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Doing business in the gig economy: A global guide for employers

Global Publication December 2020

The term “gig economy“ describes the business model where workers rely on a digital platform to be put in contact with clients to provide their freelance services. The number of gig economy workers globally is increasing significantly each year. In the UK alone around 5 million people are employed in the gig economy, while, in Canada gig economy workers make up about 8-10% of the national workforce. 

In all jurisdictions, it is predicted that the numbers of such workers will grow, particularly in the current economic climate. Those working within the gig economy do not fit easily within the parameters of the laws that govern the traditional relationship between an employee and the employer and globally jurisdictions have struggled to determine the nature of their employment status. This briefing looks at the position of gig economy workers in various jurisdictions as well as what legal developments are expected in the future.

Australia Canada (English) Canada (français) France Hong Kong Italy South Africa The Netherlands United Kingdom United States (California)

Australia

Key issues Commentary and perspectives
What is the state of law on the status of gig workers today?

While less than 1% of the Australian workforce is engaged in the gig economy, it is predicted that this number will grow.

In broad terms, Australian workers fall into two categories: ‘employees’ or ‘independent contractors’. An employee enjoys comprehensive protections, such as a minimum rate of pay, maximum hours of work, leave entitlements and protection on termination of employment. A contractor is not provided with the same entitlements and does not have the right to make the same claims as an employee when the relationship ends.

Australian courts adopt a multi-factorial approach when characterising the relationship of a worker to a business, with no one factor being more determinative than any other factor.  The whole relationship is considered and it is a matter of balance.  The courts have also expressed the view that the key question is whether or not a worker is carrying out a business of their own (in which case they are an independent contractor) or providing their services exclusively to a third party (in which case they are an employee).

To date, Australian courts have held that the better view is that gig workers are independent contractors, rather than employees but acknowledged that there are ambiguities.

What are the grey areas in the law?

The fundamental challenge for Australian courts is that the two current categories of workers do not easily accommodate the particular circumstances of gig workers.

Although currently characterised as independent contractors, it is difficult to say that an individual gig worker is conducting a business in their own right. Gig workers typically rely on a shared platform or App for the allocation of jobs and the facilitation of payment. These platforms provide specific instructions, set limits on the workers’ relationships with customers and restaurants, and effectively rate their performance. Some gig workers are provided with branded uniforms, tools and other equipment.

While Australian legal academics have suggested that some of these features create a problematic dynamic, their arguments have not yet persuaded the courts.

What legal developments are expected in the future?

Many jurisdictions across Australia have taken steps to deal with the perceived inadequacy of the traditional definitions of ‘employee’ and ‘independent contractor’, exploring various policy and legislative solutions. There have been several State Government inquiries, reflecting a growing community concern with the lack of legal protections afforded to gig workers.

For instance, the Inquiry into the Victorian On-Demand Workforce has published 20 recommendations aimed at better protecting on-demand (or gig) workers. The Victorian Government is currently considering community feedback on the recommendations before publishing its response. Similarly, New South Wales has established a Select Committee on the impact of technological and other changes on the future of work and workers in New South Wales, with hearings scheduled throughout 2020 and early 2021. The Select Committee’s terms of reference include considering the impact of the gig economy in New South Wales. Queensland also undertook an investigation into a possible extension of workers’ compensation coverage to certain gig economy workers. The matter is still under consideration by the Queensland Government, with a Decision Regulatory Impact Statement expected in response to the current consultation process.

At a Commonwealth level, although the Attorney-General instigated an industrial relations reform working group process earlier this year, attended by employers, unions, industry groups and government, the status of gig workers has not featured in these discussions.

More recently, the likelihood of some legislative reform has increased following public and media scrutiny of the conditions of gig workers, because of several instances in the last 12 months of gig workers being seriously injured or killed while working and their perceived vulnerability more generally during COVID-19.

 

Canada

Key points Commentary
What is the state of the law on the status of gig workers today?

In Canada’s pre-pandemic context, gig workers made up about 8-10% of the national workforce. Though, given the year’s extraordinary circumstances, it is speculated that this figure has likely increased. In light of COVID-19, some factors now driving the gig economy in Canada include the increased demand for the home delivery of products and goods, a heightened reliance on technology and innovation, and a developing appetite for more flexible and easily accessible paid work. Despite this apparent increase in popularity, the employment status of gig workers in Canada is an issue that remains nebulous and, to a certain extent, controversial.

