What exactly is the gig economy? According to Ute Krudewagen, partner in DLA Piper’s Silicon Valley office, it’s the new labor market where millenials seek to leverage the digital economy through more dynamic working arrangements.
Many of Krudewagen’s Silicon Valley clients are tackling the question of how to “lawfully engage individuals across the globe on a daily basis.” If you’re also engaged in this new labor market, odds are your operations don’t stop at the “Great Great Wall.”
Krudewagen and her colleagues Adam Hartley and Nicholas Turner—heads of DLA Piper’s United Kingdom and Australia Employment Practices, respectively—provided attendees of a recent BNA webinar with a tour de force survey of how the “gig economy” and other modern work arrangements are being addressed by countries across the globe.
New Paradigms, New Challenges
According to Krudewagen, twenty to thirty percent of the working age population in the U.S. is engaged in some form of independent work. The explosion of non-traditional working arrangements isn’t limited to the U.S. Independent workers are the fastest growing labor group in the European Union market today. India fills about 40 percent of the world’s freelance jobs.
This model comes with its share of challenges, including “the lack of access to job security, unemployment insurance, worker’s compensation insurance, disability insurance, and minimum wage protections,” she said. A recent New York Times article warned certain global markets are creating “a new generation of perma-temps,” she noted.
In response to these challenges, social pressures for stronger workers’ rights and protections and governments’ desire for more efficient capture of taxes on non-traditional labor have resulted in virtually every country trying to tackle this issue in different ways.
The U.K. Reviews Its “Worker” Model
The U.K., for example, employs a unique hybrid “worker” status category somewhere between traditional employees and independent contractors, Hartley noted. These “workers” enjoy many rights shared by full employees, including minimum wage and discrimination protections, holiday pay and pensions.
According to Hartley, “when we start to look at the categories beyond the employee, the three cornerstones of the test” for "worker" status are mutuality of obligation, control and workers’ right to “substitute” for one another if they can’t turn up for work.
A trend in U.K. litigation is for gig workers, such as Uber drivers, to assert “worker” status to ensure they receive these heightened benefits. By contrast, Hartley said, if someone is “genuinely self-employed” in the U.K., they’re only entitled to discrimination protections.
Currently, several high profile reviews of the U.K.’s gig economy are underway.
The prime minister tapped Matthew Taylor, chief executive of RSA Insurance Group, to lead an independent review on how employment practices can keep pace with modern business models. This review focuses on workers’ security, pay, and the balance of rights and responsibilities.
Meanwhile the Business, Energy and Industrial Strategy Committee (BEIS) launched a select committee on the future of work, focusing on the status and rights of agency, self-employed and “gig” workers. BEIS also is looking into pay and working conditions of people in these non-traditional roles.
“We’re really seeing a potentially new or extended definition of workers, focusing that definition on peoples’ control and economic dependency,” as well as a tax-shift towards the employer and a greater focus on wealth, social security and benefits for people classified as workers, Hartley said.
He also anticipates that once the Brexit process is completed, the EU’s Temporary Agency Work Directive no longer will apply to the U.K.
EU Pushes Towards Uniformity and Minimum Rights
There hasn’t been the same intensity of focus on worker status and the gig economy in other EU countries as in the U.K. Hartley attributed this to stronger individual employment rights and more clearly established worker classification models among continental member states.
The European Commission has provided guidance on the application of existing laws to new business models, he said. It has encouraged member states to look at whether their national rules are adequate to cover the needs of self-employed workers and whether further guidance is needed in this area of the economy. Hartley anticipates further legislative pushes by the EU into this area and believes that “in due course, the EU will come up with a more uniform definition of worker.”
To that end, members of the European Parliament (MEPs) have provided a resolution recommending a “floor of minimum rights” for all workers, including related tax and social security reforms, decent working conditions and a clear distinction between genuine self-employment and employee status.
Union Challenges in Australia
In Australia, you are either an employee or an independent contractor – there’s no middle ground—and the factor tests are very similar to those utilized in U.S. jurisdictions.
According to Turner, Australia has expressed significant interest in the gig economy and worker classification. Unlike the U.S., unions in Australia are still very strong, and workplaces are highly regulated. Those unions are in the process of challenging various types of worker classification arrangements.
Further, employee misclassification is a serious offense, and directors can be personally liable for fines and interest.
Approaches in Asia
There are a number of different approaches to contingent workers in Asia, from the very flexible to the extremely restrictive, Turner said. A number of countries significantly limit the use of contingent workers.
The misclassification risk is the same in Asia as it is elsewhere in the world, he said. Numerous Asian jurisdictions—China among them—recognize independent contractor status only under exceptional circumstances, if at all.
Further, labor leasing of agency workers is often more highly regulated in Asia than in Australia or the U.K., Turner added. The Philippines, for example, prohibits labor leasing arrangements. Even traditionally “light touch” jurisdictions like Hong Kong and Singapore are facing pressure to increase regulation of these types of modern work arrangements, he noted.
There’s also significant regulation throughout the region that prevents employers from renewing fixed-term worker arrangements. In Japan and South Korea, for instance, once engaged for a set period, workers typically are converted to full-time regular employees, irrespective of the original underlying contractual arrangements.
Canada and Brazil
The Americas are no exception to the international patchwork of approaches to regulating gig workers. Krudewagen said Brazil is an expensive jurisdiction if you have misclassified individuals due to its significant labor regulations. Until recently, labor courts hadn’t really recognized gig workers as employees, but such cases are working their way through the system, she said.
In Canada, the British Columbia Supreme Court recently applied a “substance over form” approach to define the modern employment relationship in a way that elevates employer actions as more probative than the underlying employment contract.
Getting It Right
“We’re going to see a spread of increased regulations around the world to protect individuals working under these types of arrangements, whether they establish a new worker classification or deem them to be employees for a particular purpose,” Turner said. This is where the focus will be over the next 12 to 24 months, he projected.
With a trend towards greater regulation across so many legal jurisdictions, how can you mitigate risks for your clients?
Hartley suggested keeping the following universal “do’s” in mind:
On the flipside, Turner offered suggestions for behaviors to avoid.
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