(Bloomberg) -- The Spanish government is preparing strict labor law changes that could mean food-delivery platforms have to formally employ the couriers they rely on.
Under rules expected to be proposed as soon as this week, companies such as Uber Eats, Deliveroo and Barcelona-based Glovo may be forced to offer wages, social security and unemployment benefits to 30,000 platform couriers working in the euro area’s fourth-largest economy, a labor ministry spokesperson said on Tuesday.
It’s not been decided yet if the proposal would next head to congress for approval or be issued via an executive decree, meaning it could take several months to take effect if unopposed.
“This regulation settles the legal debate of whether these workers are self-employed or not because it presumes labor dependency,” said Maria Luz Rodriguez, a Castilla-La Mancha University law professor and former deputy labor minister who reviewed a draft of the regulation.
Spanish Labor Minister Yolanda Diaz said in December the new framework will codify Spain’s Supreme Court ruling last year that delivery startup Glovo had labor ties with its riders and was not merely an intermediary.
The move will be seen by other countries as a test case for how lawmakers respond to the growing power of delivery apps and the responsibility they have for their workers. A fight has already reached California’s Supreme Court over the same issue and the European Commission is expected to publish its recommendations for EU-wide legislation later this month.
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Businesses reliant on not having to officially employ their couriers would be exposed during a period of intense market consolidation and interest from public markets. Glovo Chief Executive Officer Oscar Pierre said in January he intends to take his company public with an initial public offering sometime in the next three years; Deliveroo is also said to be planning an IPO.
Companies like Uber say their businesses only function because its drivers, in Uber’s case, are free to choose to work when and where they please, and for whatever hours they need. Unions say the trade-off is that workers miss out on essential benefits such as health insurance or sick pay.
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“Delivery platforms are concerned about the future of the sector and the effect that forced employment could have on couriers, who have clearly expressed their rejection to it,” according to a statement from an association of platforms that includes Deliveroo, Glovo and Uber Eats.
Coronavirus lockdowns helped push the value of the food-delivery app industry to $45 billion last year as households relied more frequently on companies such as Delivery Hero and Grubhub, according to Morgan Stanley.
But even before the pandemic, food delivery was big business in Spain. Orders jumped nearly 70% in 2019 from a year earlier, generating about 700 million euros ($848 million) in business for apps and restaurants, according to Adigital, an industry body that represents the main delivery platforms.
Adigital also said in October that direct employment as expected to be proposed by the Spanish government threatens the delivery platforms’ business model and could leave as many as two-thirds of Spain’s food-delivery riders without a job.
“If the legislation is approved these companies will have to endure higher costs for their sales because of salaries and social security contributions, which means their gross profit will be lower,” said Bloomberg Intelligence Analyst Diana Gomes.
Among delivery apps, an exemption will be Just Eat Takeaway.com NV because the Amsterdam-based company uses its own staff, delivery companies or employees of restaurants to take food to customers. Patrik Bergareche, the company’s managing director in Spain, welcomed the regulation.
“It has been very hard to compete when the rules are not the same for everyone,” he said.
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