Employment in disguise? Gig economy and employment law (Taiwan)

Alex Liao

1. Gradual changes to life and employment patterns due to gig economy

As the mobile Internet and personal devices have become increasingly popular,[i] all kinds of convenient services have also found their ways into the life of everyone through internet transmission.  Platforms for online shopping, map information, restaurant ratings or social media, audiovisual streaming, etc., which are commonly used by people nowadays.  The lifestyle of modern people has long been intertwined with the Internet.  In recent years, the gig economy,[ii] which first emerged in the US, has also gradually changed the life and working patterns of modern people thanks to the pervasive influence of the Internet, e.g., Uber, which completes 14 million rides per day worldwide;[iii] Taskrabbit, which provides all kinds of household services (such as furniture assembly services); Uber Eats, which operates food delivery services; and operators such as FoodPanda, Deliveroo, Postmates and DoorDash.  In addition to more convenient and transparent services made available to the consumers, a new group of working people whose work is assigned by online technology platforms have also emerged in the labor market.  Free from the constraint of conventional jobs on time and location and unlike traditional workers, who serve one employer for a long time, they take orders via a platform operator from end customers and primarily complete project-based work in short periods of time, resulting in fragmented employment patterns.  According to all kinds of platform operators, such emerging types of employment can ensure that the workers can “regain their autonomy” and become their own bosses as commonly indicated in all kinds of promotional materials of platform operators.  Therefore, a massive working population is entering the realm of such type of service.  According to a survey conducted by McKinsey & Company,[iv] one of the most renowned consulting companies in the world, in 2016, approximately 20% to 30% of the working population (around 160 million) in North America and Europe (EU-15) alone had participated in the gig economy.  In comparison, platform operators in emerging markets such as Asia and Africa are also proactive in their business deployment, allowing consumers in all parts of the world to enjoy such services through their hand-held devices.

2. Incompatibility between the gig economy and labor laws and regulations

However, as the population involved in gig economy is increasing, relevant social problems have also gradually emerged.  The most controversial issue is the incompatibility between such emerging employment phenomenon and the labor laws and regulations in various countries on top of the question of whether relevant platform operators are subject to the restrictions under relevant laws and regulations like conventional operators in this sector.  In recent years, protests or strikes staged by platform employees have often hit news headlines, which involve nothing more than their assertion that platform operator have violated the minimum wage protection[v] under labor law and misclassification lawsuits brought to confirm the existence of the employment relationship.  However, platform operators assert time and again that they are by nature nothing more than technology operators that provide job matching services and merely have a contract relationship with the platform workers, thus aggravating the confrontation between the two.

After carefully reviewing such disputes, the author believes that they are mostly attributed to the fact that the legal relationship between platform operators in the gig economy and their collaborating partners does contain both employment and contract elements.  For example, the delivery men of food service platforms, on one hand, can determine their work hours and have the right to decline orders, which is very different from the traditional employment relationship, but platform operators, on the other hand, can request the delivery men to put on a uniform bearing certain marks and use specific delivery boxes, not to mention that the platform operators have the right to unilaterally decide and change the delivery charges and all kinds of rewards and have the right to sanction any delivery men who have violated relevant requirements by suspending their service accounts.  Since this highlights the fact that there is indeed certain subordination between the two, the clear-cut determination standards in the past have been challenged in the face of the employment relationship with a mixture of employment and contract elements.  It would seem that such relationship can hardly be put in a specific rigid  category of legal relationship.  As the judges in Cotter v. Lyft stated, in this scenario “the jury in this case will be handed a square peg and asked to choose between two round holes” and such relationship cannot possibly be a perfect match under any system.

Incidentally, the several car accidents of delivery men last October in Taiwan raised the concern of the public and labor authorities due to the failure of platform operators to actively report the occupational accidents.  The Ministry of Labor also determined that the delivery men and Uber Eats and FoodPanda had an “employment relationship” after its labor inspection was completed a few days earlier.  The Ministry of Labor stressed that in the future, the legal relationship between the delivery men and the platform will be determined by considering if there is “subordination” in the individual contract and released requirements such as the Guidelines for Labor Contracts and the Guide for the Safety of Food Delivery Operation on November 19, 2019 and December 2, 2019, respectively, for the compliance of the operators.  With respect to local governments, the Taipei City Council took the lead in adopting the Autonomous Regulations on Delivery Platform Operators on January 7, 2020.  The regulations not only require platform operators to obtain insurance coverage for delivery men but also specifically provide for matters such as the mechanisms for reporting occupational accidents, food sanitation management and the mechanisms for order cancellation.  If the operators violate relevant provisions, a fine of up to NT$100,000 may be imposed.  This marked the beginning of government regulation on the platform economy in Taiwan.  Although a series of government actions appear unambiguous, still the author has reservations about the actual efficacy of the Labor Relationship Checklist, which consists of as many as 21 items, when the substance of such actions is explored.  There is no clear standard for determining a labor relationship (as to the number of items that should be satisfied to conclude the subordination in the employment relationship and to whether any specific item has any decisive weight).  In addition, relevant interested parties can hardly allocate their benefits and risks through such labor contract when the Supreme Court in Taiwan is in the opinion, with respect to the subordination, that partial subordination is sufficient to establish an employment relationship.  Therefore, the author became interested in exploring the views on this issue in other countries to explore regulatory adjustments better accommodating industry needs.

