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Informal and atypical work patterns – the Five Megatrends

Authors
Chris Engels
Chris Engels
Partner - Belgium
Claeys & Engels
Colin Leckey
Partner - United Kingdom
Lewis Silkin
Burkard Göpfert
Partner - Germany
Kliemt.HR Lawyers
Greg McGinnis
Partner - Canada
Mathews Dinsdale
Jose Carlos Wahle
José Carlos Wahle
Partner - Brazil
Veirano Advogados
Brazil
01.04.21
13
COVID is impacting the world greatly at the present time, but it is not the only factor changing the world of work.

We look below at the impact of certain large-scale influences on the way we work. It’s important to say that these are not the only drivers of change, as there are also some influences that are country specific. However, these, it seems to us, are in most places the major ones:

a. Desire for flexibility

Although most changes to the workplace are being thrust upon the world, a significant element of the drive is coming from workers and businesses themselves, as many see new forms of work as desirable. These include anyone who would like more flexibility, a better work/life balance and greater self-determination. The trick will be for businesses, governments, workers – indeed all stakeholders – to create a system going forward that nurtures these aspirations, whilst at the same time protecting people from the possible downsides. 

 

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b. Technological innovation & the Gig economy

The trend towards more flexible work didn’t start with COVID, and has been building for a number of years, often in the form of piecemeal work via IT platforms. In this scenario, workers log on to a platform, such as Uber, and the platform marries them up with someone who wants a service (in this case, a taxi ride). That job is a ‘gig’ and the working arrangements are informal or ‘atypical’. Workers log on when they like and this provides a level of flexibility that many have welcomed and also, easy access to work.

But in various places across the world, this new form of work has been testing the boundaries of employment law to the limit over the last few years. The essential question that is reverberating around courts worldwide is: should ‘gig’, workers who interact primarily with an IT platform rather than a human manager, be classified as employees in the traditional sense, or independent contractors – essentially, self-employed people who access the platform at will and have the ability to turn it off whenever they like? Most employment law around the world defines an ‘employee’ as someone who is subject to the managerial authority of their employer (amongst other tests). The latitude they have to choose how they are going to perform their work – when, where, and how – is limited. Contrast that with a self-employed person, who has complete freedom to decide how to perform the work. The only factor of importance to the buyer of the service is whether it is completed well and on time, in other words: output.

If someone is classified as an employee, that normally comes with certain rights and privileges (such as paid holiday, sick leave and pay, working hours rules, etc.) to balance against the responsibility they have to perform the work. If a worker is classed as independent, they are responsible for themselves and are subject to a different tax and social security system, in most places. For that, they gain the freedom to work in the way they choose. The shift towards an ‘on-demand’ economy has often been facilitated by the advantageous tax treatment of on-call labour and self-employment.

A third way

In some countries, people have been mooting (or actually operating) a third way, in which a worker is provided with certain rights (though not full employment rights) in recognition of their de facto dependence on the platforms they work on. Governments tend to be in two minds about these things: on the one hand, they normally want to encourage innovative businesses to operate as they wish, but on the other, they receive less tax and social security contributions from self-employed workers, as in most economies, employees are taxed more heavily than independents.

As far as the countries covered in this report are concerned, the UK benefits from a hybrid status, known as ‘workers’, which enables them to benefit from certain baseline employment rightsIn Canada also, there is a broad spectrum of work for which ‘dependent contractors’ are recognized as having an intermediate status between ‘employee’ and ‘independent contractor’. Gig economy workers tend to have been framed as independent in the past, but recently, the courts have been suggesting that gig economy workers do not fit neatly in one classification and could be treated as an employee, dependent contractor, or an independent contractor depending on various factors, including how much control they have over their work.

By contrast, our commentator from Brazil, José Carlos Wahle, notes that there is no hybrid status there but “this legal gap brings uncertainty and needs proper attention from the legislator.” Equally, there is no hybrid status in Germany. Belgium also has no third way, but a Royal Decree still exists that dates back long before the emergence of gig work, allowing people driving a vehicle which is not their own to still be subject to social security even if they qualify as self-employed persons under the normal criteria. But this would not apply to Uber drivers who drive their own vehicle.

