EU Directive on Labour Platforms: What It Means for Freelancers

The rise of the platform economy has been one of the most dramatic changes to the world of work over the past decade. Pew Research data suggests that 16% of Americans have earned money through an online gig platform, with many performing tasks such as delivering food, driving for ride-hailing apps and shopping for groceries. 

The situation in Europe is similar, with some studies suggesting that the number of people participating in this type of work will reach 43 million by 2025 — almost 10% of the population of the EU. 

EU Directive on Labour Platforms

For many people, working on platforms allows them the flexibility to earn a living while choosing their own working hours and adjusting how much they work as their other commitments change.

And, since the barrier to entry for platform work is often relatively low, it can provide an opportunity to make money in economies where getting a traditional job is challenging. 

However, there is also a growing concern about the potential for abuse by platforms that employ so-called freelancers or contractors under expectations normally associated with an employer-employee relationship — but without the benefits and legal protections that come with this status. 

In December, the EU Commission released a series of proposals aiming to redress this balance and improve working conditions for the millions of platform and gig workers across Europe.

In this article, we’ll discuss how freelancers — both bonafide ones and those who have been assigned this status against their will — could be affected by the proposed legislation. 

Note: This article uses the word ‘worker’ or ‘platform worker’ to refer to those working for platforms, either on a freelance or employed basis. 

What is a digital labour platform?

A digital labour platform or gig platform is an online or mobile-based application that connects workers to work opportunities. Broadly speaking, there are two categories of digital labour platforms: online web-based platforms, and location-based platforms.

  • Location-based platforms assign jobs to workers based on their location and include things like takeaway food delivery apps, ride-hailing apps and grocery delivery services.
  • Online web-based platforms are not limited by location and permit individuals or companies to hire freelancers in real-time for various tasks. 

We often think of the gig economy and platform workers solely in terms of Deliveroo riders, Uber drivers and grocery delivery services like US-based Doordash. However, it’s worth noting that this economy also encompasses a whole range of information-based work, including translating documents, programming, graphic design and more.

HIRE ANYONE ANYWHERE

Who will be affected by the changes?

According to EU data, over 28 million people in the EU work through digital labour platforms. The vast majority are — legitimately and by choice — freelancers.

However, they also estimate that some 5.5 million platform workers are incorrectly categorised as self-employed when the actual facts of their working relationship with the platform suggest that they are effectively employees. 

The proposed directive aims primarily to provide legal certainty to workers on their status and to help the 5.5 incorrectly labelled ‘freelancers’ to access the benefits that they would be entitled to under a traditional employment contract, including sick pay, minimum wage, and workplace safety requirements.

As part of the package released in December, the EU has also released proposed guidelines that aim to improve the working conditions of platform workers, including both those who are actually self-employed and those who would be reclassified as employees under the proposal.

There are three main areas included in the EU directive that could affect both genuine freelancers and those who may actually be employees:

  • Clarification on employment status
  • Improvements to transparency around algorithmic management
  • The ability to bargain collectively

Clarity on employment status

One of the main aims of this directive is to clean up the classification of platform workers. Many platform workers see themselves as freelancers, entered into the situation voluntarily, and enjoy the flexibility this status offers. But others are effectively being denied employment rights through this arrangement.

Under the proposed rules, a worker will be classed as an employee if at least two of the following conditions apply: 

  • The platform determines or sets an upper limit on the level of remuneration the worker receives
  • The platform requires the worker to respect specific binding rules concerning appearance (such as wearing a uniform), conduct or performance
  • The platform restricts (or effectively restricts) the freedom to refuse tasks, outsource them to subcontractors or substitutes, or choose when and how to complete work
  • The platform restricts the worker’s ability to build a client base or work for other parties

This distinction is hugely important, as those misclassified as freelancers currently miss out on essential rights such as the right to a minimum hourly wage, holiday pay, unemployment and even health and safety requirements such as limits on the number of consecutive hours they can work without a break. 

The proposed legislation also introduces a shift of the burden of proving that someone is not an employee to the employer — a hugely important move, as platform workers currently often have to go through lengthy and costly legal procedures to prove that they are in fact employed — something which is financially inaccessible to many. 

MORE TRANSPARENCY ON ALGORITHMIC MANAGEMENT PRACTICES

Many platforms use algorithmic management to remotely manage their workers. These technological tools and processes rely on the collection of data such as worker location and customer-generated reviews and ratings, and allow the company to make decisions automatically or semi-automatically. 

However, these systems can create power imbalances as it’s not always easy for workers to understand how decisions are made. There is also a potential issue of bias and discrimination when data such as customer reviews is used to make decisions that affect workers. 

Under the proposed new rules, workers will have the right to contest automated decisions, and platforms will be obliged to provide more transparency on how they use these systems.

This will apply to both self-employed people and those who will be newly classified as employees. Platforms will also be under obligation to provide human monitoring where the respect of legal working conditions is concerned. 

LEGAL CERTAINTY ON COLLECTIVE AGREEMENTS

The package released by the EU Commission in December also includes a set of draft guidelines that aim to provide legal clarity to solo freelancers — those who work alone and don’t employ anyone — on the circumstances in which they can collectively bargain for better working conditions, including pay. 

Currently, EU competition law, which prevents businesses from effectively limiting or distorting the open market, prohibit those classified as freelancers from unionising and negotiating a better deal for themselves in the way that traditional employees have long been able to do.

The guidelines, on which citizens, businesses and other interested parties have been invited to comment, would affect freelancers if one of the following conditions applies to their situation: 

  • 50% or more of their total annual income comes from one customer
  • They work ‘side-by-side’ with employed workers, performing the same or similar tasks
  • They work through a digital labour platform

Under the proposed guidelines, such workers would be treated as employees in this context, granting them the right to collectively bargain for better working conditions without fear of breaking EU competition law.

REDUCE WORKER MISCLASSIFICATION RISKS

Potential downsides for freelancers

The EU directive is undoubtedly a welcome initiative for many workers who have been incorrectly classified as freelancers and effectively denied the employment rights they are entitled to.

This is particularly relevant in the context of the COVID-19 pandemic, during which many gig workers were left without either work or the social safety net an employment contract would have granted them. 

However, some genuine freelancers who use platforms have concerns about the unintended side-effects of the proposal. Some are concerned that they may be inadvertently lumped in with those workers who have not chosen the freelance status deliberately, and treated as employees.

This could effectively remove some of the reasons that many become freelancers in the first place, including the freedom to choose the work they take on and how they complete it, and the ability to turn down work. 

There’s also a concern among some that collective labour agreements might stifle flexibility and innovation within certain industries. 

Conclusion

While we don’t yet know the exact terms which will be included in the final directive, it looks like the difference between freelancers and employees will be set out fairly clearly.

The conditions that need to be met for a person to be considered an employee do genuinely seem to represent an employee-employer relationship. 

While concerns about introducing unnecessary rigidity into the platform economy are certainly justified, it looks like most genuine freelancers will likely be able to continue using platforms as a flexible source of income while retaining their freelancer status. 

On the other hand, the added protections for those (often marginalised) groups who have thus far been incorrectly labelled as freelancers have the potential to significantly improve the lives and working conditions of millions of workers across Europe.

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