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The EU Parliament approved the EU directive on platform work in April 2024. Once the directive is published in the Official Journal of the EU, member states will have two years to transpose the rules into national law.
If you operate a digital labour platform in an EU country, you can’t afford to ignore this directive. And, because the new rules will require a significant amount of work, restructuring and planning, it’s best to start preparing now. Read on for everything labour platform operators need to know.
EU directive on platform work: An overview
In 2021, the EU estimated that around 28 million people were working through digital labour platforms across all member states. They also predicted that this number would grow to around 43 million by 2025.
The majority of these workers, which include taxi drivers, food delivery drivers and domestic workers, are legally classified as self-employed. However, many of them have to follow the same rules and restrictions as employees — implying that they may actually be in an employment relationship.
In fact, an EU estimate suggests that as many as 5.5 million workers may be falsely classified as self-employed, and missing out on key employee benefits like the minimum wage, mandated rest breaks, unemployment benefits and income support schemes. The EU also had concerns about the algorithmic management practices that some labour platforms use to organise work and make decisions about workers.
To combat these issues, the EU Commission put forward a proposal for a set of measures to standardise the rules surrounding labour platforms in 2021. These measures, which are collectively referred to as the Platform Work Package, included a first draft of the EU’s directive on platform work, which has now been approved by the EU Parliament.
Timeline of key developments
Since the EU Commission’s initial proposal in 2021, the directive has gone through a number of revisions and negotiations. Here’s a reminder of the key moments so far and the next steps as of 2024:
- December 2021: The EU Commission puts forward a proposal for a set of measures to create a common set of rules for labour platforms across the EU.
- December 2022: The European Parliament’s Employment Committee makes revisions to the initial draft of the directive.
- June 2023: The Council agrees its position on the directive and begins negotiations with the EU Parliament.
- February 2024: The EU Parliament and Council reach an agreement on the directive.
- April 2024: The EU Parliament approves the new rules with 554 votes in favour, 56 votes against and 24 abstentions.
- Next steps: The directive will now need to be formally adopted by the Council. The text will then be finalised in all official languages and published in the Official Journal of the EU (OJEU). From this point, member states will have a maximum of two years to transpose the rules into national law.
Key objectives of the directive
Broadly speaking, the directive aims to provide a common set of rules for labour platforms across the EU, levelling the playing field for platform operators and improving working conditions for platform workers.
The main goals of the directive are:
- To allow workers who have been falsely classified as self-employed to access the rights, benefits and protections they are entitled to.
- To provide transparency to workers around the use of algorithmic management practices and ensure decisions impacting workers are made fairly.
- To give national authorities more access to information about labour platforms operating in their countries and the workers who use them.
We’ll explore what each of these elements means for platform operators in the next section.
What the directive means for labour platforms
The EU directive on platform work will have a big impact on companies operating labour platforms in the EU. Below, we’ll discuss what each of the major changes brought about by the directive will mean for labour platforms.
Need to prove worker classification
One of the core objectives of the EU directive on platform work is to address cases of worker misclassification and help misclassified workers to be reclassified as employees. To this end, the original draft of the directive included a list of criteria that should be used to determine a worker’s legal status. However, this chapter of the directive has undergone significant changes, and no longer imposes specific criteria. It will be up to each member state to determine what makes a worker an employee instead of an independent contractor.
Instead of imposing specific conditions, the final version of the directive introduces an effective legal presumption of employment. This means that platform workers will be assumed to be employees if they are subject to ‘control and direction’ from the platform they work for. Digital labour platforms will be able to rebut this presumption, but they will have to prove that the contractual relationship is one of self-employment.
How this will work in practice will vary from one member state to another, but the key thing to note is that the burden of proof will be on the labour platform, not the worker. This will be particularly challenging to platforms operating across multiple countries, who will have to ensure their operations are compliant with national legislation in each one.
Changes to how algorithmic management is used
Many labour platforms use algorithmic tools to organise and manage their workforces. These tools allow platform operations to make automatic or semi-automatic decisions without the need for human input, which can be a significant driver of cost savings. However, many platforms will have to make changes to how they use these tools once the EU directive on platform work is in effect.
First, platforms will have to inform workers about the automated monitoring and decision-making tools they use. These systems will also need to be monitored by qualified staff, and platforms will need to guarantee human oversight for important decisions like suspensions or terminations.
Until now, labour platforms have been able to use algorithmic management tools relatively unchecked. Once the new rules are in force, they’ll have to reassess the systems they use to ensure they comply with the new requirements. Of course, this will also involve an HR cost since platforms will likely need to hire additional personnel to oversee algorithmic tools and ensure they are used fairly.
Obligation to provide data to national authorities
Another key element of the directive is a requirement for platforms to provide more data to national authorities. Currently, governments and regulatory bodies often struggle to access information on who is actually working through labour platforms in their countries, particularly when platforms operate across several member states. This makes it almost impossible for national authorities to ensure platforms are meeting their obligations in terms of providing the right working conditions and social protections to their workers.
The directive clarifies labour platforms’ existing obligations to declare their employees to the competent authorities in the states where they operate. Under the new rules, platforms will have to provide labour and social protection authorities with basic information on the number of people working through the platform, their employment status and their standard terms and conditions of employment. Naturally, this obligation will represent a significant administrative and financial burden for platform operators, who will likely have to hire new personnel to prepare and submit this data.
Ensuring compliance with data protection rules
As part of the new rules on algorithmic management, labour platforms will be prohibited from processing certain types of data on their workers. For example, they will be unable to process:
- Personal data on the emotional or psychological state of a worker
- Data related to private conversations
- Data used to predict trade union activity
- Data used to infer a worker’s race, ethnicity, migration status, political opinions, religious beliefs or health status
- Biometric data, other than for authentication purposes
Labour platforms that are currently collecting data that falls into any of the above categories will need to reassess their systems and processes to ensure compliance.
The future of digital labour platforms
The good news is that those platforms that have previously been unscrupulous in their operations and deliberately misclassified workers will lose the unfair competitive advantage they’ve enjoyed until now. The directive will provide a level playing field for platform operators, allowing those who have always treated their workers fairly to compete.
However, the directive will also put all labour platforms under a lot more scrutiny from national authorities. Platforms will need to go through the extensive work of reassessing all of their worker classifications and putting in place systems to ensure workers are correctly classified in the future. And this isn’t something that platforms can afford to ignore: while the sanctions for non-compliance will vary by country, they will likely include significant fines and penalties.
Plus, many labour platforms are likely to see their operating costs increase as a result of the directive. This will be caused both by the higher costs associated with engaging employees rather than self-employed workers, and the higher administrative burden that some of the other elements of the directive will represent. While platforms may attempt to pass some of this cost to customers, this will need to be balanced against the need to remain competitive.
Prepare for the directive by working with a skilled partner
The EU directive on platform work will introduce a lot of new obligations for labour platforms. Assessing all of your current workers to determine their correct classification will be key to avoiding sanctions — but that’s a long and admin-heavy process. Plus, platform operators will also need to put processes in place to ensure correct classification going forward.
You can make this process easier by working with a trusted partner — like CXC. As experts in contingent worker classification, our team has the knowledge and experience you need to ensure you’re prepared for compliance once the new rules are in force. Want to learn how we could help your platform business? Get in touch with our team.