Of course, having a hybrid status doesn’t necessarily solve the problems and in fact, can make things even more complicated. Employers and the courts have tried hard over the years to classify the distinctions between employment and self-employment and draw a clear line between them. But inserting a hybrid just increases the number of lines to draw – meaning there are now two boundaries to interpret, instead of one. This only increases the chances of the grey areas ending up in the courts in search of an interpretation.

Chris Engels, partner at our Belgian firm, Claeys & Engels, has an interesting take on the employment/self-employment debate, believing that COVID may just be presenting us with an opportunity to break out of the virtual stalemate in which most countries find themselves. Many people working in the industries hardest hit by COVID are classed as self-employed, but instead of treating them as automatically beyond the scope of employment protection, it seems many governments have gone ahead and included this category of workers in their COVID stimulus measures, so holding out the prospect of a different sort of settlement for the future, in which workers of all stripes are entitled to basic rights and protections. Whether any form of this comes to pass or not will depend on a whole raft of different factors, a good many of them political, but this slight clearing of the air at least presents an interesting opening gambit for debate.

Case law on employment versus independence in the gig economy

We asked our lawyers to tell us about what’s happening in the courts in their countries in terms of employees versus independents. It seems that in Brazil, ride-hailing and delivery companies are facing class actions initiated by the Public Attorney’s Office, Labour Branch, the MPT (Ministério Público do Trabalho), for workers seeking employment rights, but there are no final judgments as yet – and individual litigation is yielding few judgments favourable to workers. In Canada, there are two significant recent cases. The first involves Foodora food delivery and the question was whether workers had the right to join a union. The adjudicator ruled in the workers’ favour. The second is a class action against Uber, claiming that the company improperly classifies its drivers as independent contractors. If successful, it would force Uber to recognize its drivers as employees. Uber has again been under fire in the UK, this time, with a recent Supreme Court judgment in favour of the notion that the claimants were ‘workers’ – the hybrid category available under UK law.

Meanwhile, in Belgium, two gig workers recently challenged their relationship with Deliveroo before an Administrative Commission. In both cases, the Commission concluded that they should be employed based on an employment contract (instead of a self-employed service arrangement). But it should be noted that the case was limited to the social security status of the parties and Deliveroo has contested the decisions. In Germany, the district court of Munich decided that no employment relationship existed between the plaintiff and the defendant, an internet platform operator and that the contract between them was a ‘framework agreement’.

All this indicates that the issues surrounding classification are not yet definitively resolved in many places, but as key rulings are made, rest assured, we will report on them.

Direction of travel for the gig economy

We asked our lawyers to tell us what they think the direction of travel is for the gig economy in their countries. Here’s what they told us:

Jose Carlos Wahle says: “Brazil is at a crossroads. The courts are divided and even judges who deny employment status acknowledge that self-employment does not work properly either as a classification, but is simply the only possible solution, given there is no other option. However, the congress has more pressing issues holding its attention, such as administrative and tax reforms. So, we should not expect any active legislation soon.”

Greg McGinnis says: “Employment legislation in Canada varies significantly from province to province, but recent changes in federal law suggest that Canada is moving towards greater regulation. Many of the anticipated changes in government policy will place additional responsibilities on federally regulated employers. This is already reflected, for instance, in a presumption of employee status, which has shifted the burden onto the employer to disprove that an independent contractor is an employee.”

Burkhard Göpfert of Germany says: “One of the aims of the coalition agreement of 2018 was to improve the social protection of self-employed people. The government wants to introduce compulsory old-age provision for all self-employed people who are not already covered by other rules. In principle, the self-employed should be able to choose between statutory pension insurance and – as an opt-out solution – other suitable insolvency-proof types of provision. In addition, the minimum health insurance contributions for the self-employed should be reduced.”

In the UK, Colin Leckey comments: “A major review of employment, the so-called Taylor Review, is meant to bring about greater regulation, but the government’s current plans on this are unclear. There is unlikely to be any greater shift towards employment relationships but harmonisation of the social security systems applicable to employment and self-employment is possible in due course.”

In Belgium, Chris Engels says: “Apart from some small measures (mainly in relation the tax regime for gig workers), few regulatory measures have been taken with respect to gig workers. There also seems to be a consensus that no new hybrid status will be introduced.”

