The Challenges Ahead for GIG Economy Platforms in Europe Increase as the Labor Courts’ Scrutiny Intensifies

Further to the reclassification of the service agreement between an independent deliveryman and Deliveroo, ordered by a Spanish lower Court, French jurisdictions recently shifted position, considering that several independent workers should be deemed employees of the platform that they were working for.

1. Recent French case law

1.1. In France, this new trend was originated by a French Supreme Court’s decision dated 28 November 2018, concerning the meal delivery platform, Take Eat Easy.

In this case, both the Labor Tribunal and the Court of Appeal had rejected the deliveryman’s claim to have his service agreement reclassified as an employment contract. Judges considered that the independent contractor was free to choose when he wanted to work and considered that the bonus-malus system applied by Take Eat Easy was not sufficient to characterize the alleged subordinate relationship.

The Supreme Court judges reversed the Paris Court of Appeal’s ruling  :

(i)         They recalled the following principles:

  • The existence of an employment relationship depends neither on the intentions expressed by the parties, nor on the qualification they have given to their agreement, but on the factual conditions in which the activity is carried out, and
  • A subordinate relationship between parties is defined as the performance of work under the authority of an employer who has the power to give orders and directives, to control their performance and to sanction the breaches of its subordinates.

(ii)        In light of these, they observed that :

  • Firstly, Take Eat Easy’s application was equipped with a geolocation system enabling the company to track in real time the deliverymen’s location and the total amount of kilometers traveled, so that the role of the platform was not limited to connecting the restaurants, the customer and the deliverymen, and
  • Secondly, the company had the power to sanction its deliverymen through a bonus-malus system,
  • and therefore, that Take Eat Easy had the power to give orders to its deliverymen, control their performance and sanction their breaches, characterizing an employment relationship subject to Labor Law.

1.2. Lower courts have already started to abide by this new position.

Very recently, the Paris Court of Appeal has indeed changed sides and reclassified the service agreement entered into by Uber and one of its driver into an employment contract (Paris Court of Appeal, 10 January 2019), considering that :

  • As soon as the driver connected to the application, he integrated a service entirely organized by Uber (imposed fees, charter prohibiting to constitute its own customer base, imposed operating conditions of the service provision, etc.),
  • Uber gave instructions to the driver (behavior, itinerary, etc.), controlled their execution (geolocation of drivers, incentive to accept client’s requests, etc.), and could sanction their breaches (deactivation of the application).As a reminder, such reclassification entails :

Even though Uber has lodged an appeal in front of the French Supreme Court, this case law entails an important risk of reclassification of service agreements between digital platforms and individual contractors as employments contracts.

As a reminder, such reclassification entails:

  • Labor law related risks (such as back payment of salary / overtime hours over the last 3 years, damages for wrongful dismissal in case the company has terminated the individual contractor’s contract, damages for concealed work corresponding to 6 months’ salary),
  • Social security risks (ie. payment of social security contributions on all the sums paid to the individual contractor over the last 3 years, with application of relevant increases),
  • Criminal law risks (the offence of concealed work is mainly punishable by up to 3 years’ imprisonment and a fine of up to 45,000 euros for the legal representative of the company, and a fine of up to 225,000 euros for legal entities).

1.3. A few days ago, the Nice Labour Tribunal also fell into line with the French Supreme Court, in a case also concerning Take Eat Easy (CPH Nice, 22 January 2019). The deliveryman’s claims were upheld on two counts:

  • The Tribunal reclassified the relation with the worker as an employment contract,
  • The Tribunal sentenced the company to pay the employee damages for concealed work (ie. corresponding to 6 months’ salary).

Such acknowledgement of concealed work by the Labour Tribunal may affect the pending criminal proceedings introduced by independent deliverymen.

2. What now ?

While waiting for further clarifications from the French jurisdictions, two main options can be envisaged by digital platforms in order to mitigate those risks :

  • The first option could be to adapt the existing service agreements with independent workers in order to comply with the line drawn by the Supreme Court, ie. limit as much as possible the control over the worker’s performance and end sanctions (notably ensuring that no penalty system is implemented). Although, according to the dean of the Social Chamber of the Supreme Court, the existence of a geolocation system, at the heart of GIG economy platforms, does not per se characterize an employment relationship, the recent Uber decision suggests caution in its implementation.
  • Another option, already used by several platforms established in France, is to hire their delivery people under employment contracts. The question then remains how to adapt the specificities of such jobs (very fluctuating nature of demand, limited hours, etc.) with French Labour Law.

Legislative changes can still redistribute the game’s cards. However, for the moment, the “Mobility” draft bill of 26 November 2018 limits itself to offering the possibility for digital platforms to implement a social responsibility charter, which the bill states would not characterize the existence of a subordinate relationship between the platform and the worker. Such provision is not fully securing for digital platforms as it does not preclude a worker claiming for the reclassification of his/her contract as an employment agreement on the basis of the recent court decisions.

Caution is therefore more than ever required for GIG Economy platforms.