On 9 December 2021, the European Commission (“Commission”) published a proposal for a Directive on improving conditions in platform work (“Platform Work Directive” or “PWD”). This initiative adds to the EU’s portfolio in the area of platform regulation but contrary to other instruments that deal with platform-to-business and platform-to-consumer relations (e.g., the Digital Markets Act, the Digital Services Act), the proposed PWD focuses on employment matters. It is part of a package that also comprises two soft law texts, namely a Communication setting out the EU’s approach to platform work, and Guidelines clarifying the application of EU competition law to collective agreements of solo self-employed people. The PWD will protect and enhance the rights of people working through digital labour platforms. Concretely, the proposed PWD pursues the following objectives: (a) ensure that people working through platforms can obtain the correct employment status and gain access to the existing labour and social protection rights, and (b) ensure fairness, transparency and accountability in the platform work context.
The first objective will be attained by creating a framework to tackle employment status misclassification in platform work (where workers are often wrongly treated as self-employed contractors). The second objective will be achieved through the introduction of new transparency rules (e.g., rules that regulate the use of algorithms by digital labour platforms) and material rights for people performing platform work (e.g., the right of workers and self-employed individuals to contest automated decisions). The legislative process has not been concluded yet; the trilogue negotiations on the PWD have started on July 11th). With the EU elections taking place in less than one year, there is not much time to finalise the text. However, this is exactly what may prompt the EU institutions to reach an agreement sooner rather than later. Clearly, the outcome of trilogues will be different from the original proposal. However, the novel features the Commission proposes to add to the existing legal framework (e.g., a rebuttable legal presumption to determine employment status) are unlikely to be abandoned.
This blog post focuses on arguably the most important aspect of the PWD proposal, which is the establishment of a rebuttable legal presumption to determine whether there is an employment relationship between a digital labour platform and an individual. It examines the conditions under which an employment relationship is deemed to exist; interpretation challenges that may arise; and how to address such challenges in order to ensure that only those platforms acting as employers fall under the scope of the relevant provisions.
Developments preceding the publication of the PWD proposal
Before examining how the proposed PWD seeks to address the misclassification of employment status, a brief discussion of the developments that influenced the (rationale for) the proposal is warranted. The emergence of the so-called gig economy, that is, a labour market involving independent contractors rather than full-time employees, has given rise to legal disputes that the Court of Justice of the EU (“CJEU”) and several other courts were called on to resolve. The reason why these legal disputes arose is explained in the proposed PWD as follows: “[P]latform work […] can blur the boundaries between employment relationship and self-employed activity, and the responsibilities of employers and workers”.
Misclassification of the employment status has consequences for the persons affected, as it is likely torestrict access to existing labour and social rights.”
Clearly, the CJEU had the opportunity to rule on the definition of “worker” on many occasions in the past (and long before the emergence of digital labour platforms). Throughout its case law, the CJEU has developed a legal test for assessing the existence of an employment relationship that it has applied consistently to cases concerning both online and offline work. According to that case law, the crux of the matter is to establish whether there is an element of direction, control, or legal subordination in the relationship concerned (see, for instance, here and here). If so, the individual cannot be regarded to act as a self-employed contractor. This assessment is conducted on a case-by-case basis with a view to determining whether the independence of the individual is fictitious (this is usually referred to as “the principle of primacy of facts”).
However, not all legal disputes reached the CJEU. In other words, many of those disputes were handled domestically. By the time the Commission published its proposal, more than 100 court rulings and 15 administrative decisions dealing with the employment status of people working through platforms had been adopted, with varying outcomes and different criteria. Against this background, the proposed PWD seeks to (a) resolve the uncertainty created by the legal patchwork discussed above, (b) level the playing field among Member States as well as between platforms and other businesses (i.e., businesses which have been subject to regulation that does not apply to platforms), and (c) avoid downward pressure on labour standards and working conditions.
Scope of the proposed PWD
The PWD would apply to “digital labour platforms”. A digital labour platform is defined in Article 2(1)(1) as “any natural or legal person providing a commercial service which meets all of the following requirements:
1. It is provided, at least in part, at a distance through electronic means, such as a website or a mobile application;
2. It is provided at the request of a recipient of the service;
3. It involves, as a necessary and essential component, the organisation of work performed by individuals;
The first two criteria may look familiar; they reflect the definition of an “information society service” laid down in the E-Commerce Directive and, more recently, the Digital Services Act. The third criterion establishes that a service provider falls in scope if it involves the organisation of platform work. In turn, the PWD proposal defines “platform work” as:
“any work organised through a digital labour platform and performed in the Union by an individual on the basis of a contractual relationship between the digital labour platform and the individual, irrespective of whether a contractual relationship exists between the individual and the recipient of the service.”
