Quo vadis, platform work?

The EU Commission proposed a directive on improving working conditions in platform work – work organised through a digital labour platform, performed by an individual based on a contractual relationship between the platform (or an intermediary) and the individual. In our article, we summarise the most important requirements of the directive, regarding the determination of employment status, algorithmic management, and transparency on platform work.

We also examine the challenges in legal classification under Hungarian labour law, as well as the recent Hungarian case law in the field of platform work, which concerned employment status, and underlined the key criteria when determining that. The national legislator can be expected to reflect on those when implementing the directive, as the recently reached provisional agreement on the directive would require the Member States to establish a legal presumption on employment status.

The European Union predicts 43 million platform workers by 2025 in its territory, which translates to a 53% rise with respect to 2022 when it is estimated that there were 28 million workers. Reflecting on this, it has initiated a legislative procedure to ensure uniform protection of persons performing platform work. The proposed directive on improving working conditions in platform work aims to regulate the correct determination of employment status, the conditions of algorithmic management, and the transparency on platform work.

Determination of employment status

Initially, the proposal aimed to regulate in detail a legal presumption of employment status. This was later changed in the interinstitutional negotiations, and the latest provisional agreement requires the Member States to establish the presumption corresponding to their own legal system.

Original proposal

From an EU perspective, the core principle that determines the existence of an employer-worker relationship is independence. According to the ECJ, “formal categorization as a self-employed person under national law does not exclude the possibility that a person may have to be treated as a worker for the purposes of Directive 92/85 if that person’s independence is merely notional, thereby disguising an employment relationship within the meaning of that directive” [Case C-232/09].

The proposal originally stated that, when the worker´s performance is controlled, there should be a legal presumption of an employment relationship, assuming that independence is the opposite concept of control. The indicators of control would have included determining remuneration, binding rules on appearance, supervising the work through electronic means, and restricting the freedom of organizing one’s work and building a client base.

Latest provisional agreement

However, the provisional agreement reached in March 2024 deleted the original presumption. It requires each Member State to legislate the requirements of the presumption, taking into account the use of automated monitoring or decision-making systems. Member States will also be required to develop appropriate guidance to ensure that all stakeholders can understand and implement the legal presumption, including the procedures for rebutting it.

Algorithmic management

The second pillar of the proposed directive establishes rules on the limitation of data processing, as well as transparency and human oversight of automated systems. The rights regulated in this pillar, as well as in the third pillar concerning transparency, are provided regardless of employment status. Even if a person performing platform work is not an employee, they would still have the rights regarding algorithmic management and transparency.

Data processing will have to be limited to what is strictly connected to and necessary for the performance of the work. It would explicitly forbid data processing on emotions and psychological state, data about private conversations, and data generated out of working periods. Digital platforms would also be required to disclose information on the functioning of the used automated monitoring and decision-making systems, at the latest on the first working day.

Human oversight of automated systems is required to be ensured. When it identifies a high risk of discrimination in the use of the systems or finds that the decisions of automated systems have infringed the rights of a person performing platform work, the platform will have to take appropriate steps to bring such behaviour to an end. This could include the modification of the automated monitoring and decision-making system or a discontinuance of its use.

Persons performing platform work will have to be able to access a contact person for clarification regarding any decision taken or supported by an automated decision-making system. In case of decisions of high significance, e.g. the suspension, restriction and termination of the existing contractual relationship between the worker and the platform, a written statement of reasons is also required to be provided.  

Transparency on platform work

Finally, the directive would require digital platforms to provide information for the authorities and persons performing platform work about its operations, including the number of persons performing platform work, the general terms and conditions applicable for contractual relationships, the average weekly number of hours worked by the persons, and the average income of them. Moreover, it will also be obligatory to declare work performed by employed platform workers to the competent authorities of the relevant Member State.

In conclusion, the new EU proposal aims to comprehensively regulate the working conditions of platform work. The majority of the proposed rules and limitations on algorithmic management and transparency would be applicable even if the persons performing platform work are not in an employment relationship. Besides, the directive would require Member States to establish a legal presumption regarding the determination of employment relationship in platform work.

It will therefore be up to the national legislator to define the conditions for the legal presumption of the existence of an employment relationship. In this respect, it is important to emphasise the binary nature of Hungarian labour law, according to which employment can take place either within the framework of an employment relationship or in a so-called self-employment relationship. In other countries, a third – or transitional – model is also known, but platform working is an employment novum that cannot be confidently classified in either category.

Specific features of the legal relationship

The difficulty of labour law classification arises from the fact that many of the characteristics of platform work differ from the classical framework of both employment and self-employment.

