The European Commission is preparing new rules that would supposedly improve the working conditions for platform workers. We are yet to find out what the nitty-gritty of the EC’s proposal will be, but the general idea is to make people operating via digital platforms, such as ride-hailing drivers and food delivery couriers, reclassify as workers.
Digital platforms could be considered as employers if they set the employee’s salary, require specific rules of appearance, limit the freedom to choose working hours, and limit the platform employee’s ability to work for others. Reportedly, if two of these criteria were met, a gig worker would have to enter into employment relationships with the digital platform.
Economic logic and research suggest that strict and excessive regulation of platform workers and the reclassification of service providers as employees may undermine the very essence of providing services through online platforms.
Even more, the new rules would eliminate the possibility for people to choose the model and conditions of work they prefer.
Providing services through platforms benefits local workers who seek additional income. It also helps migrant workers by facilitating their integration into the labor market. Platform work facilitates labor market entry and can help reduce the problems of short-term unemployment and skills mismatches.
It also provides new job opportunities and a source of additional income for recent graduates and immigrants.
If transport and food delivery service providers were universally treated as workers, this would reduce the supply of these services and increase their cost for the consumer, which means less income for many platform workers. It would also reduce job opportunities in the sector, which is no good news for those hurt by the effects of nationwide lockouts and pandemic-related unemployment.
What governments should do if they are looking for effective and sustainable strategies is to create a favorable regulatory environment, encourage competition between platform operators, and take care of better access to information. More competition in the sector would incentivize platform operators to better respond to drivers’ needs. Workers would have more options to choose the operating conditions that suit them best.
It is worth remembering that the way the sector is operating right now has actually led to the explosion of platform activities. If we want to strike a balance between the development of digital platforms and the protection of the interests of service providers and customers, the regulatory status quo for platforms should be maintained, while effective and easily accessible dispute resolution mechanisms would help to sustain this balance.
Platform work should be allowed to develop under a legal environment that responds to the need for flexibility in the provision of services via platforms.
Tightening the rules and imposing employment regulations on platform work is not only unjustified but is very likely to hurt the consumers, providers, and economies at large. It would strip service providers and consumers of the essential advantages of the gig economy, such as flexible timing of services or flexible working arrangements.
After all, the traditional labor law is not adapted to the needs of platform activities. Allowing open-ended employment contracts or “zero-hours” contracts, which are the closest alternatives to platform work, could help address this issue.
The existence of these types of employment contracts could provide the necessary flexibility. Zero-hours contracts allow the worker to determine the amount of work they want to do while guaranteeing at least a certain level of income in cases where the person does not exceed a minimum number of working hours.
Such contracts also allow workers to better reconcile personal needs with work, to have multiple employers, and to discard unacceptable work assignments without penalty.