LONDON (Reuters Breakingviews) - Europe is becoming the main front in a global battle over the status of gig economy workers. Tougher rules in Britain, Spain and elsewhere mean a longer path to profit for companies like $110 billion Uber Technologies – and potentially higher prices for consumers.
The UK Supreme Court on Friday classed a group of Uber drivers as workers. That entitles the 25 people who brought the claim to certain benefits like a minimum wage, and potentially sets a precedent for the group’s roughly 60,000 British drivers and others working for its UK food-delivery rivals like Deliveroo.
It’s hard to calculate the direct cost to Uber, since an employment tribunal will now hash out the exact details. But the new regime looks expensive. Judges decided that drivers’ working hours begin when they switch on the app and are ready to accept trips. In practice, this could mean Uber has to pay them for hours worked rather than jobs completed, implying a more rigid cost base.
It’s part of a wider European crackdown. Courts in Spain, Italy, the Netherlands, France and Belgium have ruled in favour of increasing gig workers’ employment rights. In Spain, Labour Minister Yolanda Diaz wants to codify in law the principle that food-delivery companies employ their couriers, rather than acting as intermediaries. The European Commission will later this year release recommendations on potential gig economy legislation, which could serve as a template for the bloc.
It’s a bleaker picture for the sector than in the United States, where a recent California ballot victory gave companies like Uber the roadmap for a compromise with workers in the rest of the country. Delivery apps will have to pay some healthcare costs in the state, but the measures fall well short of full benefits. Uber could lobby for a similar legislative route in Europe, but governments in the region traditionally take a much harder line on labour rights.
The consequence of higher costs is that Uber, Deliveroo and others will face a longer path to profit. Europe, the Middle East and Africa accounted for 21% of Uber’s revenue in the final three months of 2020. London-based Deliveroo may face questions from investors about the Supreme Court ruling as part of its planned initial public offering this year. Finally, consumers will have to bear some of the cost if the services raise prices. After all, every battle has its losers.
Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.
Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.