Platform work: Stricter regulation on the horizon

In an article on this website, we reported on the European Commission’s efforts towards stricter regulation of platform work (work for digital labour platforms). The main purpose of these efforts is to bring more platform workers into a social security system and broadly expand their rights. The basis for this was the proposal for a directive on improving working conditions in platform work (COM(2021) 762 final).

Elements of the directive proposal

The proposal’s core element is the intent to legally classify persons performing such work as employees, in contrast to current widespread practice, if two of the following activities are conducted:

1. effectively determining, or setting upper limits for the level of remuneration;
2. supervising the performance of work by electronic means;
3. effectively restricting the discretion to choose one’s working hours or periods of absence, to accept or to refuse tasks or to use subcontractors or substitutes;
4. requiring the person performing platform work to respect specific binding rules with regard to appearance, conduct towards the recipient of the service or performance of the work;
5. effectively restricting the possibility to build a client base or to perform work for any third party.

There are many situations in which these criteria are probably fulfilled, which means that the workers are to be classified as employees of the platform. Platform operators can rebut this legal presumption, but the burden of proof, and thus ultimately the expenditure of resources and the risk, will be on the digital labour platform. For more of the significant content of the proposal and a short contextual explanation, please click here.

Progress in Brussels

Although our previous article was written under the assumption, not least due to similar efforts on the part of the German Federal Ministry of Labour and Social Affairs, that this project would be pursued with a certain urgency, the opposite happened. The project seemed to fall into a coma, but now shows signs of waking up.

According to a press release from the European Council and the Council of the European Union, negotiators in Brussels have agreed on a draft directive that will still have the abovementioned classification as employees as its core component, making it nothing more and nothing less than a frontal assault on the current business model of many platform operators. The draft is also a game changer with significant impact on differentiating between employment and self employment. This differentiation is currently being made based on an overall weighing of all criteria on a case-by-case basis. Implementation of the directive would mean that this differentiation would be made based on a specific list of criteria, so that in the vast majority of cases, labour platform workers will be classified as employees subject to mandatory social security coverage.

For this reason, it is advisable to closely monitor the results of the consultations among all Member States’ EU representatives planned for this week. This situation is unusual in the sense that there is no consensus that the EU Council and the Parliament will definitely give their consent, which is necessary for passage. The position that each Member State will take remains to be seen. Many consider additional workers becoming part of the beleaguered social security systems to be desirable. However, in the current economic environment, consideration will also have to be given to reducing hindrances to investment and the possible deterrent effect the directive could have on investors. Investors are probably also watching these developments intently because classifying everyone who works for a digital labour platform as an employee would have far-reaching consequences for the profitability of many platforms, and these consequences would often be negative.

In any case, we will continue to closely monitor these developments for you and report all changes here.