By way of background, workers in Canada are generally categorized as employees or independent contractors. In general terms, what separates one from the other is the extent of an organization’s control over the worker, coupled with his or her level of their dependency on the organization. Usually, employees are subject to a higher degree of control and demonstrate heightened dependence on the organization, while the opposite is typically the case for independent contractors.

Clues potentially indicating a higher degree of control can include an organization’s ability to discipline, set normal hours of work, manage promotions and salary increases, and approve time off. In terms of measuring an individual’s degree of dependence, factors that can tip the scales in favour of “employee status” can include an individual’s reliance on an organization to provide them with the necessary tools and equipment needed to work, to influence their advancement in the industry, and to receive compensation fundamental to their livelihood. By contrast, an independent contractor is generally a worker who provides services on a limited or temporary basis, on his or her own account.

Finally, the third category of workers relates to the sometimes elusive notion of “dependent contractors.” In general, dependent contractors in Canada lie somewhere between employees and independent contractors. When distinguishing the independent from the dependent contractor, decision-makers have paid special consideration to the level of economic dependence, vulnerability, bargaining power, exclusivity and permanence between the worker and the entity for which the worker is performing services.

When considering how these concepts apply – or don’t – to gig workers specifically, it may come as no surprise that it is not uncommonly argued that these workers should be classified as independent contractors under the law. Though, recently, there appears to be a growing attractiveness in the case law towards finding gig workers to be dependent contractors. This is important because in some provinces, like British Columbia, Alberta, Ontario, Newfoundland and Labrador and for businesses under federal jurisdiction, dependent contractors have the right to unionize under labour laws in the same way employees do. In addition, depending on the contract, dependent contractors may also be owed  certain entitlements upon termination without cause in some jurisdictions, like British Columbia, Alberta, Ontario, Quebec and New Brunswick. When such protections are afforded to gig workers, the resulting consequences for the newly dubbed “employer” can be significant.

What are the grey areas in the law?

The case law in Canada provides no clear consensus on the status of gig workers. Likewise, there is a dearth of guidance from law and policy makers on this topic, and no new or amended legislation is currently expected any time soon. Until that happens, determining the employment status of gig workers will likely continue to be a highly fact-driven and -specific exercise, and, as a result, employers can expect continued litigation in this area.

What are trends to look out for?

The substantial contribution of gig workers to the Canadian economy continues to be increasingly noticed, above all in the context of COVID-19. This is perhaps one among other factors fueling recent legal trends whereby the contractual relationship of gig workers has been more and more likened to that of an employee.

While on the legislative front there is little to indicate any major changes in the near future, it bears mentioning that in February 2019, the federal government established the Expert Panel on Modern Federal Labour Standards. Among other issues, this panel was tasked with examining labour standards protections for non-standard workers, including gig workers. In its Report, the panel addresses certain considerations related to the working conditions in which gig workers can sometimes find themselves. The panel also discusses the expressed need for and potential advantages of securing stronger protections and benefits for those working in the gig economy. Whether initiatives such as these eventually materialize into some basis for future government intervention is undoubtedly a question that businesses and employers will closely follow in the coming time.

With many thanks to Emily Deraîche-Grossberg for her help with and contribution to this piece.

France

Key points Commentary
What is the state of law on the status of gig workers today?

In France, the business model of gig economy platforms is based on the assumption that the individual is self-employed.

This distinction between the status of employee and self-employed service provider is fundamental from a legal perspective and often gives rise to disputes. The distinction is important in particular with regard to the strict employment law rules that exist in France, such as working time restrictions and protection on termination, as well as the employer’s liability for social security contributions (employers must make these payments only for employees but not for self-employed workers) and the eventual entitlement to unemployment benefits after termination.

As is the case in several countries, case law has established that in determining the employment status, courts must look at the substance of the relationship rather than any labels that the parties have given to that relationship. A number of factors will be reviewed such as the extent of the integration of the worker within the company’s operations, the equipment provided and the level of control exercised by the company.

What are the grey areas in the law?

This distinction between employee and self-employed has evolved through case law and so, in making a determination, will very much depend on the facts of each case.

