In brief
On 30 May 2022, the Swiss Federal Supreme Court (“Court“) rendered two landmark decisions relating to the legal qualification of platform work.
Contents
Platform work is a relatively new term for organizing paid work through digital platforms. Users access workers through online digital platforms for a wide range of paid services. The legal definition of platform work raises numerous questions, some of which were addressed by the court in two decisions rendered on 30 May 2022 (cases 2C_34/2021 and 2C_575/2020).
No general qualification of platform work
The Court decided first, that the mere existence of a digital work platform did not prejudice the qualification of the contractual relationship. Rather, a case-by-case analysis is required based on the specific economic model used.
The subordination or employer-employee relationship is the most distinguishing factor that determines employment as opposed to the terms of the service provision agreement. The subordination relationship places the employee in a dependent position on a personal, organizational and economic perspective. The court stressed that economic dependence is a typical aspect of an employment relationship. Apart from other sources of income, the individual cannot, by their own entrepreneurial decisions, influence their income from the engagement. Furthermore, instructions that are not limited to general directives on how the task should be exercised but which influence the purpose and organization of the work and grant the other party a right of control hint to the existence of an employment rather than a mandate.
In one of the cases, the court found that the contractual relationship qualified as employment even though the individuals had the freedom to decide when to connect to the platform and to reject their services suggested by the platform. In practice, this freedom was restricted because the rejection of a service had an impact on the individual’s rating by the customers. Since a minimum rating level was required to remain connected to the platform, the freedom to reject services was rather theoretical. Further, there was a system of geolocation, which allowed the customer and the platform to track whether the services were rendered, which the court also found to be characteristic of an employment relationship.
In the other case, the court upheld the cantonal court’s decision that an employment relationship existed between the platform and the individual who performed the services. In the said case, the individuals were likewise free to reject offers but if they did so two to three times, they would be disconnected from the platform and may only be reconnected after a certain waiting period. Individuals who rejected requests for services more often than the average service provider even got permanently disconnected.
Furthermore, the service provider was prescribed a specific route and was also subject to the customers’ rating and those service providers whose overall rating did not meet a certain threshold were disconnected from the platform. The geolocation function of the platform was again considered as another element of subordination.
No staff hire
It was argued that if the platform work is considered as employment, the contractual relationship between the platform and the customer might qualify as staff hire, which would be subject to a license. In the present case, the court rejected the argument adopted by the cantonal authorities that staff hiring exists because the customers remained responsible for the products that the employee transported. Furthermore, the customers just received a specific service for a very short duration. Apart from designating the collection and delivery point and the period within which the products had to be picked up, i.e. elements that are characteristic of transport services, there was hardly any instruction given by the customer. Therefore, there was no transfer of the right to give instructions from the platform to the customer and no staff hiring existed.
Foreign platform
If the platform work qualifies as employment and the platform company entering into the agreement with the service provider is located outside Switzerland, then additional hurdles might apply. The court upheld the decision of the cantonal authorities prohibiting the activity of a Dutch platform by arguing that the bilateral treaty only allows an EU entity to provide services in Switzerland for up to 90 days per calendar year. In our view, this would not be the case if the foreign entity exclusively engaged Swiss citizens and foreigners holding the right of permanent establishment in Switzerland, but the court did not make this distinction.
Social security
The Court did not (yet) have to decide the question on whether the individual service providers qualify as employees from a social security law perspective. Indeed, the qualification under social security law and under civil law is not identical. However, whenever an individual qualifies as an employee from a contract law perspective, the same holds true from a social security law perspective.
Recommendation
Whenever offering or engaging in any platform work, careful analysis of the legal framework based on the specific circumstances is required. The qualification of the platform work as employment will trigger various issues, which need to be considered when structuring the platform and the underlying agreements with the service provider and customer.
