Yahoo Finance Is this the moment of reckoning for the gig economy?
Amazon has been raking in $11,000 a second — the firm’s founder,
Jeff Bezos, has seen his net worth grow to almost $200 billion
(AFP via Getty Images)" />
We’ve been tapping more than ever since lockdowns began almost a year ago. We tap our screens for Amazon, Ocado and Deliveroo. App-based big online retailers have seen demand and profits skyrocket. Amazon has been raking in $11,000 a second — the firm’s founder, Jeff Bezos, has seen his net worth grow to almost $200 billion. That’s good news for consumers in tough times, for the whizzy new e-businesses, and for their workers, right?
Not if you ask the ever-growing army of always-on gig workers that do the heavy lifting, racing to deliver what we “need” when we need it. Thanks to our “get it now” culture, Britain has more gig workers as a proportion of the overall workforce than any other of the G7 group of the world’s richest nations — some five million, half of those in London and the South-East — and critics say they are getting a raw deal.
Instead of offering flexible working, big gig firms have sparked “a race to the bottom that leaves people working more hours for less money and with minimal job security and benefits,” argues Duncan McCann, of think tank New Economics Foundation. “They are the robber barons of the modern age.”
The big gig companies have managed to persuade governments and regulators that they are merely electronic platforms connecting a merry band of freelance contractors to eager consumers, which means they can opt out of almost all the usual employment protection and workers’ rights legislation. They sign up millions of casual workers and, critics say, cream off as much as 25 per cent of their pay, while offering none of the benefits of a full-time job: paid holidays, minimum wage, health insurance, a pension, expenses, overtime and redundancy pay, not to mention the right to join a union and bargain for pay. But that might be beginning to change.
Last week’s Supreme Court ruling that Uber drivers should be recognised as workers, not contractors, and are entitled to holiday pay, the minimum wage, sick leave and a pension, opens the way for Uber’s 60,000 British drivers to bring legal cases for lost earnings. Drivers may be entitled to up to £12,000 each. Uber may have to move to a shift-based model and switch to paying its drivers an hourly rate, rather than a cut of each job. That’s good news for drivers — although it does mean fares are likely to rise.
The ruling has implications for more than Uber. Other gig economy companies are now frantically reviewing the status of their workers to try to avoid similar legal challenges. “The decision goes to the heart of the gig economy structure. The ripples will travel far,” predicts Mary Walker, a partner at law firm Gordons.
Some firms are already improving contracts. In December, food delivery service Just Eat announced plans to offer more than 1,000 UK workers benefits including sick pay. Its chief executive, Jitse Groen, told the Financial Times the “gig economy comes at the expense of society and workers”. Other gig outfits, such as Instacart, the grocery delivery service, offer workers the chance to become employees.
Deliveroo, which has profited more than most from a surge in demand and revenues under lockdowns, has however remained silent. The firm’s normally ebullient founder, Will Shu, has not said a word. That might be because his firm is planning a £5 billion flotation on the stock market next month, which will earn him and his backers vast fortunes. Any change in its business model will reduce the value of the business and their bumper pay day.
Speaking privately, the firm’s executives say the Uber ruling will not affect its model. “Uber had rules that said riders could not decline several trip requests in a row. Deliveroo places no obligations on riders to accept work, so the models are incomparable,” says one. Shu has won three court cases in the UK over the self-employed status of his riders and is likely to defend his firm’s position robustly.
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However, Deliveroo faces legal challenges in Europe which could spread here if riders feel emboldened by Uber drivers’ success. Other firms that might face challenges include ride-sharing outfits Ola and Bolt, and Amazon which employs “gig worker” drivers.
Although it is too early to say how many legal challenges will follow the ruling, it is hard to avoid the sense that it marks the beginning of the end of the free-wheeling era for gig firms. When they first exploded onto our screens a decade ago they sounded modern and exciting, promising lower prices for consumers and more jobs for workers who did not want to toil nine to five.
Gigging did not simply apply to relatively low-skill jobs. Many of us now use online freelance professionals to do our tax returns or for simple legal tasks for a fraction of the price. Many more rent a room on Airbnb to make extra cash. Governments welcomed them as they helped to keep unemployment figures low. UK jobless totals have been lower than in many EU countries over the past decade. But the faster they have grown, the more the big gig outfits have attracted criticism for their insistence that the normal rules do not apply to them. “Existing labour laws apply to all companies. Gig or ‘sharing’ economy firms can’t opt out because they claim they are ‘a new type of company’ or they don’t like the laws,” says Shannon Liss-Riordan, a leading lawyer who has battled the gig firms in the US.
Stung into action by the courts, politicians are beginning to urge reform. Not a moment too soon, argues Lindsay Judge, research director at research group the Resolution Foundation. Rather than leaving tough decisions to judges, “it’s time for Parliament to debate questions of employment status in the modern world of work,” she says. Andy Chamberlain, director of policy at the IPSE, the body representing self-employed professionals, agrees. “The only way to resolve this tangle is to clarify employment status in UK law,” he says.
Some politicians are toying with creating a new legal category of worker, between a traditional employee and a freelance contractor. One suggestion is “independent worker” — who would enjoy flexible working hours while also gaining some employee-style perks, such as minimum-income guarantees and health benefits, but not, say, holiday pay. This idea, dubbed “flexicurity”, is also being considered by the EU.
In response to last week’s ruling, Uber says it has made “significant changes” to its business in recent years, including giving drivers more control over their earnings and bringing in new protections such as free insurance in case of sickness or injury. Its global chief executive, Dara Khosrowshahi, wrote last week: “We’re committing to change. We believe independent workers across Europe deserve better: work that offers flexible and decent earning opportunities when they want it, and protection and benefits when they need it.”
As it waits for the compensation bills to land, it knows that life for it and many other gig firms is no longer going to be such an easy ride.
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