- A UK supreme court case against Uber determined that drivers are employees, not contractors.
- In many ways Fiverr (NYSE:FVRR) may exceed Uber style control over contractors leaving it more vulnerable to regulation.
- A precedent has been set for regulators globally to act against modern slavery platforms that claim workers are contractors.
- Following the Uber case, other gig economy stocks are at risk of wider legal repercussions.
In 2021, the UK was the first country to stand up against modern slavery and moved to protect citizens from exploitation by foreign technology companies. Indeed now, the walls are closing in on technology platforms that for many years sought to bypass employment legislation and corporate responsibility. It happened under Boris Johnsons’ clock yet Theresa May was the UK prime minister who famously pledged to improve conditions for gig workers.
Now that the UK supreme court determined Uber drivers in the UK are not self-employed contractors, but rather employees, the fallout for Uber is yet to be determined as it remains to be seen how many drivers will be awarded back pay and for what duration of time.
A Catalyst for Change: The UK was merely the first domino to fall
Albeit that Europeans are starting to align on the rights of “gig” workers in Spain, Italy, the Netherlands, France and Belgium where courts are in favour of protecting their rights, Ursula von der Leyen, the President of the European Commission will need to show resolve to ensure that EU citizens enjoy the same employment rights than their UK counterparts.
Corporations in the Gig economy should consider reflecting this new unfolding reality as a legal risk in their sec filings. They include in particular Airbnb (NASDAQ:ABNB), Etsy (NASDAQ:ETSY), Uber (NYSE:UBER), Fiverr (NYSE:FVRR).
The rationale for the UK supreme court decision:
To understand how and if other gig operators are affected, it is essential to consider the UK case. The court decided that because workers are subject to significant control over what, when and how to work, that their status should be that of an employee, rather than a self-employed contractor.
How Fiverr Control of Contractors Compares To Uber And Other “Gig” Platforms:
Currently, the only possible factor differentiating Fiverr, should they need to contest a future class action similar to Uber, would be that contractors can set their own rate at Fiverr. However, in cases where buyers on the Fiverr platform seek to exploit a contractor by asking for additional services that were never agreed to: should the seller (worker) decide not to and the buyer raises a dispute or refuses to pay, the seller is not covered. Buyers, therefore, have significant leverage to coerce defenseless sellers into doing more work that is practically unpaid – or, is left with no pay whatsoever for services they performed. Fiverr may claim that it is the buyer who exercises this level of control and that it is simply an intermediary – however, European regulators are unlikely to buy into such a stunt.
Considering the “what, when and how” elements of control that the Fiverr platform currently exerts over the worker: When seeking to cancel a less than ideal client order, workers are told through automated messaging that they risk poorer metrics such as low completion rates, which in turn determines how well they rank over other workers – thus affecting the “what” element. Concerning “when”, workers are on a clock – which times out whether or not the buyer moved at a satisfactory speed to provide the necessary information and support to enable the worker at numerous stages up to approval. For example, towards the end of a job, the buyer can play delay tactics that cause the seller to deliver late – which gives the buyer the right to cancel the order and leave the worker uncompensated for their time and expenses. Considering the “how” element, workers often face review extortion: where buyers ask for more than what was promised or threaten to leave the workers with a negative review.
Concerning all the above elements of control, Fiverr does not provide protection for workers and often retains these customers regardless of their tactics which are tantamount to slavery and sheer exploitation. The culture and ethics gap is also substantial: with many ex-military youngsters working in its Israel office in Tel Aviv, left in charge of whether or not a European or American worker will ever see their hard-earned money, this company is a far cry from the types of rules and norms workers are used to.
Workers can also get scammed by people who do chargebacks, which can easily run up to $5000, for which the platform does not protect workers, leaving them out of pocket in such an eventuality. In one case, a “PRO” seller got removed for daring to raise the alarm bell and taking on a fraudster himself to ensure his workers are not left out of pocket. In this particular case, the PRO seller insisted that $6000 be refunded to a company in Spain and $3100 to a German business, in fear that the platform will not pay him for carrying out the work and while waiting for an unpaid case to be resolved. This would have been unfair dismissal and would have triggered workers’ compensation, but since it is conveniently treated as contracting, labour abuses and cancel culture are effectively facilitated at scale.
Unlike Deliveroo which has set up a 16M thank you fund for drivers during the pandemic, Fiverr actually continued taking a hefty commission on workers’ tips and introduced a “pay per click” system for promoted gigs, where desperate workers, slammed by a pandemic-induced recession, started paying Fiverr to promote their services on the platform. In fact, on Change.org, petitions have gone out to demand that Fiverr pay “banned” workers like Urban VoiceoverPete and to CEO Micha Kaufman directly where 50 000+ petitioners insisted that the exploitation of Indian child workers be halted.
There are of course platforms like Peopleperhour which are known for terminating worker accounts and keeping their funds – and Udemy where teachers face a loss of rankings unless they deliver additional unpaid work in answering forum questions. Yet the sheer scale at which Fiverr operates means that more people are affected by a potential misclassification of workers as contractors.
Where to next for the Gig Economy?
It is nearly 10 years now since Bill Gates donated billions to anti-slavery measures along with generous action from Andrew Forrest in Australia. Yet the world is only at the early phases of this ancient injustice going digital. The gig economy has grown substantially in the last decade. Modern slavery in the cloud, is to be addressed by ethical, conscious investors and funds. For companies to be publicly traded on the NYSE and in clear violation of employment law in G7 / G8 countries and the EU, spells a significant legal risk that investors may not have been informed of.
Share warnings should be no surprise as this sector will rebalance in accordance with modern legal systems that evolve to protect workers. In the early days of outsourcing, core functions were retained in America and Europe where workers’ rights and commercial law are serious matters, deeply entrenched in our culture. Today, we see critical HR and Legal decisions taken by workers in parts of the world where the rule of law, ethics, and human rights are somewhat questionable: exactly the sort of locations excluded by data-protection laws for the sake of data protection. Can investors really see a sustainable business model under these circumstances?