Gig Economy Protections: Did the EU Get It Right?

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Wharton’s Gad Allon and Valerio De Stefano from University of Leuven discuss the EU’s new rules protecting gig economy workers.

Gig economy workers in Europe are getting some employee protections after the European Parliament passed new rules last month granting them transparency in working conditions, more predictable work hours, payment for canceled work and the freedom to work for more than one employer. The rules define beneficiaries as “workers in casual or short-term employment, on-demand workers, intermittent workers, voucher-based workers, platform workers, as well as paid trainees and apprentices.”

Individuals working for Uber and similar companies “deserve a set of minimum rights,” the European Parliament stated. European Union member states have already approved the plan at the European Council, and have up to three years to enact their own domestic laws. The U.K. had recently introduced similar legislation, but will have to follow the new EU law if it chooses to back away from Brexit, its plan to leave the union.

Those who join the growing gig economy typically have little control over their hours of work or income, and don’t enjoy health care benefits for themselves or their families, said Gad Allon, Wharton professor of operations, information and decisions who is also director of the Jerome Fisher Program in Management and Technology. In such a setting, he welcomed the EU protections for those workers.

However, the EU directive leaves out significant portions of the European workforce, according to Valerio De Stefano, a research professor at the Institute for Labor Law in the University of Leuven in Belgium. “The directive will apply only to those platform workers that are classified as employees,” he said. “Pure freelancers are not going to be covered by the directive.” He noted that while the rights of platform workers has received much attention in Europe, others in the informal sector such as household domestic workers have been largely ignored. “Most of the debate is concentrated on food delivery providers and Uber drivers.”

De Stefano pointed out that while EU member states have the right to decide who qualifies as an employee, the European Court of Justice or the Supreme Court of the EU could intervene wherever necessary.

Allon and De Stefano discussed the EU directive and the likelihood of the U.S. and other countries adopting similar measures on the Knowledge@Wharton radio show on SiriusXM. (Listen to the podcast at the top of this page.)

The EU rules cover those working an average of three hours each week and 12 hours every four weeks; they do not cover self-employed workers. Specifically, they require employers to provide clarity on working conditions to employees on their first day at their job, but no later than seven days in select cases. The probationary period is limited to six months, and employers are mandatorily required to provide free job training that will be counted as working time. Workers will have the right to refuse, “without consequences,” assignments outside predetermined hours or be compensated if the assignment was not cancelled in time. Significantly, the protections do not extend to health care coverage.

De Stefano highlighted the EU extending its protections to trainees and apprentices as commendable. “In many countries in Europe, trainees and apprentices are basically considered employees,” he said. “If you don’t treat them in the same way [as regular employees], you again undermine the traineeship or the apprenticeship concept. In some countries like Germany, for instance, it’s very important that their apprenticeship schemes are not undermined by unfair competition.”

Room for More

Estimates vary widely on the share of gig economy workers in the total U.S. workforce. However, data is hard to come by on the size of the gig economy in Europe, said De Stefano.

According to Allon, the gig economy requires regulation to ensure that there is enough competition in the market, not only on the customer side but also on the firm side or on the contractor side. He noted that the gig economy has evolved with not just more and more platforms being set up, but also the emergence of “platforms of platforms,” which allow workers to make comparisons across platforms.

Gig economy protections should also enable workers to do more than one type of job, according to Allon. He made a case for “fluidity, [where] people can choose between working for ridesharing for a while, then doing a little bit of household work, and then continuing later on to do food delivery work.”

“Fluidity [is where] people can choose between working for ridesharing for a while, then doing a little bit of household work, and then continuing later on to do food delivery work.” –Gad Allon

Allon pointed out that many Uber drivers use their off-time to work for TaskRabbit, a handyman site based in San Francisco that Swedish furniture company Ikea bought two years ago. “Uber drivers use their off-time to be able to go and assemble a table that was purchased at Ikea in someone’s apartment,” he said.

Allon noted that the gig economy is still in its early days, where most workers commit their time to a specific industry or a specific firm. Over time, he expected that to change, and for workers to take on a variety of roles across industries. He pointed out that platforms like Uber and Lyft had earlier attempted to dissuade their drivers from working other jobs, but have since backed off on that.

While it is good for gig economy workers to have the flexibility to switch jobs, it is difficult to achieve that in practice, said De Stefano. “If you are working online you may need to be online at the very time in which the best jobs are posted online,” he said. “It is not easy to match that with other forms of work because you always have to be on call and ready to respond to the best job that you find….”

People who work on platforms such as Uber are also “subject to a lot of control from the platform, on the way you have to work, and on the way you have to provide your service to the client,” De Stefano noted.

“Pure freelancers are not going to be covered by the directive. Most of the debate is concentrated on food delivery providers and Uber drivers.” –Valerio De Stefano

Will Others Follow the EU?

Cities such as New York or San Francisco might try to adopt some of the EU rules on protections for gig economy workers, Allon predicted. He noted that New York City was the first to introduce measures to regulate the ridesharing industry. With gig economy protections, however, U.S. cities would want to do some experimentation to arrive at the right level of regulation, he said.

For example, they would want to look out for unintended negative consequences. “[For example], are we going to see people use multiple identities maybe to try to go on multiple platforms?”

De Stefano said he expected some U.S. states to “focus on some of the innovative aspects of the EU directive,” such as giving gig economy workers the right to refuse a shift if they do not get a certain amount of benefits, or requiring employers to pay a worker if a shift is canceled. “[However], I don’t see the U.S. at the federal level moving in the same direction.”

However, health care benefits are likely to remain a sticking point, according to Allon. “We might be in a situation 30 or 40 years from now where the majority of the work will be done through what we call the gig economy, where what we see essentially is the reduction of transaction costs,” he said. “I might be working only 20% [of the time] for you, so why would you supply health care for me?”

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