There have been numerous cases before the courts over recent years but these have given mixed results both before the courts of first instance and at the court of appeal level.

A new law was passed in 2017 granting some minimal rights for the individuals providing services through a digital platform, such as the obligation for the company to pay for work-related accident insurance cover, some sparse obligations to cover the financial cost of professional training and the right to strike and to constitute a trade union.

However the French Parliament decided not to seek to legislate on the status of such individuals, arguing that it was up to the employment courts to apply the case law to determine whether such individuals were employees or not based on the facts of the case.

An attempt was made in 2019, through a new law, to allow platforms to set up their own social policy or charter determining the individuals’ rights and obligations. However, the proposed provision of the law was held to be invalid by the Constitutional Court on the basis that the courts should have the power to qualify the individual as an employee. A recent Decree published in October 2020 provides the authorisation of such charters by the labour employment administration but does not introduce any new rules on determining the status of the individuals.

Despite the general view that these individuals are generally self-employed, on November 28, 2018, the Supreme Court decided that a rider was an employee with a company using a platform and an application to connect partner restaurants, customers and riders, on the basis that the application used a geo-location system enabling the monitoring in real time of the rider’s position and the recording of the total number of kilometres travelled and that the company had the power to sanction the rider by a system of penalties which could even lead to the exclusion of the rider.

In a further case of March 4, 2020, the Supreme Court decided that a driver had the status of employee, notably because he was not able to develop his own clients and could not freely fix the price of his services.

What legal developments are expected in the future? In light of the recent Supreme Court decisions and of the EU Directive on transparent and predictable working conditions (Directive 2019/1152), which Member States have until August 1, 2022 to transpose into national law, the government is working on a law, the timing and content of which remain uncertain.
  

Hong Kong

Key points Commentary
What is the state of law on the status of gig workers today?

In Hong Kong there is an increasing trend for employers preferring to fill some or all of their staffing needs by hiring consultants and contractors on a self-employed basis. There are important distinctions between a worker being hired as an employee on the one hand and an independent contractor on the other: An employee is afforded rights and protections under the Employment Ordinance (Chapter 57 of the Laws of Hong Kong) and at common law; whereas independent contractors are expected to look after their own needs in relation to job safety, accident insurance, retirement schemes, leave periods, job security and other benefits normally associated with employment.

However, whether a worker is characterised as an employee or an independent contractor is fact sensitive and ultimately a matter for the courts to determine on a case-by-case basis. The courts will look to the substance of the relationship rather than the label applied to the contract.

What are the grey areas in the law?

Despite the importance of determining a worker’s employment status, unfortunately, the legislation in Hong Kong does not provide a definition of employee or any guidance in making the distinction between a worker engaged under a contract of employment and an independent contractor.

It is therefore necessary to refer to the common law for an understanding of how the distinction is made.

When looking at the legal characterisation of the worker, whether he or she is an employee or an independent contractor, the courts would typically look at the overall situation by considering a non-exhaustive list of factors. These include the degree of control the employer has over the worker, who provides the tools and equipment, whether the worker has freedom to delegate work or hire workers, whether the worker takes on any financial risk and has any prospect of profit and the employment status as expressed in a written contract.

The object of the exercise is to paint a picture from the accumulation of detail, which is not necessarily the same as the sum total of the individual details. In other words, a factor considered important in one case may carry very little weight in another.

What legal developments are expected in the future? The categorisation of workers in the gig economy is an area of the law, which remains uncertain in Hong Kong. When hiring a gig worker, employers must ensure that the relationship is in substance one of self-employment to avoid misclassifying a worker.


Italy

Key points Commentary
What is the state of law on the status of gig workers today?

When jobs in the gig economy became more common in Italy, gig workers had been initially qualified as “para-subordinate workers”, a special category of self-employed workers whose performance is carried out through a continued and coordinated collaboration with the principal. However, over time, there has been an increasing trend at giving such workers a minimum level of employment protection (i.e. minimum wage; insurance protection etc.).

This gradual trend started from case law, which, after some initial claims, granted gig economy workers with the core employment protection typical of subordinate employees, after holding that their performance – although occasional – is often strictly directed by the employer through a digital platform.

The above trend has been then acknowledged by Italian statutory law, that now considers “para-subordinate workers” (expressly including “riders”), whose performance is in practice organised and directed by the employer as subordinate employees.

