The European Commission announced draft rules on Thursday to give workers such as couriers for online platform companies including Uber and Deliveroo rights, including employment benefits in many cases, a move which labour unions say is overdue but some companies argue will lead to job losses.
The proposal, a global first that needs to be thrashed out with EU countries and EU lawmakers before it can become law, marks the latest attempt by the European Union to regulate tech companies and ensure a level playing field between online and traditional firms.
"No one is trying to kill, stop or hinder the development of the platform economy," Jobs and Social Rights Commissioner Nicholas Schmit said at a press conference to introduce the proposals.
However, the rules are needed to ensure that new business models "uphold the labour and social standards which have been established in the EU," he said.
Online platform companies that set pay and standards of conduct for their workers will have to classify them as employees entitled to a minimum wage, paid holidays and pension rights, according to the draft rules.
Online food ordering and delivery companies, which are generally loss-making, have fought court cases around Europe and the US to have their couriers classified as self-employed contractors, rather than employees, with varying success.
Reactions varied, with CEO Jitse Groen of Europe's largest food delivery company Just Eat Takeaway.com saying he "welcomed" the rules.
However, Delivery Platforms Europe, a lobby group that includes Uber, Deliveroo, Glovo and Delivery Hero, warned in a statement that the proposed rules could lead to job losses.
Petra Bolster of Dutch labour union FNV, which won lawsuits against Deliveroo and Uber over employment, noted that the rules still give companies a list of five tests they can use to show couriers are self-employed.
"That's naive because platforms will use that as a toolkit to get around the criteria and get away with everything," she said. "It is their entire profit model to avoid costs of employment."
The EU executive said the draft rules could apply to between 1.7 million and 4.1 million workers from the 28 million working at more than 500 online platform companies across the 27-country bloc.
Under the EU proposal, companies will be considered an employer if they supervise the performance of work through electronic means, restrict workers' ability to choose their working hours or tasks, and prevent them from working for third parties.
The rules will also require ride-hailing, food delivery apps and other companies to be more transparent on how they use algorithms to monitor and evaluate workers and to set tasks and fees.
Crucially, the rules would shift the burden of proof onto companies, rather than couriers, when a dispute arises as to whether a worker is a self-employed contractor or an employee.
Analyst: A Necessary Intervention
Giles Thorne, an analyst for Jefferies, said that the EU proposal will not destroy either ride hailing or online ordering and delivery models, which are here to stay.
He said the EU move is best seen as a necessary intervention to give more power to riders, individuals who often have the weakest position in a chain between restaurants, the software platforms and consumers.
"The rider is going to get a bit more of the economics and the platform, the restaurant and the consumer are going to get a bit less," he said.
A similar intervention in the US during the COVID-19 pandemic capped the commission fees Uber, Grubhub and others can charge restaurants for orders.
For consumers at the end of the chain, the long term result of more protections for workers will be a small increase in either prices or delivery fees.
But "I would bet my bottom dollar that people keep ordering bento boxes online," Thorne said.