Published Sep 3, 2021
Over the past decade the gig economy has rapidly expanded worldwide, due to increasing digital innovation, lower costs for employers, and flexibility for workers. Countries are now beginning to update their regulations in response, as they attempt to work out how to regulate a new economic sector. The biggest area of contention relates to the legal status of freelancers – are they employees, or contractors?
To remain both compliant and competitive, gig economy employers will have to stay abreast of rapidly evolving regulations.
Regulatory changes to date
It’s taken a while for regulators to catch up to the emergence of the gig economy, and the bulk of actions in response have taken place within the last few years:
- October 2016 – A UK employment tribunal rules that Uber cannot classify their drivers as self-employed, and must extend them the same rights as full-time employees.
- April 2019 – European Union implements enhanced minimum standards for all gig workers, including more predictable hours, the right to training and compensation for cancellation of planned work.
- January 2020 – California introduces Assembly Bill 5, changing the way that contract workers such as Uber drivers are classified, and allowing them to set their own payment rates and reject ride requests without being penalised.
- November 2020 – the California electorate votes in favour of Proposition 22, making an exception to Assembly Bill 5 for ride-hire companies.
- March 2021 – UK Supreme Court upholds decision classifying ride-hire drivers as employees, entitling them to a minimum wage, pension and holiday pay.
- May 2021 – Spain introduces the ‘Rider Law’, categorising food-delivery gig workers as employees. The law also compels gig employers to be transparent about the role played by machine-learning algorithms in their decisions when allocating work.
Recent legislation to be aware of
The UK Supreme Court decision from March this year remains the key recent development, as the government so far hasn’t delivered the employment bill that was promised in the 2019 Queen’s Speech.
In the US the situation varies depending on state – so far, the governments of California, New York, New Jersey and Illinois have all moved to re-classify some gig workers as employees, but many freelancers still aren’t covered. There’s been no substantial change in the other 46 states and little federal regulation, although the Biden administration has indicated that they support efforts to re-classify freelancers as employees.
For now the EU’s main response remains the 2019 initiative, although it intends to extend this regulation in the near future. At a national level some have also introduced their own regulations, including Spain and France, but the majority have yet to take action to change or clarify the status of their gig workers.
What’s coming next
To date, there haven’t been many attempts by governments in other markets to regulate their nascent gig economies – but that may now be changing. Having previously paid little attention to the gig economy, the Malaysian government recently announced plans to create new legislation which will be the first substantial effort to protect the rights of gig workers in the developing world, and may indicate a new trend. At a lower level there have been a plethora of recent lawsuits directed by gig workers against their employers, pushing for extended employment rights.
This is feeding a backlash in some economies, with companies aggressively pushing to reverse recent changes. For example, last year in California a group of ride-hire companies including Uber spent over $200 million on lobbying in support of Proposition 22, successfully overturning the state’s re-classification of gig workers as employees. A similar coalition seems to be forming in the EU, aiming to shape future legislation.
It remains unclear what the final situation will be, as the gig economy is still a relatively new, swiftly-evolving phenomenon – but it’s likely that as it grows internationally, workers’ rights and expectations will continue to enlarge. Employers will need to stay in front of that wave of change to ensure that they remain compliant, and aren’t driving away valuable freelancers.
As a global financial platform with an abundance of local partners, Nium is perfectly placed to help employers navigate this evolving situation. Reach out to us to learn more!