What are the grey areas in the law?

Despite the recent legislation, in Italy gig economy workers have not yet been provided with a clear legal classification. Consequently, from a practical standpoint, the assessment of the actual employment status of a gig worker can sometimes be complicated.

Irrespective of the labels used by the parties to define the relationship, the assessment of the individual’s status (i.e. genuine self-employed worker, para-subordinate worker or subordinate employee) is determined by courts on a case-by-case basis.

Therefore, the chances of a self-employed or para-subordinate gig economy worker being re-labelled as a subordinate employee still mostly depends on how the performance is carried out in each  specific case.

Nevertheless, there is a growing trend to encompass gig economy workers within the scope of subordinate employment. In this context, recent case law, having determined that an individual was a subordinate employee, also held that the worker’s disconnection from the digital platform by the employer should be considered equivalent to a verbal dismissal.

What legal developments are expected in the future?

The specific features of the gig workers performance (e.g. discontinuous/occasional performance) has left some outstanding issues, such as those relating to the adoption of proper remuneration criteria (e.g. how to remunerate the waiting time between the single tasks carried out by the gig workers?).

It is felt that a key role could be played by consultation with trade unions, through the possible implementation of the “On-Call Job”, a special kind of intermittent employment contract. However,  this has very limited chances of application due to the lack of a specific collective bargaining agreement introducing and regulating it.

South Africa

Key points Commentary
What is the state of the law on the status of gig workers today, generally?

It is estimated that there are tens of thousands of gig workers in South Africa, making up at least 1 per cent of the South African workforce, and growing by more than 10 per cent each year. Common platforms link customers with a number of services including: transportation, food delivery, cleaning, repair, creative skills and technology development.

There is presently no legislation framework which regulates the gig economy. Furthermore, gig workers are generally categorised as independent contractors in South Africa and are thus not entitled to the rights and benefits afforded to employees under Labour legislation, including: protections against unfair labour practices and dismissals; basic conditions of employment; access to unemployment insurance and occupational injury benefits; and a prescribed minimum wage.

Technology platforms in the gig economy may still incur liability in terms of the Occupational Health and Safety Act which requires businesses in South Africa to take steps to ensure that, as far as is reasonably practicable, any person who may be directly affected by the business’s activities are not thereby exposed to hazards to their health or safety. Gig workers may report their platforms to the Department of Labour should they feel that their safety may be at risk through their business activity. Gig workers themselves also bear the responsibility to guard against unsafe conditions for themselves and anyone affected by their activities.

What are the grey areas in the law?

At this stage, South African courts have not yet been requested to provide guidance as to whether in certain instances gig workers can be categorised as employees and therefore entitled to the associated protection. However, the main employment tribunal in South Africa (the Commission of Conciliation, Mediation and Arbitration or the CCMA) has considered the issue and found favourably for gig workers.

In a relatively recent decision, a Commissioner of the CCMA was required to determine whether drivers engaged by an eHailing service (the “Company”) were employees or independent contractors. The Commissioner referred to Section 213 of the LRA, which defines employees as:

(1) “any person, excluding an independent contractor, who works for another person or for the State and who receives, or is entitled to receive, any remuneration; and

(2) any other person who in any manner assists in carrying on or conducting the business of an employer.”

In conjunction, the Commissioner relied on the statutory Code of Good Practice: Who is an Employee, which introduces a comprehensive test that requires one to consider the real relationship between the parties, despite the form of contract. In this case, the Commissioner held that the drivers are employees under South African law for the following reasons:

  1. Firstly, the drivers render their personal services to the Company  as they have to drive in their own name and may not out-source their driving to someone else.
  2. Secondly, their relationship with the Company is indefinite so long as the driver complies with the specified requirements.
  3. Thirdly, despite the flexibility regarding work hours, the drivers are subject to the control of the Company in the sense that they have to comply with the clear performance standards. Furthermore, if the driver does not meet the required standards, he/she is effectively dismissed or “deactivated.”
  4. Lastly, the drivers are economically dependent on the Company.

Whilst the CCMA’s decision was ultimately overturned by the Labour Court, this was on account of the incorrect citation of Company instead of the Netherlands-based holding company. It was thus not necessary for the Court to re-examine the question of the employment status of the drivers. However, the CCMA’s reasoning does provide some insight into one interpretation of the complex relationship between gig workers and their platform providers.

