Three questions about the Platform Directive

We answer three questions concerning the new Platform Directive

Platform work is a relatively new phenomenon that has emerged with the development of digital technology. Platform work takes many different forms, and the growth of digital platforms has benefited both companies and consumers, but it has also led to a gray area for platform workers regarding their employment status. Many platform workers are incorrectly classified as self-employed contractors instead of employees, which means they miss out on the employment and social protections that employees are entitled to.

The EU is now the first legislator in the world to propose specific rules for digital work platforms. On April 24th, the European Parliament voted in favor of the final proposal that will provide new conditions for platform work. The new rules aim to strengthen the rights of platform workers and at the same time increasing transparency for platform companies by ensuring a correct assessment of the employment status of platform workers. In this article, we will go through three questions concerning the Platform Directive.

*The information should not be seen as exhaustive or advisory in specific cases.

What is platform work?

Platform work means that organizations or individuals use a digital platform to come in contact with other organizations or individuals to solve specific problems or to provide specific services for payment. The digital platform economy is growing rapidly and gained particular momentum during the COVID-19 pandemic, especially due to increased demand for food and grocery deliveries.

The benefits of platform work are many. It provides employees with the opportunity for flexible work as platform workers can choose to work when and where they want. It can also provide individuals who otherwise have difficulty finding work with an opportunity to earn money. For employers, platform work can mean lower costs and greater availability of labor. At the same time, however, there are also challenges with platform work. Since the work is carried out via an online service, it can be difficult to ensure a sufficient working environment and protect workers from, for example, harassment or discrimination. In addition, it can be difficult to establish working conditions and salaries, which can lead to uncertainty and inequality.

What does current legislation say?

Unlike in several other countries, Swedish employment law does not have a statutory definition of the term "employee". The assessment of whether a person is to be classified as an employee, and not an independent contractor, is based on the employment concept that has emerged in Swedish case law, whereby the boundary between an employment relationship and a contractor relationship is drawn after an overall assessment that includes all circumstances of importance in the individual case. The assessment of whether an employment exists focuses on all contractual terms and - not least - on the actual application of the agreement, i.e. the actual relationship between the parties and the actual conditions under which the platform worker carries out the work. According to Swedish employment law, it is therefore not of decisive importance how the parties themselves have classified the relationship between each other.

For platform companies, it becomes relevant to determine in each individual case whether it is a real contractual relationship with independent contractors, or whether the platform company exercises such a high degree of control over the organization of the work and working conditions that, in principle, the platform company can be considered to be responsible for the performance of the service and in fact acts as a “disguised” employer.

What do the new EU rules on platform work state?

Through the new rules, the member states are required to establish appropriate procedures to verify and ensure a correct determination of the employment status of platform workers, in order to address misclassification of employment status and correcting "false self-employment".

In the original version of the Directive proposal, platform workers would be reclassified as employees if they met two out of five criteria, such as if the platform controls the allocation of tasks or monitors the work. The criteria established in the proposal of the Directive would apply to all EU countries, however, in the final version of the Directive, which was adopted by the European Parliament, the common criteria have been removed.

The Directive provides for a legal presumption, including a reverse burden of proof, that an employment relationship exists if the platform company to some extent controls how the work is performed. More specifically, it is presumed that a contractual relationship between a platform company and a platform worker constitutes an employment relationship if there are circumstances indicating that the platform company has management and control over the platform worker. This assessment will continue to be made on the basis of national law and the national employment concept. As such, the criteria for determining whether a contractual relationship is considered to be a contractual or employment relationship will most likely remain unaffected under Swedish law, but the Directive affects the placement of the burden of proof in such a way that it is the platform company's responsibility to prove that the contractual relationship is not an employment relationship, if the company is deemed to exercise control over the platform worker.

The Member states now have two years to incorporate the provisions of the Directive into national legislation. It remains to be seen how the Directive will be implemented in Swedish law and it is not possible to determine or foresee exactly what effects it may have on current Swedish laws and regulations. Our assessment is that the biggest difference from the current regulations concerns the placement of the burden of proof and that it is likely that the burden of proof will to a greater extent fall on the platform company. However, this does not necessarily mean that more platform workers will be reclassified as employees, given that the contractual relationship will continue to be assessed on the basis of the national employment concept. It remains to be seen if the Swedish legislator will propose any further amendments to Swedish regulations to strengthen the rights for platform workers or whether case law from the European Court of Justice may affect the current regulations.    

At Deloitte Legal, we continue to follow the developments regarding this topic. If you have any questions about the distinction between employees and contractors or other employment law issues, please do not hesitate to contact our employment law practice group.

Authors: Jonas Lindskog and Eric Leijonhufvud.

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