By Nancy CreminsJuly 2018
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Globalization Partners enables companies to quickly and easily expand into 187 countries without the hassle of setting up local branch offices or subsidiaries. You identify the talent, and we employ your team member via our in-country payroll. This enables you to quickly and easily hire around the globe, and lifts the burden of figuring out HR, tax and legal matters from your shoulders to ours.
The on-demand economy, comprised of independent and frequently short-term temporary independent contractor arrangements, continues to face international scrutiny over whether subject individuals are being misclassified. Also known as the “gig economy,” the method of engaging on-demand workers, as opposed to a standard employer-employee arrangement, is a common practice around the world as companies, including large U.S. companies such as Uber and Amazon, leverage gig workers to drive their international expansion.
While on-demand work may initially seem like a mutually beneficial situation for both the worker and the employer, the reality is that these on-demand workers do not typically have access to employment-related benefits, such as vacation, sick time, and paid parental leave. Additionally, in most countries, on-demand workers are not able to access social safety net programs such as worker’s compensation and are not making social security contributions. As a result, the courts, legislatures, and companies both in the United States and abroad are challenged with how to classify these workers and provide them with some access to benefits.
As companies rely on independent contractors to deliver goods and services worldwide, those practices face increasing scrutiny by courts and legislatures. Although there is no global test for independent contractor classification, tribunals often consider factors such as: whether the employer has control over the worker; whether the worker has a trade or independent business in that line of work; and whether the work is done outside the usual course of the employer’s business. These factors are laid out in the “ABC test” for classification, which is applied in some states including Massachusetts and was adopted earlier in 2018 in California. Additionally, throughout the U.S. and elsewhere, courts commonly use a “right to control” test in assessing employment misclassification claims. The “right to control” test balances considers all factors of the parties’ relationship to conclude who has the right to control the means and manner by which the work is performed. In a recent New York decision, couriers for delivery service, Postmates Inc., were deemed independent contractors after the court, using the right to control test, determined a lack of requisite “supervision, direction and control necessary to establish an employer-employee relationship” between the couriers and the company.
Although there seems to be some recognition that on-demand workers should have access to benefits, individual countries vary on how to determine if workers are employees or independent contractors leading to different outcomes, even within the same company. For example, Uber classifies its drivers as independent contractors, yet drivers have challenged such classification throughout the world. Courts in the UK and Colombia, as well as the European Court of Justice (ECJ) determined that drivers should be classified as employees following rulings that Uber operated as a transportation service. However, Uber drivers in Australia and France may continue to be classified as independent contractors after rulings that Uber operated as an intermediary service. This discrepancy demonstrates the ongoing difference in employee classification standards around the world.
The UK is at the legal forefront of classifying workers as employees instead of independent contractors. In a recent decision, the UK Supreme Court unanimously ruled in favor of classifying a heating engineer as an employee of, and not an independent worker of, Pimlico Plumbers. Additionally, the Employment Appeal Tribunal (EAT) in the UK recently dismissed an appeal by Addison Lee, a taxi and courier organization, upholding a decision that a courier is an employee of the company. Most recently, the UK’s GMB Union filed suit against Amazon delivery companies on behalf of three couriers claiming improper self-employment classification. Though this case is still in early stage, the current trend in such rulings in the UK suggests an outcome against Amazon’s classification.
Countries within the EU are beginning to adopt the EU’s precedent of employee classification after its ECJ ruling against Uber in 2017. In a recent landmark decision, a Spanish court ruled in favor of classifying a Deliveroo rider as an employee, and not as a self-employed contractor. Because of the short amount of time since the ECJ’s decision, it will take time for EU countries to adopt its decision. Until then, EU countries are starting to speak out in support of providing benefits to on-demand workers. Italy’s new minister of labour and economic development, Luigi Di Maio, recently called for a revamp of labour laws to better protect members of the gig economy. Di Maio described members of Italy’s gig economy as the “symbol of an abandoned generation abandoned by the state” and emphasized the need to provide the workers with “job security and a dignified minimum wage.”
Although there are judicial trends within countries, without a legislative change, tribunals consider worker classifications on a case-by-case basis, and a trend does not guarantee any certain outcome because the facts of each case may be different. As stated above, Australia’s Fair Work Commission recently issued a decision in favor of Uber’s classification of drivers as independent contractors. However, shortly after this decision, the Australia Fair Work Ombudsman launched an investigation into food delivery service, Foodora, for unfair practices and worker misclassification. Because Foodora acts more like a traditional employer, providing its drivers with more specific boundaries and better benefit options than companies like Uber, Australia’s Fair Work Commission may be more likely to classify Foodora’s workers as employees despite its finding that Uber drivers are not. As cases dealing with worker classification continue to emerge around the world, it is important for those companies who rely on independent contractors as part of their global staffing model to understand the rationale for each courts’ rulings in order to avoid the consequences of worker misclassification claims throughout the world.
This article was co-authored by Globalization Partners summer law clerk Krista Sherman. Sherman is a third-year law student at Northeastern University School of Law.