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The 'Uberization' of the labor market?

By Stefan Nerinckx, Partner, Fieldfisher Brussels

Social media and other new technologies are changing the way professional services are delivered. Individuals can make a living by renting out their homes via Airbnb or by offering rides for pay in their personal cars via Uber. Others are combining these jobs with their full-time day job.

Needless to say, our existing employment and business models are under pressure.

Recently, the Belgian Secretary of State against Fraud stated that all Uber drivers are to be considered as self-employed workers according to Belgian legislation.

A few weeks before, the Labor Commissioner of the State of California came to the opposite conclusion: in California, Uber drivers are considered (salaried) employees (Case n° 11-46739 EK of June 3, 2015).

Uber organizes its services similarly in the US and in Belgium: it provides the technological platform to connect drivers and passengers.

In developing its arguments, Uber defended itself by stating that they only supply a smartphone application which facilitates transactions between passengers and drivers. The smartphone is provided by Uber, unless the driver has his or her own.

To be able to use the platform, a contract is signed between the driver and Uber, imposing a number of strict conditions on the driver.

The California Labor Commissioner concluded that Uber drivers are to be considered (salaried) employees as:

  • The drivers’ work is an integral part of Uber’s regular business;
  • Uber holds a pervasive control over every aspect of the drivers’ work;
  • No managerial skills are involved that could affect profit or loss;
  • Apart from the car, there was no investment in the business.

Interesting to note is that the Labor Commissioner assimilates the activities of the Uber technological platform with the transport of individuals (drivers using the platform). One could assume that Uber's primary (and only) activity is making available its technological platform. The second interesting conclusion is that a company cannot outsource its main activity to self-employed individuals.

Uber

Classification of the nature of the employment relationship in Belgium

In Belgium, the principle is that the parties freely choose whether their labor relationship is an employment agreement or a self-employed cooperation agreement. However, the parties' choice may not be contrary to the actual exercise of the labor relationship.

Anyone who works under the authority of the other party, the employer, is an employee. A self-employed person performs his or her professional activities outside any link of subordination.

The Program Law of December 27, 2006 provides four general criteria to assess the existence of a link of subordination:

  • The will of the parties as this appears from their agreement;
  • The freedom to schedule working time is indicative of an absence of a link of subordination;
  • The freedom to plan the work is indicative of an absence of a link of subordination;
  • The possibility of exercising hierarchical supervision is indicative of the existence of a link of subordination.

Refutable presumption of employment or self-employment in risk sectors

The Law of August 25, 2012 introduced a refutable presumption of employment or self-employment in the building (for works on fixed property), security, transport and cleaning sectors. The presumption can be refuted by all legal means.

The taxi sector established additional criteria to determine whether someone is to be recognized as self-employed or an employee (Royal Decree of October  23, 2013 – section 140.02). If it appears that more than half of the criteria provided above, which are indicative of economic dependence, have been met, the labor relationship is (refutably) presumed to be an employment agreement.

Finally, the Program Law of December 27, 2006 (adapted by the Law of August 25, 2012) also provided for the establishment of a committee to regulate the labor relationship.

It is possible for the persons involved in the labor relationship to request the committee to rule on the nature of the labor relationship. This is the so-called social ruling.

All self-employed? – recent Belgian case law

Finally, I would like to make reference to recent case law. In my opinion, the Labor Court of Appeal of Brussels takes a rather remarkable position in applying the abovementioned criteria. The first one (Labor Court of Appeal of Brussels, September 9, 2014) concerns a consultant in agriculture who exercised his activities in an employee-employer relationship; the employee is terminated and a self-employed contract for a determined duration is concluded to exercise the same functions. The contract is not extended, and the consultant claims the existence of an employment contract. The court decided the structure was not in contradiction with a self-employed relationship as:

  • It is irrelevant whether the same activities were previously exercised as a salaried worker;
  • It is irrelevant whether one can or cannot be replaced;
  • It is irrelevant whether a fixed amount is being charged;
  • Furthermore, the contractor was not obliged to take on the assignment, the principal was not obliged to provide the contractor continuously with work, and there was only a limited control over the activities performed.

The second case (Labor Court of Appeal of Brussels, December 9, 2014) concerned the execution of a self-employed contract for the activities of an Operations Manager. Here, the court decided there was no employee relationship as:

  • The parties decided to have a self-employed relationship;
  • There was no limitation as to when the services were performed (no strict schedule or obligation to work in certain moments), although holidays and times the manager was available had to be communicated;
  • The possibility for the principal to sanction the service provider following a control is not in contradiction to a self-employed status.

What is next?

In the evaluation of the status of employee vs. self-employed worker, both Belgium and the United States have similar criteria. However, an interesting conclusion of the California Labor Commissioner is the assimilation of the activities of the Uber technological platform with the transport of individuals (drivers using the platform). Would the same principle apply to other platforms such as Airbnb? The factual elements will have to be analyzed, but can it be envisaged that landlords are to be considered employees of Airbnb?

Another conclusion brought forward by the California Labor Commission is that a company cannot outsource its main activity (in the Uber case, by assimilating the transport of individuals); if it does that, the workers performing that main activity must be considered employees of the company.

The California Labor Commission ruled Uber drivers are to be considered employees. In Belgium, however, the Secretary of State stated that Uber drivers are to be considered as self-employed, based on the above factual organization of the Uber relationship and the sector requirements.

Doesn't this demonstrate that the employment status itself is under pressure and our legislation is not adapted to these new formats, including scenarios where companies provide only a technological platform? A recent issue of The Economist reported that the standard company structure is probably outdated and the “company has to be reinvented”. The present young generation tends to 'ownership' in which the business is composed of a small team (of owners) who nonetheless have a global reach because of new technologies. Maybe it is time to review the social structures we have in place, such as salaried employee vs. self-employed, and consider an (additional) hybrid status which combines reasonable social coverage with the flexibility those ‘new’ businesses require. Food for thought! 

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Photo credit: flickr / afagen