First, the tripartite nature of the legal relationship should be highlighted, where, in addition to the worker (employee), the employer is technically split into two parts, as the employer's rights are divided between the platform and the client (consumer). The system is based on the – entirely subjective – feedback of the consumer, which will be used by the platform to rate the worker using an objective measure.

A further speciality of the legal relationship is the questionable nature of the employer's direct right to give instructions, since persons performing platform work undertake their daily tasks individually and choose the way in which those are carried out.

Thirdly, the issue of collective rights is also worth raising. In this respect, the Hungarian Labour Code shows complete dispositivity. Thus, ultimately, the exercise of collective rights would also be possible between persons performing platform work, but since they are mostly self-employed persons, competition law rules would apply accordingly. This means that agreeing to negotiate on price between enterprises is prohibited, but it is possible for them to cooperate to advance other rights. It should be added, however, that in Hungary such cooperation between platform workers has not been observed so far.

In view of the challenges of labour law classification, it is important to review the most recent jurisprudence in Hungary: Curia judgment number Mfv. VIII. 10.091/2023/7.

Statement of facts

The plaintiff worked for the defendant as a food and beverage courier under a contract of agency to deliver orders placed through the platform set up to carry out intermediary activities. The defendant required that the couriers must perform the work as individual entrepreneurs. The applicant was free to choose the periods during which he wished to work. There was no provision in the contract for the shortest or longest period of work, but a 30-minute paid break was guaranteed after 6 consecutive hours of work.

The parties agreed on an hourly rate, with an additional charge per delivery. Both parties were free to interrupt the pre-selected period of work at any time. For that, there was no negative legal consequence for the defendant. If, however, the plaintiff interrupted, he was moved down the ranking of couriers according to their reliability. This did not constitute a breach of contract, but the courier who was higher in the ranking was given priority regarding the periods of work that could be booked in advance.

Legal question

The applicant requested a declaration that the contract was a sham contract, since, in his view, it was intended to create an employment relationship and not a contract of agency. The question of law was whether the legal relationship was an employment relationship or a relationship of agency, and whether the rules of the Labour Code or the Civil Code applied in the specific case.

The applicant argued that the legal relationship was based on a subordination, under which he was regularly obliged to provide personal services under the defendant's right to instruct. The Court of Appeal shared the plaintiff's view, identifying the elements of basic salary, standby time, flexible working hours, and outsourced employment relationship from the Labour Code, and also found the subordination relationship in the contract to be more substantial.

In his counterclaim, the defendant pointed out that the applicant was an individual entrepreneur and self-employed, and that he carried out his work with his own means. He was not subject to a permanent and general obligation to be on call and could interrupt his working hours at any time. As regards the subordination, the applicant pleaded the absence of a contractual agreement establishing such a relationship, the absence of economic dependence and the lack of proper integration into the employment organisation.

Decision and key takeaways

The Curia stated that the activity carried out on a digital platform cannot be considered a unique scheme, so the nature of the legal relationship defining it must always be examined on a case-by-case basis. According to the Hungarian case law, if a given activity can be performed both in the context of a contract of agency and in the context of an employment relationship, the contractual intention must always be examined in the first instance [BH2017.412.]. Following this principle, the Curia upheld the defendant's counterclaim, finding the contract valid and that the parties had indeed entered into a relationship of agency.

The assessment criteria set out in the judgment were as follows:

• For activities carried out through the platform, the examination of contractual intent is the primary consideration, and such relationships are examined on a case-by-case basis;
• Non-regular employment, pay for performance, holidays and inter-work breaks are not essentially categorising legal instruments;
• Economic dependency is not a decisive factor when examining subordination;
• An employment relationship cannot be envisaged in which the number of hours worked by the employee is solely adapted to the needs of the person carrying out the activity, and
• The use of a digital monitoring system does not necessarily indicate the exercise of the right of control, it may also serve merely to confirm contractual performance.

It can be assumed that the presumption under the proposal will be developed in the domestic legal system in light of and in reaction to the principle findings of the Curia. However, it is important to emphasise that the proposal explicitly requires the use of automated systems to be taken into account when drafting the presumption, thus placing greater emphasis on digitalised monitoring systems than domestic case law. In view of this, although the Curia's judgment states that the use of a digital monitoring system may not necessarily be a basis for the existence of a right to control and thus for qualification as an employment relationship, the domestic legislator will also be obliged to properly consider and regulate how the use of automated systems, including the use of a digital monitoring system, affects the classification as an employment relationship. It is possible that, in view of the obligations under the directive, the legislator will nuance the Curia’s findings and give a greater role to the use of automated systems in the assessment of platform work.