Foreward by Andrew Chilvers
Whenever the gig economy comes up in conversation, app-based technology companies such as Uber usually get a mention as the emerging business models for ‘gig’ workers. And while these new ‘gig’ business models are changing the way people work, many jurisdictions are resisting the changes taking place.
Back in the pre-COVID-19 days of 2019, two London-based Uber drivers sued the company claiming they should be classified as workers and given a minimum wage, holiday pay and other benefits due for company employees.
They argued that Uber was a proper taxi company employing drivers to provide a service for customers. Uber employment rules included standardised routes and fares, similar to any employer-employee relationships, and driver standards and conduct, under the Uber brand banner. Indeed, they said if drivers failed to keep to these standards their driver accounts would be deactivated, essentially sacking them like any other company.
Meanwhile, Uber argued that it was not a taxi company but rather an app-based software company providing a direct contact (via the app) between the driver and the customer. Simply put, the app helps freelance employees gain customers and the company’s terms of business state that drivers work for themselves. They are not obliged or indeed contracted to work solely for Uber. An employment tribunal upheld the taxi drivers’ claims, while Uber was set to appeal the decision.
The issue of companies such as Uber and Deliveroo as employers of gig workers and drivers of the gig economy is a talking point the world over. The debate goes well beyond taxi and delivery services and highlights the fundamental shift now happening in the modern workplace. This shift eschews the traditional nine-to-five office hours in favour of employment based on often casual, remote working underpinned by digitisation. Above all, it’s a generational shift based on technology, as our members discuss in the following pages.
The recent resurgence of the gig economy can be seen as an extension of the technology revolution in the workplace. Does the gig economy offer benefits that older models of employment lack?
In Germany you can already recognize a big shift due to the rise of the gig economy. This affects the classic economy to a certain extent and leads it to a change in the direction of the gig economy. All-in-all it seems that the gig economy comes along with a generational shift.
Several long-established and well-known companies are in the process of adapting their classic patterns towards the gig economy because the digitalisation of the workplace and the basics of the gig economy are changing the attitudes of the younger workforce. This younger generation has certain expectations about how they want to work. They are rejecting the more traditional employment practices. Businesses have to change to attract that kind of young talent. In many respects younger people want to be gig workers, using social networks and technology to achieve their ambitions. These days there are few expectations of working in an office or working 9am to 5pm. Job security is not en vogue anymore, the key requirement is flexibility.
On top of all pros and cons of the gig economy with respect to how we work, nowadays one has to consider the impact of COVID-19. Across a wide range of industries both employers and employees have suddenly realised that working from home is a feasible alternative. It is often seen as more convenient and allows employees to work at their own pace. This is a further indication that classic workplace models are disappearing. Nowadays, both young and old people no longer need an office to perform a wide range of jobs.
As employers see the benefits of the gig economy in terms of cutting the costs of social security payments, pensions and health insurance, how important is it for companies in different jurisdictions to understand local legislation and court precedent?
Germany has very strong social security and labour laws. In addition, there is a steadily growing number of legal developments due to court decisions at a local level. Thus, it is important to understand legislation on national as well as on a local level. This is true not only for local companies but also and especially for international companies entering the German market.
Germany has a statute law system, however, this is evolving over time by an ever-increasing number of court decisions. One can argue that there is little difference nowadays between the classic case-law and the statute law system. Everything is aligning over time, so it is very important to understand the legislation and the respective case-law regarding the differences between self-employment and dependency employment with respect to the gig economy. This distinction seems to be a significant challenge for the gig economy in Germany and has a huge impact on how foreign investors operate to avoid legal penalties.
A misclassification may lead to a revocation of a necessary operating licence, penalty payments or additional payments including high interest by German authorities and can even lead to public prosecution in certain cases.
Uber is a classic example. In Germany all taxi drivers need to have a licence to convey passengers. The respective law is nearly 50 years old. Consequently, if you’re working for a taxi company not only the company needs a licence but also all individual taxi drivers. People who drove for Uber did not have individual licences. Thus, the Uber-setup was clearly forbidden under German law. It appears that Uber ignored this aspect of the national legislation when it entered the German market.
Furthermore, Germany has a fairly strict social law. Unlike in the US or UK, one cannot easily lay off an employee without a valid social reason. The laws are generally very strict and protective with respect to the employees. While businesses and technology are leaning towards the gig economy, it is actually difficult in Germany to get a gig economy going properly and for businesses to be more flexible and agile. By the nature of technology, a business needs to be agile and flexible in terms of its introduction to the workplace. As a result, there is a contradiction happening – flexibility and technology fit well with the gig economy, but they don’t suit the current legislation in Germany.
What is the gig economy’s impact on employment patterns in different jurisdictions?
There is no doubt that the gig economy will open up new opportunities for flexibility around working patterns. As a result of COVID-19, the typical old-fashioned working patterns in Germany have now shifted significantly towards remote working. Businesses have realised that a lot of jobs no longer need to be performed in an office and instead can be carried out just as well from home. For many companies and workers there is a sudden realisation that they are not working alone as the office guinea pig anymore. Everyone is doing it but with regard to Germany, how flexible can businesses become?
After working from home for several months, I have noticed myself that professional service companies have been able to quickly adapt to these changing circumstances since the legal requirements have existed in Germany for decades already. Nevertheless, as previously mentioned, it is the younger generation who is embracing this model. Older people still prefer turning up to work in an office.
Going remote also largely depends on the sector of business. The younger generation is comfortable working remotely for technology firms, publishing, marketing etc. But older industrial sectors such as manufacturing will always prove problematic when it comes to flexible working patterns. Everyone knows if they work for BMW, Mercedes Benz or Porsche building cars that they will probably not be able to work from home any time soon.
It will be interesting to observe the different digital workplaces over the next couple of years. One should expect these developments to have an impact on legislation regarding pension funds, social benefits and labour law.