Maintaining the status quo and fostering competition among platforms would better serve the platform workers and consumers

The European Commission has proposed a Directive of the European Parliament and Council on improving working conditions on platform work (hereinafter – the Draft Directive, the Directive). The proposal lays down intricate requirements for platforms whose application is likely to have serious unintended consequences for the consumers and workers contrary to the directive objectives.

The fact that individuals themselves decide to engage in platform work suggests that they regard some conditions of platform work as more advantageous, and thus more attractive. It may also be indicative of the desire to distance oneself from employment relationships and related regulatory restrictions on work activities. The breakthrough of the gig economy was preconditioned by the laxity, or even absence, of regulation, i.e., more freedom to enterprise and act.

Centralized rigid regulations of platform workers would negate the very essence of working through online platforms and the employment presumption would unjustly deprive individuals of the ability to decide on their preferred work module and conditions. Imposing labor standards to platform work will reduce the supply of services and increase their cost for the consumers. This may lead to many platform workers losing their income.

Rather than getting employed, the service provider (worker) “buys” the connectivity service through a platform. In many cases, it is not the platform but its users who rate each other. In order to minimize its risks due to the application of the Draft Directive, it is likely that platforms will start by abolishing the rating system, which will have a negative impact on both service providers and consumers.

The Directive provides for a presumption of an employment relationship if certain criteria indicating control are met. This would unduly deprive the self-employed of the possibility of deciding for themselves the model of organization and the conditions of their activity which they prefer. In would also increase the uncertainty of the application of the Directive. This, in turn, may force out platforms from the EU since the potential risks of operating in this market would be too high to bear in comparison to other markets.

Forcing former service providers and atypical workers into formal and traditional employment relations poses another conundrum, given that the employment framework may be ill-prepared to handle unorthodox work through platforms. It must be kept in mind that platform workers may not wish to engage in traditional employment or are unable to do so due to the peculiarities of their status. The majority of traditional employment contracts do not meet the need for flexibility that is provided by platform work. In such cases, an alternative could be zero-hour contracts that are the closest alternative to platform work and could ensure the needed flexibility.

Given the relatively short period since the rise of platform work and the EC’s proposal to regulate it, it would be prudent not to rush with interventions and instead monitor the market in order to better understand how it operates and to foster competition among platform operators. In addition, by being able to conclude contracts freely, companies are encouraged to compete in order to attract service providers by providing more favorable conditions.

The full position paper Maintaining the status quo and fostering competition among platforms would better serve the platform workers and consumers may be found here and the executive summary may be found here.

This position paper was prepared in cooperation with the Bruno Leoni Institute (IBL), Italy, the Institute for Market Economics (IME), Bulgaria, and the Institute of Economic and Social Studies (INESS), Slovakia.

The position paper is supported by the Friedrich Naumann Foundation for Freedom. The Friedrich Naumann Foundation for Freedom is not responsible for the content of this publication, or for any use that may be made of it. The views expressed herein are those of the authors alone. These views do not necessarily reflect those of the Friedrich Naumann Foundation for Freedom