If a platform qualifies as a digital labour platform, this does not necessarily mean that it will be bound by all the obligations the PWD will establish. In fact, the PWD proposal establishes a graduated approach that distinguishes between digital labour platforms that control the performance of work and digital labour platforms that do not control the performance of work. The latter would mainly be bound by a tier of transparency obligations whereas the former would further be presumed to be employers, thereby being subject to a stricter regime. This is a sensible approach. The definition of a digital labour platform laid down in Article 2(1)(1) is arguably broad. In the absence of a graduated approach, platforms that only intermediate between customers and self-employed individuals without exercising control over the latter would qualify as employers. This would breach the principle of proportionality and go against the spirit of the Court’s case law according to which an employment relationship exists only where there is an element of direction, control or legal subordination. This brings us to the criteria under which a platform would qualify as an employer.
The rebuttable legal presumption that a digital labour platform is an employer
Article 4 of the proposed PWD establishes a rebuttable legal presumption that a digital labour platform is an employer if certain criteria are met. The Commission’s proposal listed five criteria and set out that an employment relationship should be deemed to exist if two of those criteria are met. The Council’s general approach (or “GA”) lists seven criteria (which are identical to the Commission’s proposal, but one was broken down into three components), laying down that three of them must be fulfilled. The proposed criteria are the following:
1. The digital labour platform determines upper limits for the level of remuneration;
2. The digital labour platform restricts the possibility to build a client base or to perform work for any third party;
3. The digital labour platform requires the person performing platform work to respect specific rules with regard to appearance, conduct towards the recipient of the service or performance of the work;
4. The digital labour platform supervises the performance of work including by electronic means;
5. The digital labour platform restricts the freedom, including through sanctions, to organise one’s work by limiting the discretion to choose one’s working hours or periods of absence;
6. The digital labour platform restricts the freedom, including through sanctions, to organise one’s work by limiting the discretion to accept or to refuse tasks;
7. The digital labour platform restricts the freedom, including through sanctions, to organise one’s work by limiting the discretion to use subcontractors or substitutes.
These criteria are discussed in more detail below. It is worth noting that the European Parliament (“EP”) establishes a looser approach compared to that followed by the Commission and the Council; the criteria it proposes would be taken into consideration in assessing whether an employment relationship exists (but without specifying a minimum number of criteria that should be met).
The digital labour platform determines upper limits for the level of remuneration
Based on the proposed PWD, a digital labour platform that sets maximum limits for the level of remuneration may indicate the existence of an employment relationship. The rationale for this criterion is fairly straightforward; upper limits could imply that the digital labour platform exercises control over how much an individual can earn, which does not characterise a genuine self-employed contractor. This criterion reflects Uber v Aslam where one of the parameters that determined the UK Supreme Court’s ruling that Uber is an employer was that “Uber sets the fare and drivers are not permitted to charge more than the fare calculated by the Uber app” [emphasis added].
However, what would the answer be if a digital labour platform set the lowest level of remuneration an individual may receive? Recital (23) of the proposed PWD arguably provides guidance on this matter by laying down that: “Ensuring correct determination of the employment status should not prevent the improvement of working conditions of genuine self-employed persons performing platform work. Where a digital labour platform decides – on a purely voluntary basis or in agreement with the persons concerned – to pay for social protection, accident insurance or other forms of insurance, training measures or similar benefits to self-employed persons working through that platform, those benefits as such should not be regarded as determining elements indicating the existence of an employment relationship”.Following the logic adopted by the proposed PWD, a digital labour platform should not qualify as an employer solely because it attempts to improve the working conditions of genuine self-employed contractors. Related to this point, if a platform relies on an auction mechanism that is meant to promote negotiations, a minimum rate aims to prevent a “race to the bottom”.
Overall, if a platform’s customers and self-employed individuals can freely negotiate the amount due (to the effect that the rate earned may be higher than the minimum established by the platform), setting the lowest level of remuneration an individual can receive should not be regarded as a means to “effectively determine” the fee earned.
The digital labour platform restricts the possibility to build a client base or to perform work for any third party
In order to assess whether this condition is met, a good starting point would be the Terms and Conditions set by the digital labour platform, which may establish restrictions on building an independent client base or performing work for another party, including another digital labour platform. In B v Yodel, one parameter determining the outcome that the entity concerned did not qualify as an employer was that the agreement between the individual and the platform provided that the individual could engage in the same activities for “direct competitors” of the platform concerned.
Another matter would be whether the digital labour platform restricts direct communications between interested parties, impinging on the freedom of the self-employed individual to approach platform users. This was one of the key parameters that determined Uber v Aslam. In determining whether Uber is an employer, a significant factor that the Court considered was that Uber restricted communications between passenger and driver to the minimum necessary to perform the particular trip, and that it took active steps to prevent drivers from establishing any relationship with a passenger capable of extending beyond an individual ride. All in all, if a digital labour platform does not prevent individuals from offering their services to others and allows communications between the two sides it brings together, this criterion cannot be deemed fulfilled.
