The new gig-economy seems to struggle with the ancien world’s regulations. Uber lost a first judicial battle in the United Kingdom. The California-based firm has been ordered to change the legal nature of its relationships with its drivers who claim the right to be considered as workers rather than independent contractors.
This new legal definition is not harmless. If this decision is confirmed on appeal, it would lead Uber’s relations with its drivers to be settled according to British labor law rather than ordinary law. Labor law would imply the duty to implement the minimum wage, holiday pay regulations, and other kinds of special rules. It would therefore increase transaction costs on the market. Uber’s business model would be undermined.
Similar legal contests across various major countries can be observed. In France, the URSSAF, a network of organizations which belong to the social security system, has also brought a lawsuit against Uber which has been accused of practicing what can be translated as ‘hidden wage labor’ or ‘disguised employment relationships.’
The French administration is seeking to change the legal nature of Uber’s relationships with its drivers to implement French labor laws, notably in order to collect ‘social contributions’ – taxes on labor – which aims to finance public insurance schemes. Even in the US, Homejoy – a market place for housecleaning – has ceased its activities because of similar legal pressures. The gig-economy seems to suffer from legal uncertainties because of the tenuous distinction regularly made between workers and contractors.
This post was published at Ludwig von Mises Institute on December 6, 2016.
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