“Developments in the gig economy” is a blog series, that gives you a snapshot of how far the gig economy has come. The series will consist of three blog posts and down below is the second one, “Gig economy and the regulatory framework in the EU”. The remaining blog post will discuss growth within the gig economy.
Gig economy and the regulatory framework in the EU
The emergence of the gig economy over the past decade has led to the rise of several opportunities. This specific subsection of the global economy (which creates the framework for the Future of Work) has the potential to reduce the transaction costs within a firm as well as providing workers with new revenue streams.
While there are many benefits, there are many challenges that arise. The gig economy reaches a greater amount of the population, which thus increases the available labour force.
Although this situation provides a plethora of advantages for companies operating in the gig economy, it poses challenges to the workers. Those who work gig jobs face fierce competition that has been generated by the mass of available workers in the gig economy: with competition even expanding to a global scale.
These matters also give rise to challenges for another actor: regulators. The gig economy is still in an embryonic stage, with a large amount of development still required. Due to the gig economy still being in this phase of infancy, regulations have not been fully developed as of yet.
This can make operating as a company or an employee in the gig economy challenging; it has created tension and resulted in many disputes over legal rights and conditions for workers.
Responses from the EU to the gig economy
The gig economy has increased in significance within the European Union (EU) since its conception. According to the European Commission (2016), the capitalisation of online platforms registered in an EU member-state constituted 4% of the worldwide capital from online platforms [1].
The sui generis nature of the EU and its combination of supranational and intergovernmental features has raised many issues with regards to the rise of online labour platforms. Most of the regulatory framework is being decided and implemented at the national level in which member-states are encouraged to strengthen the enforcement of existing legislations [2].
The member-states of the EU have adopted different legal frameworks to handle the growing pains of the gig economy. Measures have been taken to clarify the legal status of gig workers and their right to social protection,but they are not currently very thorough [3]. This lack of consensus has led to a lack of a unified legal framework and differentiation of court rulings [4].
At the supranational level, the European Commission has set a number of guidelines that could act as the basis of an effective regulatory framework. These guidelines include harmonization rules at a Union level, firms’ compliance with all the existing EU rules combined with strong enforcement and cooperation between the involved authorities.
Furthermore, the European Commission stresses the significance of two factors: i) identifying the problems that surround online platforms clearly and without ambiguity, and ii) adopting a principle-based orientation on self-regulatory measures, ensuring that platforms protect the Union’s core values, transparently and without discrimination [5].
Aside from these guidelines, the European Commission had set an agenda for the “collaborative economy” in 2016. This agenda was an attempt to more clearly define the concept of this sub-section of the global economy and the legal definition of the gig worker[6]. In this agenda, it specifically mentions that the term the “collaborative economy” should be used to describe “business models where activities are facilitated by collaborative platforms that create an open marketplace for the temporary usage of goods or services often provided by private individuals”[7].
How the Gig economy is a deterrent to a comprehensive EU approach
The difficulty in setting a regulatory framework at an EU level is not only generated by the unique nature of the EU. The nature of the gig economy is another dimension that poses challenges to policy-makers. In particular, the variety of online platforms and gigs that are available make it difficult to set a unified regulation that covers all the types of employment.
In this initial phase, there is no consensus whether labour in the gig economy should be considered as an employment, self-employment, as a non-standard form of employment or a new type of employment [8].
Furthermore, the gig economy creates a triangular framework of interrelationships between the involved parties. According to Steward & Stanford (2017), this triangular scheme creates relationships between:
a) the intermediary platform and the worker,
b) the intermediary platform and the final consumer of the service and
c) the worker and the final consumer [9].
The first two types of relationship are governed by the existence of a contract and agreed terms and conditions. The third type is more ambiguous as it is dependent on the business model of the online platform.
Despite the numerous challenges posed for the regulating authorities, the gig economy provides some positive potential to tackle some structural issues within the economy. In particular, it gives the chance to mitigate undeclared labor in some economic sectors and strengthen their formalization[10]. Due to the fact that transactions are fulfilled online, it is easier to keep track of the labor used in sectors prone to irregular work.
In summary, the EU is still in an embryonic phase in its attempt to regulate the gig economy. Even though there have been several attempts at an EU level, the differentiation of legal frameworks within the member-states and the fundamental features of the gig economy pose several challenges to the policy-makers by complicating their efforts to reach a common approach to a global issue.
The need to find suitable ways to deal with the gig economy is becoming evermore essential over the coming years, due to the rapid growth of this sector, the size of which will be discussed further in our next blog post.
References
[1] European Commission (2016) Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – Online Platforms and the Digital Single Market: Opportunities and Challenges for Europe. COM(2016)288 final. Brussels.
[2] De Stefano, V. and Aloisi, A. (2018) European legal framework for ‘digital labour platforms’. Luxembourg.
[3] Pesole, A., Urzí Brancati, M.C, Fernández-Macías, E., Biagi, F., González Vázquez, I. (2018) Platform Workers in Europe, EUR 29275 EN. Luxembourg.
[4] Urzì Brancati, C., Pesole, A. and Fernández-Macías, E. (2019) ‘Digital labour platforms in Europe : Numbers, profiles, and employment status of platform workers’. Luxembourg.
[5] European Commission (2016) Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – Online Platforms and the Digital Single Market: Opportunities and Challenges for Europe. COM(2016)288 final. Brussels.
[6] Pesole, A., Urzí Brancati, M.C, Fernández-Macías, E., Biagi, F., González Vázquez, I. (2018) Platform Workers in Europe, EUR 29275 EN. Luxembourg.
[7] European Commission (2016) Communication from the Commission to the European Parliament, the European Economic and Social Committee of the Regions – A European agenda for the collaborative economy. COM(2016) 356 final. Brussels.
[8] De Stefano, V. and Aloisi, A. (2018) European legal framework for ‘digital labour platforms’. Luxembourg.
[9] Stewart, A. and Stanford, J. (2017) ‘Regulating work in the gig economy: What are the options?’, The Economic and Labour Relations Review, pp. 1–18.
[10] De Stefano, V. and Aloisi, A. (2018) European legal framework for ‘digital labour platforms’. Luxembourg.