing certain legal challenges.
The biggest challenge concerns the nature of the contract the companies in the gig economy sign with freelancers. In several cases, although the companies did not enter into a labour contract with the freelancer, the courts ruled that there existed a de facto labour contract and that the companies should therefore bear certain liability.
This challenge is reciprocal. For freelancers, first, often the platform is unwilling to sign a labour contract with them, in an effort to evade legal responsibilities. Second, if the freelancer enters into contracts, of any nature, with several different platforms, he or she risks being recognised as having a part-time or service relationship with those platforms, and therefore may lose the benefits guaranteed by a labour contract.
By Ying Wang, Partner, Shanghai
Hong Kong courts have not yet considered whether individuals who provide their services on an on-demand basis are employees, independent contractors or a hybrid form of worker.
If these individuals were to be classified as employees, they would be entitled to a host of statutory rights. In determining an individual's employment status, the Hong Kong courts examine all features of the parties' relationship and traditionally focus on factors including whether the company provides work equipment, whether the company has an obligation to provide work, whether the individual is obliged to work and whether the individual bears financial risk.
Unfortunately, a decision on the classification of these individuals seems less likely in the wake of the criminal conviction of a few Uber drivers in March 2017. This decision, which effectively outlaws the service, will discourage future claims as it is unclear if courts will process an individual's claim if such individual is not lawfully employed in Hong Kong.
While no definitive court decision is currently available, we have seen increasing challenge from these individuals regarding their employment status. Hong Kong employers managing a more diverse and less directly controlled workforce should be alert to new legal developments and in particular, whether the Hong Kong courts will follow the UK Uber decision and classify these individuals as workers, or the Australian approach that no employment relationship exists.
By Stephanie Wong, Associate, Hong Kong
Upcoming changes likely for the gig economy in Singapore
Earlier this year, the Tripartite Partners (the Ministry of Manpower, the National Trades Union Congress and the Singapore National Employers Federation) held a Public Consultation on Self-Employed Persons' Top Concerns in the Future Economy, and recently released their recommendations on self-employed persons, which have been accepted by the Government in principle.
Based on these recommendations, the likely changes on the horizon include:
These changes are targeted at providing protection for SEPs in Singapore. While the full extent and details of these changes have not been completely released, companies engaging SEPs on a regular or long-term basis, or which rely on SEPs as the main source of labour should be ready to review and update their practices to ensure that they are aligned with the upcoming changes.
All employment in the UAE must be approved and licensed by the applicable UAE governmental authorities. Currently, there are six UAE free zones which support applications for freelance work permits: Dubai Media City; Dubai Production City; Dubai Media City; twofour54 (in Abu Dhabi); and Fujairah Creative City.
A freelancer would have to apply for and obtain both a work permit and a residency visa. The net effect of obtaining a freelance work permit is that a person would be able to conduct work in his or her own name, rather than under the auspices of a corporate entity. The freelancer would further have to choose what licensed activities he or she will undertake under the freelance permit.
Another ancillary option is for a person to incorporate a free zone establishment (sole proprietorship) with any free zone (including those not listed here), and conduct commercial business through such establishment. Although not identical to a freelance permit, a free zone establishment will give an individual the freedom to conduct business in the UAE.
A person interested in part-time work will need to obtain a part-time work permit from the UAE Ministry of Labour, as well as obtain approval from the current and part-time employers.
By Saladin Aljurf, Counsel, Dubai