Although a level of guidance can be taken from this decision, South African labour tribunals are yet to make definitive findings on how the divide between employees and independent contractors will be applied in the Gig Economy. This will ultimately depend on a number of factors specific to each case.

What are trends to look out for?

We expect that in the near future the courts will be asked to consider the question of whether gig workers in certain instances are employees for the purposes of labour legislation and are accordingly entitled to the protection that such status offers. It is probable that the courts will find that most gig workers will not fall within the traditional definition of an employee and will remain outside the ambit of certain labour protection.

However, it remains to be seen as to whether the government will consider legislating unique protections for gig workers. During the COVID-19 pandemic there has been State recognition that many individuals – including gig workers – fall outside the legislative safety nets and that this issue needs to be addressed.

 

The Netherlands

Key points Commentary
What is the state of law on the status of gig workers today?

The percentage of the Dutch working population active in the gig economy ranges - dependent on the definition used –to a range between 0.4% and 10.6%.

In the Netherlands, workers are either employees or self-employed persons. To qualify as an employment agreement under Dutch law, the following three key criteria need to be met: 

  1. The employer is entitled to give instructions as to how the work is to be carried out (relationship of authority);
  2. The work is to be carried out personally (exclusively) by the worker; and
  3. The worker receives remuneration (wages) for his work from the employer.

If these key criteria are met, then, notwithstanding any agreement between parties to the contrary, the agreement is classified as an employment contract (substance over form). Factual elements taken into consideration are, for example, the freedom of the worker regarding the organization of his work, the freedom to substitute, and whether the worker is paid during holiday and illness.

In recent years, discussions have taken place in the Netherlands regarding the future of the employment contract. Concerns have been raised about the steady decline of permanent employment contracts and the increase in other forms of employment relationships such as self employment, gig economy work, freelance work and other forms of flexible working arrangements. This trend is widely seen as an increasingly urgent social problem and an undermining of the Dutch social security system.

In 2018 a government committee was established to investigate the labour market in the Netherlands and advise on regulating the employment relationship. In January 2020, it published its report. One of its recommendations was to create a clear and fair distinction between employees and self-employed persons. This could be achieved by bringing the definition in line with European jurisprudence, which sets out that consideration of the worker’s integration in the organisation and the nature of the work should be key criteria in establishing an employment relationship.

What are the grey areas in the law?

The main difficulty regarding the test for establishing employment status is that the test is a factual one and as such is determined on a case-by-case basis. The result depends on the facts and circumstances of the specific case.

Further, with the rise of digital platforms, the level of control over the worker (authority) and how this can be established is under scrutiny. For example, do algorithms result in such a degree of control that these amount to an employer giving instructions? The control requirement is now interpreted differently, especially in lower tribunals.

However, the central discussions seems to be the social and political issues around platform workers being classified as self-employed workers and so enjoying less protection than standard employees.

Finally, there is also a lack of clarity from a tax perspective. From 1 May 2016, the Deregulation Assessment of Employment Relations Act (DBA Act) applies. The DBA Act provides for the use of model agreements when contracting with self-employed persons. However, soon after the introduction of the DBA Act enforcement was largely frozen, as it did not provide the clarity envisaged.

What legal developments are expected in the future?

According to the latest update from the Ministry of Social Affairs, the following steps will be taken in the coming months:

  • Legal presumption: The government will consider a presumption of an employment relationship for gig economy workers. The government recognizes that the test for establishing employment status lacks clarity. A legal presumption can be a useful aid to strengthen the legal position of vulnerable workers in certain sectors, professions or positions. The explanatory notes set out how it is possible to refute the legal presumption.
  • Web-based module: The web-based module allows contracting parties to determine whether a person should be categorised as self-employed or as an employee according to the criteria applied by the tax authorities. A pilot starts in January 2021 and will last for six months.
  • Broad social conversation/investigation: The government considers it important to hold a broad social discussion about the way work is carried out and to what extent certain working methods are desirable. The aim of the conversation is to gain insight into any bottlenecks resulting from the legal framework, and into social views on rules regarding the classification of the employment relationship.

 

United Kingdom

Key points Commentary
What is the state of law on the status of gig workers today?