Learning from the gig economy

In our view, in the post-COVID era, more work will start to look like gig work and so the gig economy provides us with a window into our future. We say this because the gig economy appears to be increasing in both size and variety – and with technological developments coming onstream at pace and COVID acting as a catalyst – this is only likely to increase over time.

And as gig work is here to stay, governments and supra-national organisations are taking an increasing interest. For example, the EU launched a consultation process on improving the working conditions of platform work in February 2021. i

Moreover, although Uber may be the kind of business that springs to mind when thinking of gig work, the gig economy has been moving into the sphere of white-collar work for some time. For instance, there are platform models being used to provide legal and financial services. These sectors may turn out to be the greatest beneficiaries of this kind of work, as white-collar workers seek it out as their option of choice. They may enjoy the flexibility, find it well paid, and less likely to have any of the social vulnerabilities that can make gig work insecure.

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c. COVID-19

Far from being a ‘great equaliser’ as was originally touted by some, COVID-19 has turned out to reflect certain socio-economic biases that were already present in societies across the world, meaning that racial minorities, recent immigrants, women, older and disabled people tend to be at greater risk than others of losing their jobs or of having their work reduced. This has meant that racial minorities, recent immigrants, women, older and disabled people tend to be at greater risk than others of losing their jobs or of having their work reduced. ii

But no one is safe and many governments have taken steps to protect people against the nefarious effects of the virus on work, with short-time working and furlough schemes in place across the major economies.

Some of the key sectors most heavily hit by COVID already employ many people in atypical working arrangements (though full-time, permanent workers are also badly affected). This includes large numbers in hospitality, sports and leisure, transport, the arts, and retail, for example. In addition, many of those workers have turned out to be in the sectors we have most relied on as a society to function during COVID – hospital and care work including cleaning, food, public transport, and some manufacturing being the most obvious examples. The jobs and terms and conditions of some ‘key workers’ have been brought into sharp relief by COVID, and people have been surprised to learn just how tough and mentally draining many of those jobs are.

Employers across the world have already been in the unenviable position of having to temporarily lay off workers. But now, in the midst of subsequent waves of COVID, full restructurings are taking place across the world and many workers on the lower rungs, less central to the survival strategy of the business, are being hit particularly hard. Of course, that is not to say that full-time, permanent roles and senior roles are not also badly affected, as there also seems to be some focus on the restructuring of HQs. Even vaccines are not saving some businesses currently hanging by a thread, as the roll-out may well be coming just too late for them.

COVID is making work more insecure for many people both because of the risks inherent in working, particularly in customer-facing roles, during a pandemic, and because of the risk of losing jobs as a result of the long-term impact on business. But in addition, COVID increases insecurity because people’s support networks (family and friends) are weakened, as more and more people find themselves in the same boat. For the moment at least, the state safety net has been holding up in many parts of the world, but in poorer countries, hard choices between working at risk and not being able to feed their family are no doubt being made by individual workers. Of course, there is very little that businesses can do to mitigate this. They are certainly not responsible for it and many of them are struggling to survive themselves. What is clear is that the pandemic is causing massive hardship on many levels. 

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We are (sadly) largely due to the pandemic - and like many countries - set to see a steep increase in unemployment and in consequence of this I would expect to see a greater scarcity of well-paid work which in turn is likely to lead to a higher degree of turnover than we have experienced for some time and that is primarily a consequence of the COVID crisis.
Employment Rights - Immigration & Global Mobility - Discrimination - Restructuring & Labour Relations

d. 2008 financial crisis

It’s instructive to look back at what happened a decade ago when the last global crisis hit, as that could help us understand, not only how it has influenced where we are now, but how any further contraction might be in store under COVID. But for context, it’s worth noting that although the financial crisis hit many workers and businesses severely, the initial impact of COVID-19 on OECD labour markets where data are available has been vastly larger than was seen in the first months of the financial crisis. Taking into account both the drop in employment and the reduction in hours worked among those who remained in work, total hours worked fell by 12.2% in the initial three months of the COVID crisis, compared to 1.2% in 2008 iii  – an order of magnitude apart.

