Yahoo Finance Brussels attack on gig economy sends shares in Deliveroo and Just Eat tumbling
Brussels is preparing to force “gig economy” companies such as Deliveroo to give workers extra rights regardless of how their contracts are worded in a blow for one of Europe's fastest-growing industries.
The European Commission is expected to lay out draft rules on Wednesday that would presume millions of workers are employed no matter what their contracts say, according to sources.
Concern over the proposals sparked a sharp fall in shares at companies which have thrived on the gig economy model, where self-employed workers are paid per trip to drive cabs or deliver groceries and takeaways.
Deliveroo shares fell as much as 7pc before recovering some ground. Shares in its German rival Delivery Hero fell 6pc, as did Just Eat Takeaway.
Companies will still have the right to contest Brussels and take the matter to court to prove their staff are self-employed, placing the burden of proof on the companies rather than on their riders or drivers.
The Commission’s proposals are expected to be published later this week but could take years to come into force.
Opponents claim that the gig economy model denies guaranteed wages, holiday pay and other rights to workers who are in reality expected to behave like employees.
Food delivery companies have been hit by disputes over their practices across Europe, with Spain banning gig economy work in the industry and forcing companies to take on riders as staff. Deliveroo pulled out of Spain last year, citing competition in the market.
In Italy, food delivery companies were handed fines worth €733m (£625m) over their labour practices, although prosecutors reached a deal with Uber Eats, Just Eat, Deliveroo and Glovo for improved conditions in exchange for a reduced penalty.
The knock to gig economy companies came as Uber was defeated at the High Court in an effort to have part of the Supreme Court ruling into the rights of its drivers overturned.
Uber had asked the court to look again at whether it should be considered a transportation provider, rather than simply a middleman between drivers and passengers.
In a High Court judgment, Lord Justice Males and Mr Justice Fraser said the Supreme Court “meant what it said”, adding there was a “contractual obligation with the passenger to provide the journey which is the subject of the booking”.
The Court said that Uber and Free Now, a ride-hailing app owned by BMW and Daimler, would need to change their terms and conditions.
The ruling is also expected to force Transport for London (TfL) to change its licensing rules with hundreds of minicab companies and rival ride-hailing apps and could change the status of thousands of private hire drivers in London.
It also risks having a knock on effect on an HMRC inquiry into Uber’s VAT payments, thought to be worth £1.5bn, said Jolyon Maugham, a tax barrister at the Good Law Project.
Mr Maugham said the defeat would impact “profoundly upon their ability to deliver transportation services without charging VAT”.
An Uber spokesman said: “This court ruling means that all the details of the Supreme Court decision are now clear. Every private hire operator in London will be impacted by this decision, and should comply with the Supreme Court verdict in full.
"Drivers on Uber are guaranteed at least the National Living Wage, holiday pay and a pension plan but we’re not the only player in town. Other operators must also ensure drivers are treated fairly.”