3. Observations

(1) California, USA – presumed employment relationship

Governor Gavin Newsom of California, USA, signed into law in September 2019 Assembly Bill No. 5 (AB-5) adopted by the California State Assembly and going into force this January 1.  This bill incorporated the “ABC Test” established by the California Supreme Court in Dynamex Operations W. v. Superior Court.  As a result, an employer asserting a independent contractor relationship in the future will be required to substantiate the following matters in order to reverse the default statutory employment relationship: (A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.; (B) The person performs work that is outside the usual course of the hiring entity’s business.; and (C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.  To avoid any impact on occupations which have by a contract relationship by nature, this bill also specifically provides that it does not apply to occupations without an employment relationship under traditional definition such as lawyers, certified public accountants, architects, barbers, etc.  In addition, Section 2, Paragraph (3) of the bill also specifically provides that if an employment or contract relationship still cannot be determined after the ABC Test is applied, it is necessary to revert back to the determination basis in S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations established by a court in California.  To wit, the existence of a control and subordination relationship in individual cases as well as the other 11 factors[vi] should be considered for general determination.

According to scholarly estimation, if the collaborating partners of operators such as Uber are classified as workers in a traditional sense, their operating cost will go up at least 20% to 30%, which adds insult to injury as far as Uber is concerned when it is still in the red after its inception and is still striving to grab its market share through subsidies.  Therefore, Uber has worked with its major competitors such as Lyft and DoorDash to pool together a fund of US$90 million to promote a new bill, namely, the Protection App-based Drivers & Services Act,[vii] in the hope of passing a bill that maintains the contract relationship in the general election this year by persuading the voters.[viii]  The jury remains out as to the appropriateness of such bill until it has been implemented for a certain period of time.  Still it should be recognized that after the bill was launched, relevant platform operators have also stated their willingness to take reform measures, such as increasing the minimum wage protection or providing medical and accident insurance.  This actually has brought more protections to this type of workers and resolved, to a certain extent, part of the labor issues arising from the gig economy.

(2) The City of Seattle of the Washington State, USA – resolution through collective bargaining

In 2015, the City of Seattle of the Washington State, USA, adopted Ordinance 124968, which specifically provides that qualifying drivers[ix] (QD) may choose a non-profit organization to serve as their QD Representative (QDR).  In this fashion, when the number of people represented this way reaches half of all platform drivers in the city, the authorized representative may apply to the city government to become the Exclusive Driver Representative (EDR), who will be granted with full authority to conduct collective bargaining with platform operators over matters such as terms of work, wages and background checks.  Any negotiation result should be approved by the city government and will become an effective agreement between the parties after it is approved to extend the protection to all drivers in the city.  To prevent a deadlock due to the failure of both parties to reach an agreement, this legislation also contains the design of sole arbitrator so that if the EDR and the operators cannot reach an agreement within 90 days after the EDR status is approved by the city government, the procedure involving a sole arbitrator will be initiated where the arbitrator may determine a reasonable solution to the disputes between the parties in view of the overall benefits.  If such solution is approved by the city government, relevant provisions will be valid for two years, and the negotiation procedure will be re-initiated after the two-year term expires.

A breakaway from the past framework, this system is designed not to directly define the status of platform drivers per se as employment or contract, but rather the drivers are directly granted the right by way of legislation to leverage their collective power to negotiate with the operators to reduce the issue of unequal footing between the parties.  However, what appears to be a perfect design has triggered another wave of litigation in the US.  Since relevant antitrust laws in the US fall within the jurisdiction of the federal government, the US Chamber of Commerce brought a lawsuit concerning antitrust with a court shortly after this bill was adopted by the City of Seattle, alleging that such action that allows the drivers to collectively fight for favorable terms of work is anti-competitive.[x]  This lawsuit is still pending.  Therefore, the city government was forced to shelve this bill for the time being before the court determines if there is any antitrust law violation.  Therefore, there has been no negotiation result between the parties yet.

