In brief

Although things seemed to be going badly for a while and a deal looked unlikely, the EU Parliament and the Council of the EU have finally reached an agreement on the proposed Platform Workers Directive (the “Directive“). This time, it looks likely to progress to adoption and, ultimately, implementation across the EU member states.

The Directive aims to improve the working conditions of individuals performing work for a digital labor platform. This includes introducing measures to facilitate the correct determination of their employment status; broadly the Directive provides that an individual working for a digital labor platform will be presumed to be its employee where facts indicating control and direction are present.

The Directive that has now been agreed, however, differs significantly from earlier drafts as the specific criteria that would have triggered the presumption and meant more uniformity on this issue across the member states have been removed.

Regardless of employment status, the Directive also promotes transparency, fairness, human oversight, safety and accountability in algorithmic management in platform work as well as transparency more generally.

The legal presumption of employment

Unlike the proposal of the Council of the European Union from June 2023 (see here for our earlier update on this) the newly agreed version of the Directive does not include a list of specific criteria that must be fulfilled to trigger the presumption of employment. It now only stipulates that an employment relationship will be presumed when facts indicating control and direction in accordance with national law are found to exist between the digital labor platform and the individual. It will be up to each member state to decide how to implement the presumption and the criteria that will be used to determine sufficient control and direction by the digital labor platform to raise the presumption of an employment relationship.

Most EU member states currently take a holistic and multi-factor approach to determining employment status in the context of each individual case, in some circumstances attaching more weight to certain criteria over others. The absence of a more harmonized and granular approach to determining employment status under the Directive means we will likely see varying outcomes as regards platform workers’ employment status depending on the member state in which the determination is made.

Although the revised terms of the Directive might appear to have softened substantially, the legal presumption will nevertheless make it easier for platform workers to claim that they are employees. This is in contrast to the current position where individuals usually bear the burden of proving the existence of an employment relationship. The introduction of the presumption of employment means the onus will be on the digital labor platform to demonstrate why the individual is not its employee and should instead be considered to be self-employed.

Notably, under the Directive, member states are only required to transpose into national law the presumption of employment in relation to employment rights and not proceedings concerning tax, criminal or social security matters. Member states could nevertheless extend the presumption to these areas.

Algorithmic management

The agreed provisions relating to algorithmic management have not been revised from earlier drafts of the Directive to the same extent as those relating to the legal presumption of employment. These are indicative of the increasing regulation of AI in the workplace more generally, including the EU AI Act which has all but completed the formal adoption process (see our update here).

Broadly, the provisions include various obligations and limitations on digital labor platforms in respect of their use of automated monitoring and decision-making systems including:

A ban on processing certain personal data by means of automated monitoring or decision-making systems. This includes any personal data from which racial or ethnic origin, migration status, political opinions, religious or philosophical beliefs, disability, state of health, emotional or psychological state, trade union membership or sexual orientation could be inferred as well as certain biometric data and personal data collected from private conversations or while the platform worker is not offering or performing platform work.
A requirement to provide platform workers and their representatives with written information about the automated monitoring and decision-making systems that it uses.
An obligation to carry out a data protection impact assessment (DPIA) given the high-risk nature of processing personal data by a digital labor platform; this includes seeking the views of platform workers and their representatives and providing them with a copy of the final DPIA.
An obligation to carry out regularly and at least every two years an evaluation of the impact of individual decisions taken or supported by automated monitoring and decision-making systems. This must involve workers’ representatives and include, where applicable, the impact of these systems on platform workers’ working conditions and equal treatment at work. Worker representatives must be provided with the evaluation and any discrimination risk or infringement of rights that are identified must be addressed.
A requirement that any decision to restrict, suspend or terminate the contractual relationship or the account of a person performing platform work or any other decision of equivalent detriment be taken by a human being.
A right to have automated decisions explained and reviewed within prescribed timescales.
An enhanced role for worker representatives generally including a requirement for member states to promote collective bargaining amongst platform workers.

Key takeaways

Contrary to initial expectations, there will be no standardized criteria in the EU for classifying platform workers as employees; this means that member states could implement the presumption in different ways.

It is too early to assess the full impact of the Directive, but the broad nature of some of its definitions means disputes over its scope seem likely. This arguably includes the extent to which organizations beyond those traditionally thought of as operating in the gig economy (such as delivery and transportation services apps) could potentially be caught by the Directive.

An equally interesting question will also be whether member states will extend the scope of the Directive to social security law, tax law and criminal law; an issue that could also lead to differing liabilities depending on the relevant member state. In countries like Germany, for example, intentional misclassification and non-payment of social security contributions and taxes is a criminal offence.

Next steps

The text of the agreement will be finalized in all the official languages and formally adopted by both institutions. Member states will then have two years to incorporate the provisions of the Directive into their national legislation.