Around five million people in the UK are employed in the gig economy, with the number of such workers having doubled between 2016 and 2019. This figure is expected to have increased in 2020 as unemployment has risen and more people turn to flexible work. While the gig economy provides the individuals with flexibility, it lacks job security and employment protection.  Establishing the nature of the employment relationship will determine the employment rights to which an individual is entitled.

In the UK there are three types of employment status for the purposes of determining employment rights: employees, workers and self-employed. Employees have greater employment rights and protections under English law than workers and self-employed contractors.

Case law in England and Wales has set out that in establishing employment status, courts, tribunals and HMRC will look at the substance of the relationship rather any labels that the parties have given to the relationship. The tribunal and court will consider a number of factors in determining employment status, including mutuality of obligation, personal service, and the level of control. Other factors are also considered such as restrictions on the individual working for other organisations; the pay and benefits made to the individual; integration into the company; the equipment provided; and the level of financial risk.

What are the grey areas in the law?

Much of the difficulty is that the tests for establishing employment status do not necessarily sit well with the new work environment. This distinction between worker and self-employed has evolved through case law and so making a determination will very much depend on the facts of each case. This leads to a lack of certainty.

The recent trend in the cases on the gig economy which have been heard by the courts is to find that the individuals are workers rather than self-employed, although it does depend on the facts of each case. The decisions have considered the degree of control that the business has over how the individual carries out the task, and that many of the individuals appear to be integrated into the business wearing a uniform and company branding. A couple of cases have indicated that the individuals are self-employed, looking at the fact that the individual in particular is able to provide a substitute and that the substitution clause is unfettered and genuine.

Cases are currently with the Supreme Court in the UK which are looking at the employment status  and also the freedom of courts to look behind the written agreement.

What legal developments are expected in the future?

In December 2018, the UK Government published its Good Work Plan which set out its vision for the future of the UK labour market. This included a proposal that the Government would introduce legislation “to improve the clarity of the employment status test”. Many are hoping that the judgement awaited from the Supreme Court may define some of these principals for the legislation. Another proposal was that workers should be able to request a more stable and predictable contract. It was suggested in December 2019 that this would be included in a new Employment Bill, but this has not yet been published.

The EU has published the EU Directive on transparent and predictable working conditions (Directive 2019/1152) and Member States have until August 1, 2022 to transpose the Directive into national law. Following the UK’s exit from the EU, it is not yet clear whether domestic legislation may be amended to incorporate the rights that will be available to EU workers.

United States - California

Key points Commentary
What are the grey areas in the law?

Despite the success of Proposition 22, California law overall takes a narrow view of independent contractors. With that said, other industries may well try to emulate Proposition 22’s success to further expand the viability of the independent contractor model in California. Many industries continue to lobby for additional AB 5 exemptions.

For now, there are three categories of independent contractors: (1) those covered by Proposition 22; (2) workers who are covered by the roughly 100 exemptions from AB 5 (and not subject to the right of control of the hiring entity); and (3) the remaining workers who qualify as independent contractors under the stringent ABC test and AB 5.

What legal developments are expected in the future?

Legislation at the federal level could limit the impact of Proposition 22. President-Elect Joe Biden and Vice President-Elect Kamala Harris were both opposed to Proposition 22 and Joe Biden has even promised to create a federal version of California’s AB 5, implementing the same ABC test. If the Biden Administration were to use the executive branch to reclassify gig workers as employees, the Department of Labor could sue the companies employing them for failing to pay minimum wage and overtime. In addition, the National Labor Relations Board, once it regains a Democratic majority with Biden appointees, could revisit and reverse existing precedent and hold that gig workers are not independent contractors, but are employees under federal labor law. That would allow these gig employees to unionize, among other things.

For many labor advocates, the writing appears to be on the wall: the passage of Proposition 22 could mark the beginning of similar legislation or ballot measures across the country. As of now, New Jersey and New York are among the states looking to address classification issues in the way that AB 5 did, but Proposition 22’s passage may halt those efforts.

Rideshare companies have also been pushing states and the federal government to add a third classification, a hybrid between independent contractor and employee that would afford some, but not all of the benefits enjoyed by employees. The coming years will show the widespread effect that AB 5 and Proposition 22 in its wake will have on the country.



Contacts

Partner, Canadian National Chair, Employment and Labour

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