(3) Canada, Spain and Italy[xi] – creation of the third type of employment

In addition to the standards for selecting between employment and independent contractor, a third approach[xii] has emerged on the international front, asserting that in light of the current grey legal area, it is necessary to create a third brand-new type of workers referred to as “quasi-workers” by some or “economically dependent contractors” by some others.  It is advocated that the percentage of the income sources of the platform workers should be calculated.  If a certain percentage is exceeded (e.g., 80% in Canada and 75% in Spain), the platform workers will obtain a status similar to that of workers and will thus be eligible for partial labor law protection.  It is not true that such legislative model has not been developed until recently.  Instead, it had existed before the gig economy emerged.  For example, a type of worker was created between employed and independent contractor in Italy in 1973.  However, since the design of the system was undesirable, this type of worker fell victim to legal arbitrage by the employees.  When the statutory determination criteria were loose, the employers massively transformed employees who had previously enjoyed the status of workers to quasi-workers, thus further lowering the status of workers.  In consequence, the Italian government subsequently had to go through continuous reforms to eliminate disputes as a result of such legislative disaster.  In Spain, legislation took place in 2007.  However, due to overly stringent criteria for determining the status of quasi-workers, e.g., the formality requirement that workers should register with the government and that contracts with the employers should be notarized, there were only approximately 16,000 quasi-workers in the entire labor market, far below the expectation of the lawmakers.  The circumstances of the above-mentioned countries indicate that although it is straightforward and clear to create a third type of worker, still the system may easily become excessive or be abandoned in case of design bias of the system.  In addition, although this pattern literally appears to be a viable solution to the current issues, still it is by no means a panacea.  Any further change to the labor market in the future may call into question whether it is necessary to set up the fourth or fifth type of employment.  In addition, if the fundamental aspect from the beginning is considered, the most difficult issue would be what articles in the labor laws and regulations should be applied to protect such new type of labor relationship, as well as whether the government is capable of defining the scope of protection needed by the platform workers and whether such arrangements are acceptable to the operators.  Perhaps, a long-winding negotiation process will still be required to balance different interests.

4. Conclusions

Currently there is no perfect solution in the world to the conflicts between the gig economy and labor laws with relevant disputes still lingering.  However, the author believes that the collective bargaining approach adopted by the City of Seattle, USA, serves as a good reference, since the government in this approach only plays a supervisory role while the parties are allowed to negotiate their respective rights and interests almost on equal footing.  This not only meets the purposes of party autonomy but also saves the government from its dilemma where a choice has to be made under current legal definitions.  Currently, the Labor Union for Online Platform Delivery Men has been set up in Taipei City.  In addition, delivery platform operators such as FoodPanda are optimistic about the prospect of the platform workers joining the labor union to obtain insurance coverage.  The author expects that there will be more platform workers joining the labor union to collectively negotiate the terms of work or other specifics with platform operators and join hands in improving the current impact of the gig economy on labor laws and regulations.  The government in turn should assume its supervisory responsibility to secure the negotiation between the parties on equal footing as much as possible and intervenes only when necessary so as to maximum benefits for the parties with lowest friction.

[i] According to the Taiwan Internet Report released by the Taiwan Network Information Center in 2018, the mobile internet population in Taiwan started to have marked growth approximately in 2012.

[ii] Working part-time is not a new concept.  However, such new employment pattern has enjoyed explosive growth due to the Internet.  According to research, this term was first used to describe the phenomenon of mission-based and short-term employment by Tina Brown, a reporter with The Daily Beast in the US, in one of her articles about “on the gig economy.”

[iii] https://www.uber.com/newsroom/company-info/


[v] According to a report released by The New York Times, Uber uses a lot of psychological suggestion techniques employed by the gaming industry, such as Ludic Loop and medal systems, so that the drivers will spend more time online, resulting indirectly in an increase of work hours .https://www.nytimes.com/interactive/2017/04/02/technology/uber-drivers-psychological-tricks.html?_r=0

[vi] For example, whether the business operated by the employee and the employer is different, the provider of equipment required for business operation and the location of labor fulfillment, and whether such work requires special skills, whether there is a relationship of guidance and supervision, the subjective perception of the parties, etc.

[vii] https://protectdriversandservices.com/

[viii] Such legislation guarantees the minimum wage of the employees and partial insurance benefits.

[ix] The qualifying drivers here refer to drivers who (1) joined the platform before October 19, 2016 and are still providing services, and (2) finished 52 rides in any given three-month period during January 17, 2016 through January 17, 2017.

[x] In case of collective bargaining under labor laws and regulations, this is deemed an exemption item under Section 6 of the Clayton Act in the US.  However, this is controversial since this was handled pursuant to civil government laws.

[xi] Cherry, Miriam A. and Aloisi, Antonio (2017) ““Dependent Contractors” In the Gig Economy: A Comparative Approach””, American University Law Review: Vol.66:Iss.3, Article 1.

[xii] The Hamilton Project Discussion Paper, Seth D Harris and Alan B. Krueger.