How Gig Economy Corporations Are Circumventing Spain’s Labour Laws
This week, Spain's 'rider law' came into force, requiring food delivery companies to recognise riders as workers – but big businesses are already finding ways to flout it in the interests of profit.
A cyclist working for the food delivery service Glovo rides on an empty street in Madrid, Spain. Credit: Carlos Alvarez / Getty Images
In May 2021, Spain became the first European country to legally recognise delivery riders as employees of platform companies and guarantee them trade union representation. The Spanish ‘rider law’ aims to protect an estimated seventeen thousand precarious workers who lack basic employment protections like a minimum wage, sick pay, and collective bargaining. Introduced by a coalition of the Socialist PSOE and Podemos, the legislation is an important test case for new Europe-wide legislation that could be introduced by the end of the year.
The law was announced amid much media fanfare — but the platform companies’ response also calls for a more sober assessment. The Spanish example demonstrates how difficult it is to regulate platform firms that are hell-bent on maintaining the status quo. These companies have already undermined and subverted regulations and employed various ‘work-arounds’ to avoid fully complying with the law.
This situation shows that regulation plays an important role in protecting workers, strengthening their position against bosses and providing the basis for a decent society. Organisation from below is important for making these laws effective. However, to understand the problem of tech companies only in terms of legislation and lawsuits would be to miss a key opportunity for transformative change. As well as fighting for tougher regulations on tech companies, we need to develop the collective power of workers — and imagine alternative systems that could replace corporate platforms with democratic alternatives.
The Platform Companies Strike Back
12 August marks the final day of a three-month grace period the platform companies were given to adapt to the new rules in Spain. The law follows a Supreme Court decision in September 2020 that ruled in favour of riders for delivery company Glovo, the nation’s largest food delivery service. The court found they could not be considered self-employed due to the degree of control the company had over their work activities. The new decree places a presumption of employment on delivery and distribution riders when a company exercises powers of management and control.
In theory, this means that companies like Deliveroo, Uber Eats, and Glovo will have to register drivers as employees — and pay them a monthly social-security payment toward their pensions. The reality, however, is that, over the past three months, only a handful of riders have been registered as employees of these companies.
Deliveroo has already announced that it will be pulling out of the Spanish market. As a relatively minor player in Spain, the company felt that to continue operations would require too much additional investment. Some might see this as a positive development. Perhaps the new regulations could put an end to an exploitative business model and show that these companies are simply unprofitable if they pay their workers properly. But many of these riders will migrate to an alternative platform where they face similar issues.
Glovo has stood defiant and will maintain 80 percent of its riders as self-employed — with plans to hire the remaining 20 percent (around two thousand people) as employees by the end of 2021. The company’s lawyers have devised a new system of algorithmic management designed to offer workers more control while maintaining their self-employed status. Critics like Rubén Ranz, an organiser for Spanish trade union UGT, are sceptical that this status is anything but flagrant disregard for the new law, given the continuation of what is essentially an employment relationship.
Uber Eats has employed another work-around by outsourcing its rider services to other companies — enabling it to avoid taking full responsibility for its workers. In the final days of negotiations, the platform companies squeezed in an allowance that they could use third-party subcontract services under the new law. This follows a model used widely in China as well as other countries, in which riders are engaged through external staffing agencies so the platforms have no obligation to pay workers social security.
The new law has increased costs for the platform companies and will likely benefit some workers. But the extensive carve-outs negotiated by the companies and their reluctance to fully comply with the law means more protracted legal battles will soon follow.
A New Gig Economy?
These advances show that new divisions may be emerging among different versions of the gig economy around the globe. Europe could be moving toward a new presumption of employee status, while American states drift toward California-style ‘independent contractors with benefits’ — just as the rest of the world remains within a fully precarious model.
We should be sceptical of these companies’ recent signs of willingness to move toward a new paradigm. Platform companies operate most freely in weak regulatory environments in which they can sidestep existing protections for workers. At the same time that they acknowledge the inadequacy of independent contractor status in parts of the Global North, they are further entrenching the precarious position of workers in countries in Latin America, Africa, and parts of Asia.
In South Africa, for example, the Fairwork Foundation has found that gig economy platforms benefit from a legal loophole that limits labour rights to workers classified as ’employees’ — leaving most gig workers without any protections. When workers attempted to bring a legal case against Uber in 2017, they discovered they had contracted with a Netherlands-based company, and their case was dismissed.
Following the UK Supreme Court decision, human rights attorneys have filed a new class action lawsuit against Uber in the Johannesburg Labour Court to have drivers declared employees of the company.
Resisting the Regulators
Platform companies fight legal cases and new regulation with such tenacity because they each make up part of a global battle — after all, Uber Eats operates in forty-five countries, Just Eat in twenty-four, and Deliveroo in thirteen. Every new law and court case must be resisted, because adverse regulations in one jurisdiction could soon be replicated in others.
These companies also form strategic alliances with one another to outmanoeuvre regulators. In California, companies joined forces to amass a war chest of over $200 million to push Proposition 22 across the line. This ballot measure denied workers full labour protections and effectively created a new employment category, neither employee nor independent contractor, which strips workers of rights and benefits. They now plan to roll out this model in other states, offering small perks in exchange for avoiding more wide-ranging legislative oversight.
When faced with strong opposition, the companies’ preferred strategy has been to offer certain benefits to workers in exchange for avoiding their classification as employees. In New York, Uber and Lyft are looking to strike a deal with labour organisations to support new legislation that would offer gig workers rights to unionise while stopping short of defining them as employees. Under the proposed legislation, tech companies would receive exemption from city and county minimum-wage laws and from state labour laws on discrimination.
Platform companies have lobbied extensively for favourable regulations, subverted or ignored ones they don’t like, and dragged precarious workers through the courts rather than proactively addressing issues. They are masters of this ‘regulatory entrepreneurship‘ because their entire business model relies on them operating in a shady zone of partial legality and betting on changing the laws as they go. Regulations matter, but they have been a slow and cumbersome mechanism to challenge the power of tech companies that can move quickly to undermine attempts to rein them in.
Another Digital World is Possible
There are alternative models out there, such as the newly created ‘Wings‘ — a food delivery cooperative in London that offers living wages to riders, runs a zero-emissions service, and attempts to shift customers away from the exploitative model of the major food-delivery platforms.
Workers’ cooperatives face a tough uphill battle against existing platforms and have limitations in terms of raising capital and competing against corporations. But public authorities can also play an important role in supporting cooperative and social enterprises in their area, such as Islington Council’s grant to Wings and their investment in expanding the resources available to the digital cooperative sector.
There is still a long road ahead for the Spanish rider law. It remains to be seen how the subcontracting system will affect low-wage precarious workers and what strategies workers can adopt to challenge it. What happens next will be influential for any future legislation in the EU, as the global struggle continues for workers pushing back against platform giants.