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On 20 January 2023, 139 drivers were reclassified as employees of a platform company by the Labor Court of Lyon (conseil de prud'hommes de Lyon) and were awarded a total of about EUR 17 million. The decision refers to a period from 2017 to 2019 and the company announced its intention to appeal this decision.
On 25 January 2023, the Supreme Court overruled the decision of the Lyon Court of Appeal and reclassified the relationship of a driver with the same platform company into one of employment (the period in scope is from 2015 to 2016).
Finally, on 15 March 2023, the Supreme Court reclassified the contract of a driver (from another platform) into an employment contract for the following reasons:
- The driver was not free to constitute his own personal clientele.
- The driver had no freedom to organize his trips.
- The platform could sanction the driver and terminate his contract at its own discretion.
Since May 2022, representative bodies for drivers and riders have been implemented, and a minimum salary for these platform workers, effective from 1 February 2023, has been negotiated.
Further, EU member states have developed a new framework agreement in the field of social security to address the reality of regular cross-border remote working. The framework agreement on the application of Article 16 (1) of Regulation (EC) No. 883/2004 in cases of habitual cross-border remote working aims to promote the free movement of people within the EU while preserving their right to social security. The framework agreement came into effect on 1 July 2023. Please see our client alerts here and here for more details.
The EU directive on platform workers, which was adopted by the EU Parliament in early 2024, seeks to improve the working conditions of individuals performing work for a digital labor platform. Broadly, the directive provides that an individual working for a digital labor platform will be presumed to be its employee where facts indicating control and direction are present. For more information, please see our client alert here.
The main employment law risk is misclassification as it is the current trend with attached consequences (notably, criminal sanctions based on recent case law).
Immigration issues might also have to be considered.
A finding that an individual is an employee would give them employment law rights. An employee has the full set of employment rights, including the right not to be unfairly dismissed, right to statutory redundancy pay, holiday, working time and minimum wage rights.
Concealment of employment can result in criminal liability. In case of misclassification, penalties may be levied on the company's legal representative, i.e., a maximum fine of EUR 45,000 and three years' maximum imprisonment (even if the latter is highly unlikely for a first offense) and penalties for the company of a maximum fine of EUR 225,000.
There is a risk of requalification of the contingent worker's income as employment income for tax purposes, which is subject to income tax withholding obligation for the employing company. This may also, under certain circumstances, trigger VAT issues and potentially undisclosed activity for the platforms hiring the contingent workers.
Penalties for non-withholding of income tax if a worker is reclassified as an employee could be from 5% to 40% plus 0.2% interest.
Penalties can be increased up to 40% if "intentional" or up to 80% in case of "fraud" or "abuse of law." Ultimately, criminal liability may be punished with a maximum fine of EUR 3 million and seven years' maximum imprisonment in certain situations.
The main risk is social security reassessment, by which the amounts paid to the contingent worker should be considered salary items and, as such, subject to employer (approximately 45%) and employee (approximately 23%) social charges.
If workers are misclassified and social security becomes due, companies would need to consider the EU's new social security rules for cross-border employees (effective on 1 July 2023), if the individuals are EU-based and work in more than one EU jurisdiction. Please see our client alerts here and here for more information.
The penalty is 100% of the amount due plus 5% late penalty and 0.2% monthly interest.
If this is qualified as concealment of work, an additional penalty of 25% to 40% may apply.
The main risk is social security reassessment, by which the amounts paid to the contingent worker should be considered salary items and, as such, subject to employer (approximately 45%) and employee (approximately 23%) social charges.
The penalty is 100% of the amount due plus 5% late penalty and 0.2% monthly interest.
If this is qualified as concealment of work, an additional penalty of 25% to 40% may apply.