In a recent landmark ruling, a tribunal in London has ruled that self-employed contractors engaged by Uber are in effect to be treated as “workers”. This decision, which is subject to an appeal by Uber, carries with it implications that should be considered by all tech companies that connect independent contractors with customers – a business model referred to interchangeably as the “gig economy”, the “collaborative economy” or the “on-demand economy”.
Considering the disruptive tendencies of such businesses, policymakers face increasing pressure by traditional market participants who insist that competitive balance should be restored through regulation. The Malta Hotels and Restaurants Association, for instance, has time and again called on the Maltese Government to regulate Airbnb – a popular online community marketplace that connects people looking to rent their homes with people who are looking for accommodation.
Policymakers also face similar pressures from self-employed contractors who contend that their contractual relationship is akin to that of an employee and, consequently, they should be granted the same entitlements that, as a bare minimum, include the minimum wage, sick leave, and holiday leave. This was certainly the case with the recent London ruling in respect of Uber drivers.
In that instance, the tribunal ruled that the two Uber drivers bringing the action should be classified and treated as “workers” – a definition distinct from that of an “employee” under UK law. Whereas both groups are entitled to minimum wage and leave, it appears that only “employees” enjoy protection against unfair dismissal.
Nevertheless, this ruling could be significant if upheld at the appeal stage as it introduces financial constraints that directly impinge on the profitability of several businesses in the gig economy. Considering the potential ripple effect of this judgment, it would be interesting to explore whether the Industrial tribunal in Malta would deliver a similar decision if ever faced with similar facts.
Being a civil law jurisdiction, courts and tribunals in Malta tend to rely greatly on statutory provisions, where these are available. In this respect, Maltese law appears to provide a degree of clarity on the subject through the provisions of Subsidiary Legislation (S.L.) 452.108 – “Employment Status National Standard Order” which sets out criteria that constitute an employment relationship. Article 3(1), which is the principal provision on the subject, holds that an employment relationship is presumed if at least five of the following criteria are satisfied in relation to the person performing the work:
a. he depends on one single person for whom the service is provided for at least 75% of his income over a period of one year;
b. he depends on the person for whom the service is provided to determine what work is to be done and where and how the assigned work is to be carried out
c. he performs the work using equipment, tools, or materials provided by the person for whom the service is provided;
d. he is subject to a working time schedule or minimum work periods established by the person for whom the service is provided;
e. he cannot sub-contract his work to other individuals to substitute himself when carrying out the work;
f. he is integrated into the structure of the production process, the work organization or the company’s or other organization’s hierarchy;
g. the person’s activity is a core element in the organization and pursuit of the objectives of the person for whom the service is provided; and
h. he carries out similar tasks to existing employees, or, in the case when work is outsourced, he performs tasks similar to those formerly undertaken by employees.
The above presumption of an employment relationship could present similar legal risks as those faced by Uber in the UK and in other jurisdictions. Even though careful legal interpretation is necessary to determine the scope and applicability of the above criteria, there is little doubt that businesses that depend on self-employed contractors should give them due consideration when planning their contractual relationships.
An alternative, and possibly safer, the option could be to submit a written request to the Director responsible for Employment and Industrial Relations to exempt such a relationship from being an employment relationship, as permitted by Article 3(2) of S.L. 452.108. However, all such requests are to be submitted before the relationship is established. The wording of the law also appears to grant the Director for Employment and Industrial Relations the authority to refuse requests for exemptions despite the parties’ willingness to be bound by such contractual terms.
At first glance, S.L. 452.108 may be construed as an impediment to prospective participants of the gig economy. However, the decision of the legislator to set out employment relationship criteria, in addition to the overriding option to apply for an exemption, could present an opportunity to entrepreneurs to manage risks by navigating the legal landscape in a manner that does not fall foul of Maltese employment law.