Eurofound discovered in a study in 2013 that the financial crisis had a significant negative effect on working conditions in Europe, including, most notably:

  • cuts in wages
  • an increase in job insecurity
  • greater work intensity
  • a deterioration of work-life balance and
  • an increase in work-related stress iv

 

A Eurofound report on working conditions had this to say: “The economic crisis is a factor in job stress and insecurity. Concerns rise about having or keeping a job and about establishing or maintaining an income. Job insecurity has increased across Europe. The negative consequences of this insecurity on well-being and health are a recognised scientific fact.” v

COVID-19 is likely to continue to have an even worse effect, but the individual impacts may work out along similar lines. We have already seen cuts in working hours and therefore, de facto cuts in wages, increased insecurity, a deterioration in work life balance for many and reports of increased stress. How all this pans out in the long run will depend on what governments and individual businesses choose to do in the longer term. 

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e. Globalisation

The opening up of markets to competition from around the world has promoted trade and created opportunities over recent years. All manner of global networks and supply chains have been developed to criss-cross the world and although these have contributed to economic growth, as the Labour Organisation (ILO) points out, “the quality of employment and social upgrading require additional effort.” vi These issues manifest themselves more in some countries than others. José Carlos Wahle, of Veirano Advogados in Brazil, explains some of the challenges that beset his country:

“Mobility and globalisation pose a risk even to the most highly qualified workers in Brazil, as many feel compelled to seek better jobs abroad. The future of mass employment in Brazil will depend on large-scale infrastructure projects, such as power supply projects, agriculture, and manufacturing, based on our abundant raw materials.”

Greg McGinnis of our Canadian firm believes that the key is for employees to ensure they have the skills they need, and he comments as follows on the risks for those who fail to do this: “Globalisation and technological changes have brought uncertainty around the future of work and both businesses and workers face unique challenges. While businesses may need to restructure and offshore their operations to remain profitable, workers will need to constantly upgrade their skills to maintain and obtain opportunities. Workers who fail to seek skills training may fall behind and lose low-skilled jobs to automation and outsourcing.”

It’s important to point out, though, that the effects of globalisation have taken place over time – the first real wave of global outsourcing occurred as early as the 1990s – to call centres. Colin Leckey, of our UK firm Lewis Silkin, explains: “It’s actually nothing new that those working behind computer screens are now in competition with others working from anywhere. For some years, whenever I have been involved in a tech acquisition, for example, there has invariably been a team of developers in the target company, based, for example, in Vietnam or the Philippines, so outsourcing and offshoring to lower-cost geographies was something we all lived through way back in the 2000s. What is perhaps changing now, is that what was already a norm for tech and certain other industries seems to be spreading as a result of the pandemic. This will no doubt bring advantages and disadvantages for both employers and employees.”

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Continue to explore:

 

References

iEuropean Commission, protecting people working through platforms: Commission launches a first-stage consultation of the social partners, 24 February 2021:  https://ec.europa.eu/commission/presscorner/detail/en/IP_21_686

ii UNCH, Covid-19 and minority rights: overview and promising practices, p1: https://www.ohchr.org/Documents/Issues/Minorities/OHCHRGuidance_COVID19_MinoritiesRights.pdf.

iii OECD (2020), Employment outlook 2020: Work security and COVID-19 crisis, In brief, key findings; point 2: https://www.oecd-ilibrary.org/sites/1686c758-en/1/3/1/index.html?itemId=/content/publication/1686c758-en&_csp_=fc80786ea6a3a7b4628d3f05b1e2e5d7&itemIGO=oecd&itemContentType=book

iv Eurofound (2013), Impact of the crisis on working conditions in Europe, para 1. https://www.eurofound.europa.eu/publications/reports/2013/impact-of-the-crisis-on-working-conditions-in-europe.

v Ibid, Conclusions; More insecurity and consequences for workers’ well-being. https://www.eurofound.europa.eu/publications/reports/2013/impact-of-the-crisis-on-working-conditions-in-europe

vi ILO (2015), World employment and social outlook, p7: https://www.ilo.org/wcmsp5/groups/public/—dgreports/—dcomm/—publ/documents/publication/wcms_368640.pdf.