Digital gig platform’s worker classified as an employee and not self-employed

The case at question

On 25 January 2022, the Danish Tax Assessment Council issued a ruling upholding the Danish Tax Agency’s advance tax ruling (in Danish: “bindende svar”) in which the Danish Tax Agency determined that a person working courier jobs for a digital gig platform should be considered an employee and not self-employed. This is contrary to the view of the digital gig platform that their couriers are self-employed delivery partners.

In the advance tax ruling, the Danish Tax Assessment Council identified the following four decisive factors:

1. The courier has not incurred expenses in excess of what is normal for employee relationships. In this respect, it was taken into account that the courier has only incurred expenses for a bicycle, a mobile phone, and possibly a thermal bag, if this is not borrowed from the digital gig platform. Furthermore, the Danish Tax Agency does not consider the courier to have assumed an independent financial risk.
2. The Danish Tax Agency attached significant weight to the fact that the digital gig platform has considerable power of instruction over the courier and that the digital gig platform has laid down several general and specific instructions for the performance of the work.
3. The Danish Tax Agency further pointed out that the work relation has a continuous character, and that the remuneration is paid periodically, similarly to piece-rate pay.
4. The fact that the courier does not have fixed working hours, or an ordinary notice period cannot lead to a different result according to the Danish Tax Agency.

Legal consequences

Rulings by the Danish Tax Assessment Council can be appealed to the Danish National Tax Tribunal which may in turn be brought before the regular Danish courts. It has not been disclosed whether the ruling in this case will be appealed.

The ruling does not have any direct legal effect on third parties who are not a party to the advance tax ruling, however, it does provide for guidance as to how the Danish Tax Agency will assess similar cases going forward.

For the digital gig platform in question and other similar service providers operating in Denmark, the ruling therefore means that such companies may have to reassess whether their workers are to be classified as employees or self-employed persons, taking the factors above into account.

If workers are in fact to be considered employees, the companies will have to pay withholding taxes (in Danish: “kildeskat”) and will therefore have to withhold part of the worker’s renumeration. Payment of withholding taxes in Denmark is the liability of the company.

Additionally, the ruling may also lead to the Danish Tax Agency claiming payment of withholding taxes back in time from the digital gig platform in question, and potentially other platforms as well.

Whether the digital gig platform will be able to recover the withholding taxes from the workers will depend on the individual agreements but considering that there is usually a large turnover of gig workers, it will in any case likely prove difficult to collect the money from all past and current workers. The withholding taxes to be paid may constitute a significant amount.

For the couriers, the ruling means part of their future pay will likely have to be withheld by the digital gig platforms.

Labour and social rights

In Denmark, a person’s classification in relation to tax law does not affect the person’s classification in relation to employment law, although the two usually correlate. Employee status would mean that existing labour and social rights should be observed by the employer, in this case the digital gig platform.

Such rights include but are not limited to the right to a minimum wage where applicable, collective bargaining, working time regulations, occupational safety and health protection, equal pay between men and women and the right to paid leave, as well as improved access to social protection against work accidents, unemployment, sickness, and old age.

These may be new aspects that digital gig platforms operation in Denmark need to observe.

New legislation

The ruling by the Danish Tax Assessment Council comes shortly after a new proposal for an EU directive on improving working conditions for gig platform workers by the EU Commission. As part of the proposal, the EU Commission has provided a list of criteria to determine whether a gig platform exercises control over a person, and therefore be presumed to be an employee. The five criteria to be applied to the gig platform are:

1. Determining the level of remuneration or setting upper limits.
2. Supervising the performance of work through electronic means.
3. 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.
4. Setting specific binding rules with regard to appearance, conduct towards the recipient of the service or performance of the work.
5. Restricting the possibility to build a client base or to perform work for any third party.

At least two criteria need to be fulfilled for platforms to be presumed to be employers.

The Danish government is also currently looking into the possibilities of preparing a national proposal for the regulation of digital gig platforms.