Europe’s On-Demand Economy Draws Complaints. And Regulators.

The European Commission backed a proposal last week to combat what critics say is a race to the bottom in social standards for workers with ultra-flexible working hours and no regular salary, a group which now accounts for about a third of Europe’s work force. It is part of a broader push in Brussels for better access to social benefits, from written contracts to unemployment insurance, for self-employed and temporary workers, as well as for hundreds of thousands of people in jobs with no minimum hours or pay.

The resolution isn’t binding and is still subject to public debate. But it has opened a rift with businesses and politicians who say too much regulation will ensure that Europe falls behind in the global economy by stifling innovation, reducing competitiveness and thwarting job creation.

Business groups are warning of a threat to companies like Uber and Deliveroo, which offer people work through online platforms. Tighter protections would also increase costs at companies ranging from fast-food restaurants that use so-called zero-hours contracts without guaranteed work, to behemoths like the cut-rate airline Ryanair, which relies on agencies for pilots and staff.

A flexible work force allows for “billions of euros of economic growth, millions of new jobs, flexible working hours, and more balanced work and family life,” Juri Ratas, the Estonian prime minister, said at a European Union summit last week in Tallinn focused on the future of the digital economy. “Who wouldn’t want that?”

Companies like Uber and Deliveroo are seen as successes of such a model. They and similar platforms take commissions from workers’ earnings, but classify those workers as self-employed. That lets the companies avoid paying for social security, parental leave and other workplace benefits.

The approach has been lucrative: It has helped turn Uber into a behemoth valued at nearly $70 billion.

But the company’s aggressive cost-cutting and expansion tactics, championed by its founder Travis Kalanick, who was forced out this summer, have begun to draw unrelenting scrutiny. And as an outcry rises against precariousness in the flexible work economy, governments are being forced to take a harder look.

“Companies have been gaming the system, coming up with loopholes and saying this is a great new world of work,” said Esther Lynch, the secretary of the European Trade Union Confederation. “But people are seeing how harsh those circumstances can be.”

Britain recently undertook a review of “modern working practices.” It looked at firms that rely heavily on precarious contracts and urged changes such as closing legal loopholes that let temporary workers be paid less than regular employees in the same jobs; extending holiday and sick pay to on-demand “gig economy” workers; and allowing parental leave for the self-employed.

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James Farrar, left, and Yaseen Aslam, challenged Uber in court in Britain, arguing that the company denied drivers basic protections by classifying them as self-employed.

Credit
Mary Turner/Reuters

In France, President Emmanuel Macron is trying to overhaul the rigid national labor code to energize the economy and encourage a trend toward freelance work. But under pressure from social partners, he is also proposing a minimum safety net, including extending unemployment insurance to the self-employed.

Courts, too, are increasingly regulating the gig economy.

The European Court of Justice is expected to rule this year in a major case centered around whether Uber should be treated as a taxi service, which would mean it was subject to rigorous safety and employment rules, or merely as an online platform connecting independent drivers and waiting passengers.

Uber and Deliveroo face legal hurdles in Britain, too. A British tribunal is investigating whether Deliveroo riders are workers or contractors after an effort to unionize in London. And last year, a British court issued a landmark ruling that would require Uber to classify drivers as employees, pay them minimum wage and grant them paid vacation.

Two Uber drivers, James Farrar and Yaseen Aslam, had challenged the company on behalf of a group of 19 drivers, saying that the service denied them basic protections by classifying them as self-employed. Uber relied on an argument it has used repeatedly around the world: Its drivers were independent contractors.

But judges in the case derided that idea.

“The notion that Uber in London is a mosaic of 30,000 small businesses linked by a common ‘platform’ is to our minds faintly ridiculous,” they said in the ruling.

“Drivers do not and cannot negotiate with passengers,” the judges added. “They are offered and accept trips strictly on Uber’s terms.”

Uber appealed that decision on Wednesday, sparking the demonstration in central London that Mr. Biswas, the Deliveroo driver, joined.

If the ruling is upheld, it could hit the business model on which Uber, Deliveroo and similar online platforms rely. That may mean a major recalibration of the gig economy, or it may drive companies out of those countries which choose to impose stiffer regulation.

Outside Europe, there have been signs of that happening: Uber threatened to leave Quebec this month if the government there pressed ahead with tougher standards for drivers.

For Mr. Farrar, defeating Uber would represent a win for many workers trapped in what he said were exploitative conditions.

In an interview before Uber’s court appeal, he said that he had turned to the ride-hailing service a few years ago to put money aside while he considered switching careers.

“I wanted to do other things,” he said. “I thought I would supplement my income a little bit. I could pick my hours, go to my meetings. I drank the Kool-Aid.” A few months later, he was assaulted on the job. Because he was considered a self-employed worker, Uber disclaimed any responsibility.

Mr. Farrar contacted a lawyer. “I asked a question: is this right? Is there no duty of care?” He recalled the lawyer’s stark reply: “You’re not employed. You don’t have any rights.”

As Uber lured more drivers to its online platform, Mr. Farrar said, the number of fares he received went down. He struggled to stay afloat, increasing his average working hours to 70 a week to eke out a meager profit.

Even then, he said, he earned little more than 5 pounds, or about $6.70, an hour, below Britain’s national minimum wage. After that, he soured on the ideals of the so-called flexible economy.

“The flexibility quickly evaporates,” said Mr. Farrar. “I realized I’d been had.”

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