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Commercial Question

Gig economy: the evolution

updated on 28 September 2021


What is next for the platform gig economy?


Platform companies such as Uber, Deliveroo and Lyft have become embedded in our everyday lives. From delivering us to our destination to delivering our favourite sourdough pizza, our appetite for platform services is growing at a rapid rate. The rise of these companies marks the arrival of the ‘platform business model’, a model that focuses on helping to facilitate interactions across a large number of participants. By creating and facilitating the means of connection, platform companies have created a new ecosystem where businesses, workers and consumers are interacting in new ways. As employment law seeks to govern these new relationships, many platform companies are having to evolve their original business models.

The rise of the platform gig economy

The gig economy forms the backdrop of Chloé Zhao’s Oscar-winning Nomadland, which portrays a rural van-dwelling gig worker; however, this economy is also firmly entrenched in cosmopolitan society. The gig economy is all around us and represents a free market system where organisations and independent workers engage in temporary and flexible work arrangements (known as ‘gigs’). The growth of the gig economy has accelerated in recent years, largely as a result of advances in technology. Platforms and applications have allowed individuals to find gigs by connecting these individuals to users/consumers. Platforms in this space have seen a meteoric rise in recent years, many of which are enjoying increased popularity because of consumers’ increased dependence on the digital world, rather than in-person interactions, during the pandemic. While the gig economy has been operating for many years, the exponential rise of this economy through platforms is relatively new and is providing fertile soil for legal challenge.

The question of worker classification

In the UK a person may, for employment law purposes, be an ‘employee’, a ‘worker’ or ’self-employed’. In terms of legal rights, employees enjoy the most comprehensive rights, workers are afforded a subset of those rights and the self-employed have very limited statutory protections.

Employment rights necessarily bring with them associated costs, which many of the platform businesses are keen to avoid in pursuit of offering affordable services for consumers. Some of the most significant rights workers have include rights to:

  • the national minimum wage;
  • paid holiday entitlement; and
  • automatic enrolment into a pension scheme.

The tests that define employment status have been and continue to be formulated through case law. Understanding these tests is a key element for platforms to take into account when devising and refining their business models.

Case law has established that there are three key elements that an employment tribunal or court will consider when determining employment status – interestingly what is agreed in writing between the individual and the company as to status may not be determinative. In brief the tests are as follows:

  • Personal service: employees and workers are required to perform the work themselves and are unable to send a substitute in their place. Where personal service is not required and the individual is free to send a substitute in their place, this is characteristic of the individual being self-employed.
  • Control: the more control a business has over the individual and how they perform their work the more likely the individual will be deemed an employee. Self-employed individuals are usually free to choose when, where and how they perform the service in which they are engaged.
  • Mutuality of obligation: the obligation on an employer to provide work and the obligation on an individual to accept and perform that work is seen within employment and, often, worker relationships, rather than self-employed.

These tests are regularly being applied by the courts – with interesting results. The Supreme Court decision in Uber hinged on ‘control’. As Uber controlled the cost of the fare, and how much the driver was paid, set the route the drivers should take, which passengers to accept and more, the Court held that Uber drivers were workers rather than self-employed contractors.

In contrast, in June 2021, the Court of Appeal found Deliveroo riders were self-employed contractors. When it came to control, it was found that Deliveroo riders were free to accept and decline jobs without sanction. The case of Deliveroo turned in particular on the test of personal service, as riders were free to send a substitute and had no obligation to carry out the job themselves.

‘Rider Law’

These classification issues are not exclusive to the UK of course. In August 2021, Spain introduced Europe’s first law to recognise all food delivery riders from digital platforms as employees. Interestingly this so-called ‘Rider Law’ is facing some criticism from both certain platforms and couriers.

The ‘Rider Law’ has prompted platforms to leverage their legal and technological agility by adapting their business models in consequence. Spain’s largest food platform, Glovo, has devised a new system of algorithmic management to offer workers more control, thus maintaining their self-employed status. One of the changes implemented by Glovo is that riders are free to bid for the price of their services, which many riders complained leads to a race to the bottom in pursuit of more delivery assignments. Conversely, Uber Eats chose to outsource its Spanish rider services to other companies and Deliveroo has announced that they will be pulling out of the Spanish market all together.

Platforms or policymakers?

Platform companies are also seeking change by adopting what has been coined “regulatory entrepreneurship”. In California, a group of platform companies (including Uber & Lyft) convinced Californian voters to support Proposition 22, a measure that would have allowed them to continue to treat individuals as self-employed with a few upgraded benefits and protections. These provisions have since been rendered unconstitutional, but elsewhere similar battles are being fought. In Boston, platform companies are supporting the HD2582 Bill that will give ride-hailing app drivers a small, portable benefits package and a minimum wage guarantee, but which makes those individuals ineligible for full benefits and rights of employees.

Closer to home, there have been signs of a similar strategy from platform companies to seek a resolution. Earlier this year, Uber published a White Paper offering to “work hand-in-hand” with EU policymakers to create “new industry standards for platform work, whilst ensuring it is recognised and valued at a legislative level”.

What is next for the platform gig economy?

Platform companies have introduced new ways for businesses, workers and consumers to interact with one another. As employment law catches up in its governance of these new relationships, many platform companies are attempting to evolve their business models, and in some cases influence policy, in order to thrive in their new and developing regulatory environment. Platform companies must be mindful of the governance they place over their workers in light of the tests for worker classifications and the associated costs that are linked to them. As the landscape evolves, it will be interesting to see whether employment law can keep pace and find balance, offering sufficient appropriate protections to individual workers while also providing platform companies enough freedom to thrive, innovate and grow.

David Morris (he/him) is a second-year trainee solicitor in the employment team at Burges Salmon.