March 25, 2024

By Eva Borbely, Capstone EU Tech Analyst

The European Union’s Platform Workers Directive— a years-long effort to regulate workers’ rights in Europe’s gig economy— is back from the dead. However, what has emerged from the grave has been resurrected with much more blunted teeth—a notable development for gig economy platforms.  

Since 2021, when the initial proposal was put forward, the EU has been seeking to define the employment status of millions of delivery drivers, freelancers, workers for ride-hailing services, and other people who get work from online platforms. On Monday, 11th March, EU Member State employment ministers finally adopted a common draft. But this did not come without drama. Over the past weeks, the finalization of the EU’s new landmark regulation for gig economy firms was at risk of failing to gain approval by the June 2024 European Parliament elections due to opposition from France, Germany, Estonia, and Greece. The four Member states had formed a blocking minority in the European Council.

The European Union’s Platform Workers Directive… has been resurrected with much more blunted teeth—a notable development for gig economy platforms.  

A last-minute vote favoring the draft directive from Greece and Estonia resulted from a significantly watered-down version. The adopted file notably discards the criteria indicating control that would trigger a presumption of employment for gig economy drivers and couriers.

Initially, the European Commission proposed five strict criteria that Member States should consider as elements of control—criteria that signaled the original ambition of the proposal. If two out of the five were met, the presumption of employment would be triggered. These criteria and the threshold for triggering the presumption were painstakingly negotiated since the original draft was published in 2021. Now they are gone altogether, and the responsibility to determine the specific factors that indicate the level of control and direction that would call employment status into question will be entirely up to Member States—a significant weakening of the original proposal. 

Now, under the current—likely final draft— each member state will establish a legal presumption of employment in their national legislation. This will be triggered when factors indicating control are found, which are to be defined on the member state level. The factors will likely be based on EU and National case law and collective agreements. The presumption of employment can also be triggered by persons working through digital platforms, their representatives, or national authorities. The burden of proof will lie with digital platforms.

The draft directive must now be formally ratified by the European Council and the European Parliament during the April plenary session. Member states will have two years to transpose the rules.

We think there are several notable takeaways from these developments that investors and companies should take note of. The contentious nature of the fight over EU-wide regulation of gig economy players has challenged the boundaries of the EU’s “social pillar” and shown the difficulties of harmonizing EU labor and social welfare policies. Notably, economic stagnation and incentives to maintain labor market flexibility have outweighed legitimate concerns over worker exploitation that were elevated by the Covid-19 Pandemic.

While the directive will enhance the rights of those working through gig economy platforms, particularly through the restrictions on using their personal data and the kind of decisions that can be automated through algorithms, it will do little to harmonize employment rights across Europe. While several member states are likely to goldplate and pursue the reclassification of gig workers, large member states like France and Germany will continue to be places for certain gig economy platforms to grow.

Larger players already present in these markets with the resources to comply with new rules… are poised to continue to gain market share.

What does this mean for large tech players in the space? Larger players already present in these markets with the resources to comply with new rules around algorithmic management and to take on the additional burden of proof where workers or worker representatives inevitably continue to challenge their legal status are poised to continue to gain market share. Employment status will be under greater scrutiny, but more established players, having dodged a more prescriptive directive, stand to benefit.

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