The Council of the European Union and EU Parliament on Dec. 13 reached an agreement on the draft text of a proposed directive to improve working conditions for platform workers.

Should the language stand, the directive would impose a floor of rights for platform workers, including paid leave, health and safety protection, and pension, adding cost and complexity to contingent workforce programs.

The justification for the legislation is the phenomenal increase in the number of individuals finding work through online intermediaries. European Commission analysis from 2021 found there are more than 500 active digital labor platforms, and the sector employs more than 28 million people — a number expected to swell to 43 million by 2025. Regulators in Europe are responding to this rise in platform working by passing laws that presume an employment relationship between a platform operator and a gig worker.

Belgium, Spain and Portugal have already enacted laws to this effect, while the EU’s Platform Workers Directive would establish an EU-wide standard.

SIA identifies a rise in two distinct types of platforms: talent platforms incorporating crowdsourcing, talent aggregators and work services platforms such as Uber; and staffing platforms for recruiting staff and hiring temporary workers. SIA estimates the worldwide B2B platform market for contingent work to be $37.8 billion.

Overbroad definition. The concern among those in the contingent workforce ecosystem has been that the proposed directive is drawn so widely as to include any work that is delivered via the intermediation of a digital platform. The original proposal by the EU Commission creates a definition of platform work that is broad enough to catch most staffing and talent platforms that facilitate contingent work arrangements.

“Platform work” means any work organized through a “digital labor platform,” which is:

  • Any person providing a commercial service through electronic means at the request of a recipient
  • Involving, as a necessary and essential component, the organization of work performed by individuals, irrespective of whether that work is performed online or in a certain location
  • With the use of automated monitoring or decision-making systems

However, the presumption of an employment relationship only applies where the platform controls the performance of the work.

During negotiations for the draft directive, the EU Parliament, the elected representatives of all 27 member states, had proposed a blanket presumption for all workers obtaining work through a digital labor platform. Their solution was for member states to give platform operators the right to challenge the presumption before any administrative action is taken. The onus is then on the platform operator to prove they are not an employer.

In the agreed draft directive, an employment relationship will only be presumed if two out of five indicators of control or direction on the part of the platform operator are met.

These indicators include:

  • Upper limits on the amount of money workers can receive
  • Supervision of their performance, including by electronic means
  • Control over the distribution or allocation of tasks
  • Control over working conditions and restrictions on choosing working hours
  • Restrictions on their freedom to organize their work and rules on their appearance or conduct

According to the agreed text, EU member states may add further indicators to this list when they transpose the directive into their national laws.

This presumption can still be rebutted if the platform proves that the contractual relationship is not an employment relationship.

Implications for the CW program. Presumed employment status will impose a floor of rights for platform workers, including paid leave, health and safety protection, and pension. This will add cost and complexity to contingent work previously carried out by self-employed freelancers intermediated by online platforms.

With the new rules, platforms will also be prohibited from making certain important decisions, such as dismissals and decisions to suspend an account, without human oversight. The text also ensures more human oversight on the decisions of systems that directly affect the persons performing platform work, such as whether a worker is chosen for a project or further work.

The gig economy has been phenomenally successful because it is flexible and agile. It enables employers to quickly increase or reduce its workforce depending on its short-term labor requirements and usually with limited barriers involved. Fundamentally, the increased costs and administration associated with having employees will have a significant impact on the growth of this type of work, while the need for human oversight in making decisions about the allocation of work will add cost and reduce speed in hiring decisions.

There are positive elements from the regulation of this part of the workforce solutions sector. Staffing platforms that operate as employers of record will already be managing their workforce in a way that will satisfy regulators. And the five indicators in the draft directive provide clarity for talent platforms to design their service in a way that does not result in a presumption of employment. However, organizations that want to control how, when and where the work is done while treating workers as self-employed contractors will be the ones most likely to find themselves out of compliance with the new regulatory framework.