Empowering the Freelance Economy

What will determine worker status under new EU freelancer rules?

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The European Council will start negotiations with the European Parliament on a new law that could change the worker status of freelancers in an effort to improve their working conditions

The proposal introduces two changes: to determine the correct employment status of people working for digital platforms and to establish the first EU rules on the use of artificial intelligence in the workplace.

Correct classification of self-employed workers

As it stands today, the majority of the EU’s 28 million platform workers, including taxi drivers, domestic workers and food delivery drivers, are formally self-employed. Nevertheless, a number of them have to abide by many of the same rules and restrictions as employed workers.

This, according to the EU Council, indicates that they are in fact in an employment relationship and should therefore enjoy the labour rights and social protection afforded to employees under national and EU law.

The Council said in a statement that its aim is to address these cases of misclassification and ease the way for such workers to be reclassified as employees.

“Under the Council’s general approach, workers will be legally presumed to be employees of a digital platform (as opposed to self-employed) if their relationship with the platform fulfils at least three of the seven criteria set out in the directive. These criteria include:

  • upper limits on the amount of money workers can receive
  • restrictions on their ability to turn down work
  • rules governing their appearance or conduct

In cases where the legal presumption applies, it will be up to the digital platform to demonstrate that no employment relationship exists according to national law and practice.”

Under the EU ministers version of the Platform Workers Directive, employment status can be rebutted if five of the seven criteria can be shown to not apply. The criteria are: 

  • Supervising the performance of workers through electronic means 
  • Restricting their ability to choose their working hours
  • Restricting their tasks 
  • Preventing them from working for third parties 
  • Setting an upper limit on pay 
  • Setting rules on their appearance or conduct 
  • Restricting their ability to use subcontractors or substitutes 

Source: Osborne Clarke

The gig economy has brought many benefits to our lives, but this must not come at the expense of workers’ rights. The Council’s approach strikes a good balance between protecting workers and providing legal certainty for the platforms that employ them.P

Paulina Brandberg, Swedish Minister for Gender Equality and Working Life

More transparent use of algorithms

Digital labour platforms regularly use algorithms for human resources management. As a result, platform workers are often faced with a lack of transparency on how decisions are taken and how personal data is used.

The Council wants to ensure that workers are informed about the use of automated monitoring and decision-making systems. Under the new rules, these systems will be monitored by qualified staff, who enjoy special protection from adverse treatment. Human oversight is also guaranteed for certain significant decisions such as the suspension of accounts, said the EU Council.

Next steps

The Council will begin negotiations with the European Parliament on the basis of the general approach agreed upon this week, with a view to reaching a provisional agreement.

Impact on temp workers, agencies and umbrellas

If the agreement gets passed that could spell the end of temp and seasonal workers being hired by large chains, such as hotels, restaurants, and even Amazon simply because they are required to wear a uniform or represent the company to a certain standard. This could also mean a large swathe of temp workers will no longer go through agencies on a regular basis serving multiple clients or umbrellas because they will be deemed employees by the hiring company.

“UK companies that may be affected in light of their EU operations would be wise to get involved in lobbying and related activities at EU level now – with a view to getting clear and helpful guidance,” says Osborne Clarke.

“Those with no EU operations may be wise to get involved as well to pre-empt the UK deciding to just adopt the same regime as part of a rapprochement with the EU after the next election (at which point it may be hard to change the underlying rules of the regime),” says the law firm. 

❓Do you agree with the EU proposals?

❓Are the UK’s off-pay-roll rules better or worse than the EU proposals?

🗣️Leave your comments

  1. Jayne says

    Without knowing full details yet it’s hard to say. All I know is IR-35 has reduced the pool of good contractors and the flexibility to work in different locations in the UK. As well as reduced pay and benefits. It’s hard to see how it can work blanket wise in EU. For example in Spain a freelancer is already taxed at 45% if earning 60k+ and are already treated like IR35 workers – no benefits, less flexibility etc

  2. Aaron says

    When looking at the IR35 rules in the UK the end result has been good talent moving out of the country and big clients not being able to hire the best talent anymore. (usually the best know their worth so they freelance) IR35 has hindered the UK with growing an economy if the EU want to follow suit they should be prepared that the best talent could leave to places that they will be treated best in the age of the internet and remote working, if you don’t encourage business and label everyone as a employee than how can innovation happen?

  3. Vincent says

    Will be an improvement. Many who see IR35 as a oroblem have missed the point that most of them are employees in most respects. Why not have those benefits.
    I do freelance work in the main (many clients and control over the work) but also work as an hourly paid employee (University Lecturing). the conditions are very different, especially when it comes to sick leave and cover.
    Freelancers as undercover employment without the benefits is only an advantage to the employer (who underpays their due tax).

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