A.    Starting point in Germany

Why is the classification of employees relevant? In Germany, this has considerable consequences: These range from the applicability of employee protection standards (the classic: protection against dismissal) to potential criminal law consequences for the client who turns out to be the employer and has not paid social security contributions. Compliance with the legal framework is therefore highly relevant in this area.

B.    The European way

Such risks are increasingly becoming important also considering the European level. At the end of April, the national labor ministries adopted the compromise proposal of the European platform work directive. Once the draft has been formally adopted, promulgated and published, the member states have two years to transpose it into national law, likely in 2026. The directive pursued to resolve the missing clarification of employes (versus self-employed persons) in respect of crowdworkers. The directive is intended to give misclassified crowdworkers the benefit of employee protection and to protect the personal data of all crowdworkers. It clarifies the terms “platform work” and “intermediary”. It also stipulates a presumption of an employment relationship between the platform worker and the intermediary. All the person concerned has to do is provide factual evidence for employment. The intermediary can then rebut the presumption of an employment relationship. So far, official EU sources estimate that around 5.5 million out of 28 million crowdworkers are misclassified. Other sources estimate around 1.7 to 4.1 million. However, this does not set a new low bar ‘employee’ test for all purposes. The national definition of employee remains unaffected by the directive. In addition, the European legislator leaves it up to the member states to implement tax, social and criminal law. This might reduce the risk of wider liability and criminal responsibility.

C.    Responsibility of the Member States

The obligation of the member states to provide suitable guidelines regarding the correct classification of crowdworkers is a positive step. The competent authorities must make it clear in which case a crowdworker is an employee and what consequences the presumption, including rebuttal, has for the classification. However, the directive does not resolve the question of which crowdworkers are employees and which are self-employed. Rather, the current draft leaves it up to the member states to determine the employment status using suitable procedures that include local laws, collective bargaining regulations and customary law, and taking into account the (rebuttable) presumption in favor of employee status. In the directive, the concrete transposition of the presumption is deliberately left to the member states. The recitals merely provide the usual principles for this, such as effectiveness and efficiency. It will be interesting to see how member states variously implement systems for presenting and checking the evidence to presume an employment relationship.

D.    AI in the draft directive

It is also noteworthy that the draft directive includes provisions on the use of AI in the employment context. The new regulations mandate that the termination of a crowdworker must involve a human final decision and cannot be based solely on an algorithm or automated decision-making system. Although this prohibition aligns with the prevailing interpretation under the GDPR, which prohibits termination solely based on an AI decision as per Article 22 of the GDPR, the draft directive does not provide exceptions like the GDPR does (e.g., consent). The rules in the crowdworker directive clarify that such exceptions will not apply to crowdworkers. Additionally, crowdworkers are entitled to receive explanations for algorithmic decisions in individual cases.

E.    Conclusion

Since the Covid pandemic, platforms such as food delivery and driving services have become indispensable. A corresponding app is usually part of the standard smartphone repertoire. Of course, crowdworkers need protection, but treating everyone equally and forcing them into an employment relationship — even against their contractual will — does not do justice to the usual individual legal assessment of whether employment status truly applies to an individual. Member states should be carefully considering the consequences when transposing.

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Photo of Chris Bracebridge Chris Bracebridge

Chris Bracebridge specialises in advising multinational employers on international employment and global mobility matters, including complex transactional issues and senior employee retention and termination arrangements. He co-heads a Global Workforce Solutions team providing the employment, benefits, tax and immigration advice required in these…

Chris Bracebridge specialises in advising multinational employers on international employment and global mobility matters, including complex transactional issues and senior employee retention and termination arrangements. He co-heads a Global Workforce Solutions team providing the employment, benefits, tax and immigration advice required in these complex situations. A keen advocate for increasing the diversity of the legal profession, Chris also leads the London office’s diversity, equity, and inclusion efforts.

Chris’ UK domestic practice comprises contentious, commercial and advisory employment experience. He advises on the HR aspects of company and business acquisitions and disposals, and outsourcing transactions, represents major employers in dismissal, discrimination, and whistle-blowing cases, and advises corporate clients on the full range of day-to-day employment issues (in particular, listed company executive departures), as well as data privacy and pensions matters.

Covington’s Employment team was shortlisted for three UK national awards in 2014/2015. Mr. Bracebridge was shortlisted for Assistant Solicitor of the Year 2009 by The Lawyer magazine. He has gained valuable in-house experience whilst on secondment to two global financial institutions – a major U.S. investment bank and a leading UK bank.

Chris regularly trains and presents to clients and external organizations and writes articles for both the legal press and client publications. He has spoken at events and conferences in the UK, U.S., and Europe on a range of issues such as global mobility, executive departures, redundancy, gender pay gap reporting, data protection and transfers of undertakings.

Photo of Dr. Nadine Kramer Dr. Nadine Kramer

Dr. Nadine Kramer is a special counsel in Covington’s labor and employment law and executive compensation and employee benefits department. She has many years of experience in advising on labor law aspects with respect to M&A transactions, complex HR topics and reorganizations, especially…

Dr. Nadine Kramer is a special counsel in Covington’s labor and employment law and executive compensation and employee benefits department. She has many years of experience in advising on labor law aspects with respect to M&A transactions, complex HR topics and reorganizations, especially with a focus on negotiations with works councils, and a corresponding networking within the law firm as well. Furthermore, she has a great experience in drafting of social plans, evaluating of pension liabilities and managing labor law-related proceedings, especially with regard to wrongful termination litigations at all levels of seniority and management participation programs.

Photo of Maximilian Schunder Maximilian Schunder

Maximilian Schunder is an associate in the firm’s Frankfurt office and a member of the labor and employment law practice. The focus of his work with regard to individual employment law is on advising on employee data protection, ESG with a special emphasis…

Maximilian Schunder is an associate in the firm’s Frankfurt office and a member of the labor and employment law practice. The focus of his work with regard to individual employment law is on advising on employee data protection, ESG with a special emphasis on DEI and anti-discrimination, compliance and social law.

Another area of his work is in drafting and negotiating employment contracts, managing director contracts and executive board contracts a corresponding termination agreements. In addition, Maximilian also deals with employment litigation. In the field of collective employment law, he advises in particular on negotiations of works agreements and restructuring measures such as reconciliation of interests and social compensation plans, outsourcing transactions, TUPE provisions, collective redundancies and related litigation.

Other areas of expertise include transactional employment and data protection law as well as internal investigations.