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Food Delivery Firms Slump After EU Proposes New Employee Rules

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(Bloomberg) -- Millions of gig economy workers in Europe could soon find themselves being designated as employees under a new European Union proposal that hit shares in digital platforms including Just Eat Takeaway.com NV.

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The European Commission on Thursday set out new rules that would mean people working for food-delivery and ride-hailing apps can presume that they are an employee regardless of what they are called in their contract. Bloomberg News reported the proposal last week.

The proposal may require the likes of Uber Technologies Inc., and Deliveroo Plc to relinquish some control over workers so they become genuinely “self employed,” or else make them formal employees, which would grant them rights and protections such as paid annual leave and collective bargaining. The change could cost the sector as much as 4.5 billion euros ($5.1 billion) more a year, the EU estimates.

Shares in food delivery stocks dropped, with Just Eat Takeaway sliding 3.7%, Deliveroo declining as much as 2.8% and Delivery Hero SE falling 1.7%

The companies were split in their reactions. Just Eat Takeaway said it supports the EU proposal. Deliveroo and U.S.-based Uber raised concerns on the risks to platform workers and consumers from the new rules. Delivery Hero had a bit of both.

EU Jobs Commissioner Nicolas Schmit said a failure to hold digital platforms to the same social protections standards as other companies would open a “Pandora’s box ultimately, where people in the economy are trying to get around their social obligations.”

Speaking at a press conference in Brussels, Schmit rejected a suggestion that the proposals would be fatal for the digital platforms. However, social protection costs such as health care and retirement will ultimately be borne by taxpayers, and these need to be reflected in assessments of the sustainability of the companies’ business models, he said.

Standards Landmark

Gig economy workers are now mostly classed as self-employed across the bloc, and have faced years of uncertainty over earnings and status while digital platforms saw business boom during the pandemic.

“This directive is a landmark for raising standards of employment in the platform economy,” Stephen Cotton, general secretary of the International Transport Workers’ Federation, said in a statement. “Platform companies like Uber, Bolt, Deliveroo, Glovo and others for too long have been able to use loopholes in legislation to exploit workers.” The ITF says it’s the biggest union for ride-hailing and food-delivery gig workers globally and represents 20 million workers around the world.

Here are the responses from the companies:

  • “Just Eat Takeaway.com welcomes and fully supports the EU Commission’s proposals to improve conditions for workers and help them access social protections. We hope that the Commission’s proposal will create clarity and a level playing field that ensures that companies across Europe are held to the same standards, so that all platform workers are treated with the dignity they deserve,” Jitse Groen, chief executive officer of Just Eat Takeaway, said in a statement.

  • “Delivery Hero fully supports the European Commission’s aim to improve the labor conditions of platform workers. The Commission’s proposal includes positive and much-needed elements. However, we strongly believe that the suggested criteria to trigger the proposed rebuttable presumption of employment and reversed burden of proof are too broad and would not contribute to that goal,” a Delivery Hero spokesman said in a statement.

  • “We have worked with national governments across Europe and the rest of our industry on ways to strengthen platform work without risking the flexibility independent workers say they want. But we are concerned the Commission’s proposal would have the opposite effect - putting thousands of jobs at risk, crippling small businesses in the wake of the pandemic and damaging vital services that consumers across Europe rely on,” an Uber spokesman said in a statement.

  • “Evidence from around the world clearly demonstrates that reclassifying riders has negative consequences for riders themselves, consumers, restaurants and the wider economy, These proposals will increase uncertainty and will be better for lawyers than self-employed platform workers,” a spokesperson for Deliveroo said in a statement.

Some highlights from the proposal:

  • Platform workers would have a “rebuttable presumption of employment”

  • Burden of proof lies on platform to prove a worker is self-employed in a court.

  • The rules would impact any digital platform that controls its workers by meeting two of five criteria: determining pay levels for workers, setting appearance and conduct standards, supervising the quality of work, restricting the ability to accept or refuse tasks, or limiting the ability to build a client base.

  • As many as 4.1 million people in the EU would be reclassified under the new rules.

  • Another 3.8 million could be confirmed as self-employed.

It will take years before the proposal could go into effect, if at all, as the executive has to get approval from member countries and the European Parliament.

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