Employment rights and the gig economy

The gig economy business models in Malta and around the world 

Several “gig economy” business models have emerged in Malta in recent years, with cab-hailing services, courier delivery services and outsourcing platforms occupying a significant part of the employment market.  

The term “gig economy” loosely refers to that part of the workforce which is engaged on the basis of temporary or other flexible arrangements that are typically arranged through the intervention of independent recruitment contractors. It involves the exchange of short-term work for money – commonly on a payment-by-activity basis – between individuals or companies through digital intermediary platforms.  

The absence of a level playing field and enforcement among recruiters as well as the presence of certain legislative loopholes, have led to serious concerns about the protection of workers. While gig flexibility may be a selling point for workers who are engaged in higher skilled or technical work, lower skilled workers complain that they earn less than the statutory minimum wage after accounting for their expenses.  

It has been announced that Malta will be issuing new rules regulating platform work, which will prioritise the imposition of minimum engagement terms and entitlements for gig workers. Similar legislative initiatives have also been implemented in France. Spanish law has also sought to promote self-employment and the social economy by introducing measures such as reductions in social security contributions.  

On the other hand, in the Netherlands, the tide is turning against the gig economy, with unions recently launching a plan to enforce permanent employment relationships, rather than fixed-term contracts. New legislative proposals are expected from the Dutch government, which are aimed at stimulating the use of permanent employment contracts.  

When looking globally, countries such as the UK, the US, France, Germany, Austria, Belgium, China, Canada, Finland, New Zealand, India, Poland, the Netherlands, Spain, Ukraine and Belarus have all regarded the gig economy as an important or increasingly important issue.  

However, the gig economy has not had a major impact in every country. It has not been regarded as a significant issue in Bulgaria, Croatia, Cyprus, Turkey, Greece, Japan, Romania, Latvia, Hungary, Slovakia and Slovenia. It is notable that, where there are pockets of gig economy activity in countries that do not report a major impact, such activity is often generated by a handful of foreign companies – normally hailing from the US, UK or EU. 

The employment status of the gig-economy worker 

The gig economy has been the subject of much legal controversy, especially regarding the classification of such workers as self-employed individuals.  In October 2022, more than 1,600 UK drivers working for the ride-hailing app Bolt filed claims for missed leave and minimum wage payments, arguing that they have been wrongly categorised as self-employed contractors.  This follows the landmark 2021 judgement by the UK’s Supreme Court in a case instituted by Uber BV, in which the Supreme Court set out five criteria on the basis of which the Supreme Court deemed Uber’s workers to be employees.  

Under Maltese law, employees are formally hired by their employer, their employment relationship being governed by an employment contract or a letter of engagement setting out the terms of employment. Self-employed workers, on the other hand, are those individuals whose principal source of income is derived from work they perform on their own account, and not on the basis of any contractual arrangement with an employer.  

The Employment Status National Standard Order (Subsidiary Legislation 452.108) sets out several factors and criteria which, if satisfied, would lead to the categorisation of an engagement as an employment relationship, rather than a self-employed contractual relationship. Nevertheless, the said statutory criteria are not always conducive to a clear interpretation and determination of employment status and, more often than not, require careful legal analysis and even guidance from the Department For Industrial and Employment Relations (DIER).  

The importance of increased legislative intervention and certainty in this field is further highlighted by the serious implications of an incorrect determination of the status of a particular engagement, not only from a legal perspective but also in respect of corresponding fiscal and social security payment obligations that arise from such relationships. 

The EU’s proposed rules on the employment status of gig workers  

The precarious situation of workers in the gig economy has also caught the attention of the European Commission, which has proposed a series of measures to improve the working conditions of people working via digital labour platforms.  

The proposed Directive on improving working conditions in platform work provides a list of control criteria to determine whether a platform qualifies as an “employer”, with platforms being entitled to contest or rebut this determination.  

When  platform workers meet at least two of the said criteria, platform workers would be considered as employees enjoying the same labour rights and social benefits as other traditional workers. These rights include the right to a minimum wage, collective bargaining, working time and health protection, the right to paid leave or improved access to protection against work accidents, unemployment and sickness benefits, as well as contributory old-age pensions. 

The criteria include whether the platform determines the level of remuneration, whether it dictates a worker’s appearance and conduct with customers, whether it supervises the worker’s work performance, whether it restricts a worker’s freedom to choose work hours, accept jobs or use subcontractors, and whether it limits the possibility for workers to build their own client bases or work for other parties. 

This pan-European legislative intervention is another important initiative which should provide more legal clarity and certainty as to the categorisation of work relationships at Community level. Such efforts not only safeguard the fundamental rights of workers, but also create a level playing field for businesses to thrive.  

We are currently preparing an article on how the proposed EU Directive will impact the Maltese rules on the status of workers.  Please contact us on info@empleo.com.mt if you have any questions about issues relating to the gig-economy or any other workplace matters.