Europe Pushes New Rules Turning Gig Workers Into Employees

LONDON — In one of the biggest challenges yet to the labor practices at popular ride-hailing and food-delivery services, the European Commission took a major step on Thursday toward requiring companies like Uber to consider their drivers and couriers as employees entitled to a minimum wage and legal protections.

The commission proposed rules that, if enacted, would affect up to an estimated 4.1 million people and give the European Union some of the world’s strictest rules for the so-called gig economy. The policy would remake the relationship that ride services, food delivery companies and other platforms have with workers in the 27-nation bloc.

Labor unions and other supporters hailed the proposal, which has strong political support, as a breakthrough in the global effort to change the business practices of companies that they say depend on exploiting workers with low pay and weak labor protections.

Uber and other companies are expected to lobby against the rules, which must go through several legislative steps before becoming law. The companies have long classified workers as independent contractors to hold down costs and limit legal liabilities. The model provided new conveniences for traveling across town and ordering takeout, and gave millions of people a flexible new way to work when they want.

But in Europe, where worker protection laws are traditionally more robust than in the United States, there has been growing momentum for change, particularly as the pandemic highlighted the fragile nature of gig work when food couriers and others continued to work even amid lockdowns and rising Covid-19 cases.

While there have been some important legal victories and laws passed in some countries targeting Uber and others, the policy released by the European Commission, the executive branch of the European Union, is the most far-reaching legislative attempt to regulate companies to date.

The rules would affect drivers, couriers, home cleaners, home health care aides, fitness coaches and others who use apps and online platforms to find work. As employees, they would be entitled to a minimum wage, holiday pay, unemployment and health benefits, and other legal protections depending on the country where they worked.

The European Union estimates that 28 million people work through digital labor platforms in the bloc, with their number expected to grow to 43 million by 2025. The commission said on Thursday that 5.5 million workers were at risk of what it called misclassification, and that up to 4.1 million of them could be reclassified as employees through the directive.

“This is not just bike riders in big cities,” said Johanna Wenckebach, a lawyer and scientific director at the Hugo Sinzheimer Institute for Labor and Social Security Law in Germany. “This is a phenomenon with millions of workers and many more ahead.”

The rules are part of a broader digital agenda that European Union leaders hope to pass in the coming year. Proposals include tougher antitrust regulations targeting the largest tech companies, stricter content moderation rules for Facebook and other internet services to combat illicit material, and new regulations for the use of artificial intelligence.

The new labor rules would go further than a landmark case in February, when Britain’s top court ruled that Uber drivers should be classified as workers entitled to a minimum wage and holiday pay. In the Netherlands, a court ruled in September that Uber drivers should be paid under collective rules in place for taxi drivers.

Supporters of the new worker regulations said companies like Uber behave like employers by controlling workers through software that sets wages, assigns jobs and measures performance — a practice the commission called “algorithmic management.”

The new European rules would require companies to disclose more about how their software systems made decisions affecting workers. For those who may remain independent, the new rules would also require companies to grant more autonomy that self-employment entails.

Kim van Sparrentak, a Green lawmaker in the European Parliament who helped draft a report on platform workers that was published this year, praised the commission’s proposal as “quite radical.”

“It can set a new standard for workers’ rights,” Ms. Van Sparrentak said.

The policy threatens the business models of Uber and other platforms, like the food delivery service Deliveroo, that already struggle to turn a profit. The E.U. law could result in billions of dollars in new costs, which are likely to be passed on to customers, potentially reducing use of the apps.

Uber opposes the E.U. proposal, saying it would result in higher costs for customers. The company said roughly 250,000 couriers and 135,000 drivers across Europe would lose work under the proposal.

Rather than help workers, Uber said the proposal “would have the opposite effect — putting thousands of jobs at risk, crippling small businesses in the wake of the pandemic and damaging vital services that consumers across Europe rely on.”

Just Eat, the largest food-delivery service in Europe, said it supported the policy. Jitse Groen, the company’s chief executive, said on Twitter that it would “improve conditions for workers and help them access social protections.”

The E.U. rules are being closely watched as a potential model for other governments around the world. Negotiations could last through 2022 or longer as policymakers negotiate a compromise among different European countries and members of the European Parliament who disagree about how aggressive the regulations should be. The law is unlikely to take effect until 2024 or later.

Enforcement would be left to the countries where the companies operated. Still, the proposals are a victory for lawmakers in the European Parliament, who pushed for similar rules in a report published in September.

The policy contrasts Europe with the United States, where efforts to regulate app-based ride and delivery services have not gained as much momentum except in a few states and cities.

Last year, gig economy companies staged a successful referendum campaign in California to keep drivers classified as independent contractors while giving them limited benefits. Although a judge ruled in August that the result violated California’s Constitution, his decision is being appealed, and the companies are pursuing similar legislation in Massachusetts.

The Biden administration has suggested that gig workers should be treated as employees, but it has not taken significant steps to change employment laws. In May, the Labor Department reversed a Trump-era rule that would have made it more difficult to reclassify gig workers in the country as employees.

In Europe, Spain offers a preview of the potential effects of the E.U. proposal. The country’s so-called Riders Law, enacted in August, required food delivery services such as Uber and Deliveroo to reclassify workers as employees, covering an estimated 30,000 workers.

Uber responded by hiring several staffing agencies to hire a fleet of drivers for Uber Eats, a strategy to comply with the law but avoid responsibility for managing thousands of people directly. Deliveroo, which is partly owned by Amazon, abandoned the Spanish market.

The companies prefer policies like those in France, where the government has proposed allowing workers to elect union representation that could negotiate with companies on issues like wages and benefits. Uber also pointed to Italy, where a major union and food delivery companies struck a deal that guarantees a minimum wage, insurance and safety equipment, but does not classify the workers as employees.

Ms. van Sparrentak, the lawmaker, said the E.U. directive would bring some clarity to the growing caseload of court files related to platform workers.

She said, “It will make the unbalanced fight between a massive corporation with hundreds of lawyers and workers a bit more fair.”

Adam Satarianoreported from London, and Elian Peltierfrom Brussels. Kate Conger contributed reporting.