What US and UK companies need to know as the Platform Workers Directive edges nearer

The basis of the potentially far-reaching Platform Workers Directive (PWD) was agreed at European Union ministerial level in June 2023. The legislation is likely to be adopted soon. It will apply to gig workers but will also affect UK and US-based companies using or supplying contract workers on a volume basis. 

It increasingly looks like the PWD will be adopted later this year following the agreement by EU ministers on the EU’s general approach for a proposed directive to improve working conditions for platform workers.

This proposals may affect the costs of staffing platforms –  including taxi apps and potentially temp bank arrangements –  and the broader costs of using gig workers or other volume-based resourcing of labour where recruitment or payment rate-setting processes are increasingly being automated (that automation being the factor which will trigger application of the PWD) 

Given the widespread automation of processes by most staffing companies, the PWD may in some cases affect the use and supply of contract workers and freelancers across the EU, including US and UK staffing companies that deploy contract workers into the EU. So, what now are the proposed directive's main features?

'Platform' definition 

There is a very wide definition of "platform" – it might include any organisation that automates matching or uses tech to determine payment rates. Feasibly, this could include many traditional staffing companies especially where higher volumes are involved.

Rebuttable presumption

There will be a rebuttable presumption of employment status. In other words, unless the "platform" can prove the worker is not employed, they are employees. This will put up costs (holiday pay, National Minimum Wage, etc.) and have huge indirect tax impacts (on VAT and employment taxes, as well as pension costs). This will put up the cost even further of using platform workers, who following the introduction of the PWD will be deemed to be employees of the platform (save to the extent VAT exemptions may apply)

Employers' seven criteria

Companies will be considered employers if they meet three or more out of seven criteria. The European Parliament just wanted a general presumption of employment status, so the position agreed by ministers is an improvement from the perspective of the platforms. In February, the European Parliament voted in favour of amendments to introduce a general legal presumption of employment for self-employed platform workers (without any criteria setting out what would or would not count as self-employment) , raising concerns that the new directive threatens the use of self-employed contractor models in Europe.

In other words, under the EU ministers version of PWD the presumption of employment status can be rebutted if five of the seven criteria can be shown to not apply. The criteria are: 

• Supervising the performance of workers through electronic means. 
• Restricting their ability to choose their working hours.
• Restricting their tasks. 
• Preventing them from working for third parties. 
• Setting an upper limit on pay. 
• Setting rules on their appearance or conduct. 
• Restricting their ability to use subcontractors or substitutes.  

Transparency 

The directive will require that the use of algorithms must be transparent.

Implementation

The PWD will come into force in a country once locally implemented in that country, usually within two years of the directive being adopted. Many EU countries already have laws reflecting some of the PWD principles, so it will be partly a levelling-up exercise within the EU.

UK questions

The directive raises a range of issues and questions for UK-based platforms and suppliers and users of "platform workers", which could include any staffing company with automated processes. This will increasingly be the case in higher volume arrangements.

Will UK companies supplying or using traditional contract workers across the EU be affected? And to what extent will their use of technology make the supplier a "platform"?

Will chain liability – the passing of liabilities to business users of gig workers – apply, where the platform faces a claim but has no assets? If not, what will stop cynical players from setting up temporary platforms which disappear once claims are made?

What will the current UK government do: will there be a mirroring (probably not)?

Will a new UK government in 18 months try to mirror the PWD? Possibly, but the seven criteria are not yet sufficiently clear and there would need to be lobbying and clear guidance to make the regime function effectively.

The very wide definition of "platform" might include any organisation that automates matching and that could push up costs for users of bank arrangements, such as the NHS.

Industry verdict

Delivery Platforms Europe , whose members are leading industry providers, said: "While the text approved today brings more clarity than the original proposal, it still fails to draw a clear enough line between employment and self-employment and it does little to enhance the situation of the genuinely self-employed."  

Osborne Clarke comment

UK companies that may be affected in light of their EU operations would be wise to get involved in lobbying and related activities at EU level now – with a view to getting clear and helpful guidance.

Those with no EU operations may be wise to get involved as well to pre-empt the UK deciding to just adopt the same regime as part of a rapprochement with the EU after the next election (at which point it may be hard to change the underlying rules of the regime).