The digital labour platform supervises the performance of work including by electronic means
As regards the verification of the quality of the results of the work performed, a question that arises is whether the mere existence of a rating mechanism that enables customers to evaluate the performance of an individual is sufficient for a digital labour platform to be considered an employer. Recital (25) of the proposed PWD usefully clarifies that: “Closely supervis[ing] the performance of work, also by thoroughly verifying the quality of the results of that work, including through electronic means, which does not merely consist in using reviews or ratings by the recipients of the service, [should be considered an element of controlling the execution of work].” This means that a mechanism that is solely used to post ratings (and not to monitor how individuals perform the assigned task) would not be deemed to supervise the performance of work. Guidance on cases that are found at the other end of the spectrum (and hence, caught by the PWD) is given by Uber v Aslam. In its judgment, the UK Supreme Court held that Uber exercises significant control over the way in which drivers deliver their services through a ratings system because “[a] driver who fails to maintain a required average rating will receive a series of warnings and, if their average rating does not improve, eventually have their relationship with Uber terminated” [emphasis added].
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
In assessing whether this criterion is met, some issues (e.g., whether the digital labour platform sets rules concerning appearance) may be more straightforward than others (e.g., whether it sets binding rules of conduct). As regards the latter, a question that may arise is how to deal with cases where a digital labour platform sets a framework that would lead to individuals respecting rules of conduct vis-à-vis (the platform’s) customers. Relevant examples that may be found in the Terms and Conditions include the commitment of the individual to perform the work to the best of their ability; the commitment to promptly notify the customer in cases where they opt to find a replacement; a confidentiality obligation; the commitment to ensure that their profile on the platform contains accurate information, etc. Could rules such as those discussed above establish an employment relationship?
The test established by the CJEU in B v Yodel provides guidance on this matter. That case concerned the relationship between a parcel delivery service provider and a courier. The agreement required couriers to deliver parcels between 07:30 and 21:00. However, couriers remained free to decide the time of delivery and the appropriate order and route to suit their personal convenience. The CJEU dismissed the individual’s claim that his status was that of an employee, holding inter alia that: “as regards ‘working’ time, while it is true that a service, such as that at issue in the main proceedings, must be provided during specific time slots, the fact remains that such a requirement is inherent to the very nature of that service, since compliance with those time slots appears essential in order to ensure the proper performance of that service” [emphasis added].
Though the above remarks concern working hours, the legal test established in B v Yodel is not limited to the interpretation of an individual’s freedom to choose working hours (this was only one of the elements taken into consideration in order to assess whether the restrictions introduced by the agreement undermined the individual’s independence). The judgment establishes that, to the extent that certain requirements are ingrained in the service provided, those requirements are not sufficient to establish a relationship of subordination between an individual and a putative employer. The rules discussed above (e.g., a commitment to perform the task diligently, an obligation to provide accurate information about the skills and qualifications one possesses) could be regarded as requirements that are “inherent to the very nature of the service” offered by a digital labour platform. In other words, such conduct rules may not be deemed sufficient to render an individual’s independence fictitious.
The digital labour platform restricts the freedom, including through sanctions, to organise one’s work by limiting the discretion to: choose one’s working hours or periods of absence; accept or refuse tasks; or use subcontractors or substitutes
Whether the above conditions are deemed fulfilled would (again) require a case-by-case assessment. For example, as regards working hours, we saw that in in B v Yodel the CJEU found that compliance with a frame for working hours did not in and of itself determine that the individual concerned amounted to an employee. The determining element was whether the courier concerned remained free to decide e.g., the time of delivery to suit their personal convenience. Similarly, with respect to the acceptance or refusal of tasks, in Uber v Aslam the UK Supreme Court ruled that: “once a driver has logged onto the Uber app, the driver’s choice about whether to accept requests for rides is constrainedby Uber. One way in which this is done is by monitoring the driver’s rate of acceptance (and cancellation) of trip requests and imposing what amounts to a penalty if too many trip requests are declined or cancelled by automatically logging the driver off the Uber app for ten minutes, thereby preventing the driver from working until allowed to log back on.” [emphasis added]
Based on the above, the key question is whether the digital labour platform allows individuals to refuse the completion of a task and even to freely negotiate with the customer what happens in cases where they choose not to complete a task. Finally, as regards the individual’s ability to use subcontractors or substitutes, several factors could be relevant. For example, if a digital labour platform makes explicit allowance for this possibility in its Terms and Conditions and in parallel establishes that customers do not have the right to refuse the proposed substitutes, this would be a strong indication that the relationship under consideration is not an employment relationship.
One of the major changes that the proposed PWD will bring about is a rebuttable legal presumption that a digital labour platform is an employer. The proposed PWD lays down certain criteria that must be met for this presumption to apply. These criteria will be assessed on a case-by-case basis and the key issue that would need to be determined is whether the individual that relies on the platform can act freely or not. As this post illustrates, many questions may arise when deciding whether a digital labour platform establishes such constraints to the effect that it would qualify as an employer. However, having in mind recent case law and the broad definition of “digital labour platform” in the proposed PWD, these criteria can be interpreted in a sensible manner to ensure that the presumption does not apply to platforms acting as a simple conduit for self-employed individuals to find customers rather than to exploit employment status misclassification. The arguably bigger question that arises is whether the PWD proposal will become law as the EU elections loom.