2021-04-13 by W.M.
Europe could be seeing the decline of its gig economy. And new rules could mean higher prices
A food delivery courier places a bag of food into the back of his bicycle as he prepares to deliver an order from Deliveroo in London.
Simon Dawson | Bloomberg via Getty Images
In its stock market debut, British food delivery firm Deliveroo saw its share price tank around 30% as questions materialized over workers’ rights for its riders.
In the days running up to the listing, the company revised its share price as some investors opted to avoid the IPO over these concerns.
Deliveroo is just one example of a wider “gig economy” that is coming under increasing scrutiny. In recent weeks, the industry has been rocked by a slew of court rulings and regulatory moves around Europe that could ultimately upend the business model.
Uber’s loss in the U.K. Supreme Court last month forced the company to reclassify 70,000 of its British drivers as workers, giving them a minimum wage, paid vacation time and pension plans as a result.
In Spain, legislators have introduced a raft of measures that would recategorize gig workers as employees with formal contracts and benefits.
All the while, the European Commission, the EU’s executive arm, is thrashing out plans for some kind of regional reform on gig economy workers, their status and their rights.
James Farrar of the App Drivers and Couriers Union, which took the case against Uber in the U.K., said there has been some “early triumphalism” but that this is only the beginning of a turning tide in gig economy worker rights.
“We’re still reaching for the bottom rung here and we’re not there yet,” he told CNBC.
“I think what was really significant about the Supreme Court ruling is it opened up space for other claims across the gig economy to succeed.”
Preparing for change
Other companies are preparing for change in some form, whether instigated by regulation or on their own volition in advance.
Just Eat Takeaway, Europe’s biggest online food delivery firm, is moving its Just Eat delivery riders to employment contracts. Prior to the companies’ merger, the riders of the original firm called Takeaway.com were on such contracts.
“As part of this model, couriers are entitled to an hourly salary, they are paid above minimum wage, provided with employment insurance and social security, in line with local legislation,” a spokesperson said, adding that couriers are provided with equipment like bikes.
In the case of Spain, operators in the market like Glovo are waiting to see how exactly the legislation will pan out and how to respond.
Co-founder Sacha Michaud is not a fan of the route that Spanish lawmakers have taken.
“It’s quite a strict regulation, probably the strictest (in Europe) so it’s quite a radical position in the sense that it allows very little flexibility, which is one of the things that we obviously adhere to, and the riders are asking for that as well,” Michaud told CNBC.
Michaud said Glovo will “obviously adapt to the regulation” when it is in effect but said the company is more in favor of a middle ground between worker flexibility and providing benefits and security, all while avoiding the employment tag.
He added that surveys carried out on Glovo’s riders showed that most prefer a flexible model rather than stricter employment. He said this helps many riders who may be working for gig platforms in between their studies or other jobs.
“It should be social rights, yes, and see how we can maintain flexible working conditions under that. It doesn’t necessarily have to be black or white.”
This middle ground harkens to Prop 22 in California, passed last November and backed by Uber and Lyft.
It’s an approach that Uber would like to see replicated in Europe. In February, Chief Executive Dara Khosrowshahi published a paper calling on the European Commission to follow the mixed model, like that of California.
Changes in regulatory status for workers will introduce a raft of new costs. This will be front of mind for smaller start-ups in the space too.
John Ryan of U.K.-based start-up Gigable, which connects restaurants and other businesses with freelancers, said consumers could end up feeling the brunt with price increases.
“But I think people are comfortable enough with increases in pricing if they know it’s going to the drivers or there’s public support for the move but that remains to be seen,” Ryan said.
He added that the flexible model may work for some workers and others will prefer traditional employment.
“We’ll see how hard it is for people to commit to the obligations.”
Contracts and worker status are just one front in this battle, according to the ADCU’s Farrar.
His organization is also pursuing initiatives around driver access to data that companies hold on them and what he calls “algorithmic control.”
“We’re seeing an arms race in worker surveillance in the gig economy and that’s leading to problems,” he said.
The ADCU is supporting two London drivers in a case they are taking in the Netherlands against Indian ride-hailing company Ola. The drivers are seeking access to data held on them by the company, under the EU’s sweeping GDPR rules, that they say has been denied.
Farrar said technology like AI for monitoring a driver’s performance and determining how much work they get is a red flag. The group is also calling for Uber to stop using facial recognition to verify drivers.
The discussion around regulations, including those at an EU level, are focused heavily on employment status, Farrar said, but that the debate will need to get more nuanced on algorithms.
“I think it’s being overlooked everywhere so far but we’ll be raising the topic for sure,” he said.
“Regulators and policymakers are often catching up with this rather than on top of it.”