The Platform Companies Strike Back

August 12 marks the final day of a three-month grace period the platform companies were given to adapt to the new rules in Spain. The law follows a Supreme Court decision in September 2020 that ruled in favor of riders for delivery company Glovo, the nation’s largest food delivery service. The court found they could not be considered self-employed due to the degree of control the company had over their work activities. The new decree places a presumption of employment on delivery and distribution riders when a company exercises powers of management and control.

In theory, this means that companies like Deliveroo, Uber Eats, and Glovo will have to register drivers as employees — and pay them a monthly social-security payment toward their pensions. The reality, however, is that, over the past three months, only a handful of riders have been registered as employees of these companies.

Deliveroo has already announced that it will be pulling out of the Spanish market. As a relatively minor player in Spain, the company felt that to continue operations would require too much additional investment. Some might see this as a positive development. Perhaps the new regulations could put an end to an exploitative business model and show that these companies are simply unprofitable if they paid their workers properly. But many of these riders will migrate to an alternative platform where they face similar issues.

Glovo has stood defiant and will maintain 80 percent of its riders as self-employed — with plans to hire the remaining 20 percent (around two thousand people) as employees by the end of 2021. The company’s lawyers have devised a new system of algorithmic management designed to offer workers more control while maintaining their self-employed status. Critics like Rubén Ranz, an organizer for Spanish trade union UGT, are skeptical that this status is anything but flagrant disregard for the new law, given the continuation of what is essentially an employment relationship.

Uber Eats has employed another work-around by outsourcing its rider services to other companies — enabling it to avoid taking full responsibility for its workers. In the final days of negotiations, the platform companies squeezed in an allowance that they could use third-party subcontract services under the new law. This follows a model used widely in China as well as other countries, in which riders are engaged through external staffing agencies so the platforms have no obligation to pay workers social security.

The new law has increased costs for the platform companies and will likely benefit some workers. But the extensive carve-outs negotiated by the companies and their reluctance to fully comply with the law means more protracted legal battles will soon follow.

A New Gig Economy?

The introduction of the Spanish rider law represents an important turning point in the gig economy. Platform companies have largely lost a public relations war in which they sought to portray themselves as trendy start-ups disrupting established industries with tech-enabled innovation. Platform workers are now widely seen as engaged in precarious and unprotected labor requiring new regulations to end the “platform exceptionalism” that has enabled these companies to operate in legal gray areas.

The introduction of the Spanish rider law also follows a milestone UK Supreme Court decision ruling that a group of Uber drivers were workers rather than independent contractors. In an important victory, Uber begrudgingly conceded that it would now treat its UK drivers  as “workers.” The catch is that they will only pay a minimum wage for time during which drivers have accepted a trip and not the entire time logged onto the app — thus shortchanging them by 40 to 50 percent.

The UK Parliament hasn’t shown any signs of following the Spanish example of implementing new laws for the gig economy, but there is considerable momentum across Europe to take regulatory action and codify rights for precarious workers. In Denmark, Just Eat has reached a national sectoral agreement for its delivery riders with Danish trade union 3F, offering workers hourly wages, sick pay, and pension contributions. Just Eat has also decided to put Italian riders on a national contract  designed for workers in the transport, delivery, and logistics industry, which grants them similar rights and protections.

These advances show that new divisions may be emerging among different versions of the gig economy around the globe. Europe could be moving toward a new presumption of employee status, while American states drift toward California-style “independent contractors with benefits” — just as the rest of the world remains within a fully precarious model.

We should be skeptical of these companies’ recent signs of willingness to move toward a new paradigm. Platform companies operate most freely in weak regulatory environments in which they can sidestep existing protections for workers. At the same time that they acknowledge the inadequacy of independent contractor status in parts of the Global North, they are further entrenching the precarious position of workers in countries in Latin America, Africa, and parts of Asia.

In South Africa, for example, the Fairwork Foundation has found that gig economy platforms benefit from a legal loophole that limits labor rights to workers classified as “employees” — leaving most gig workers without any protections. When workers attempted to bring a legal case against Uber in 2017, they discovered they had contracted with a Netherlands-based company, and their case was dismissed.

Following the UK Supreme Court decision, human rights attorneys have filed a new class action lawsuit against Uber in the Johannesburg Labour Court to have drivers declared employees of the company.

Resisting the Regulators

Platform companies fight legal cases and new regulation with such tenacity because they each make up part of a global battle — after all, Uber Eats operates in forty-five countries, Just Eat in twenty-four, and Deliveroo in thirteen. Every new law and court case must be resisted, because adverse regulations in one jurisdiction could soon be replicated in others.

These companies also form strategic alliances with one another to outmaneuver regulators. In California, companies joined forces to amass a war chest of over $200 million to push Proposition 22 across the line. This ballot measure denied workers full labor protections and effectively created a new employment category, neither employee nor independent contractor, which strips workers of rights and benefits. They now plan to roll out this model in other states, offering small perks in exchange for avoiding more wide-ranging legislative oversight.

When faced with strong opposition, the companies’ preferred strategy has been to offer certain benefits to workers in exchange for avoiding their classification as employees. In New York, Uber and Lyft are looking to strike a deal with labor organizations to support new legislation that would offer gig workers rights to unionize while stopping short of defining them as employees. Under the proposed legislation, tech companies would receive exemption from city and county minimum-wage laws and from state labor laws on discrimination.

Platform companies have lobbied extensively for favorable regulations, subverted or ignored ones they don’t like, and dragged precarious workers through the courts rather than proactively addressing issues. They are masters of this “regulatory entrepreneurship” because their entire business model relies on them operating in a shady zone of partial legality and betting on changing the laws as they go. Regulations matter, but they have been a slow and cumbersome mechanism to challenge the power of tech companies that can move quickly to undermine attempts to rein them in.

Another Digital World is Possible

There are alternative models out there, such as the newly created “Wings” — a food delivery cooperative in London that offers living wages to riders, runs a zero-emissions service, and attempts to shift customers away from the exploitative model of the major food-delivery platforms.

Workers’ cooperatives face a tough uphill battle against existing platforms and have limitations in terms of raising capital and competing against corporations. But public authorities can also play an important role in supporting cooperative and social enterprises in their area, such as Islington Council’s grant to Wings and their investment in expanding the resources available to the digital cooperative sector.

There is still a long road ahead for the Spanish rider law. It remains to be seen how the subcontracting system will affect low-wage precarious workers and what strategies workers can adopt to challenge it. What happens next will be influential for any future legislation in the EU, as the global struggle continues for workers pushing back against platform giants.