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Private contractor or employee? Courts rule on gig economy status

A Dutch court of appeal has upheld a ruling that Deliveroo drivers are effectively employees and not independent contractors.

The lawsuit was initially filed by Dutch trade union FNV. In the 2019 lower court ruling, the judge in that matter found that, despite the unique nature of gig economy employment, the relationship is nonetheless an employment relationship.   

The Amsterdam Court of Appeal has now upheld the finding. From a VAT perspective, the ruling is significant because Deliveroo workers are not classified as independent entrepreneurs. Therefore, they do not require a corresponding VAT number.  The ruling potentially also implies that workers are entitled to leave and sick pay. 

The company has the option to appeal to the Supreme Court of the Netherlands. 

Who is a worker?

The courts are testing a similar case in the UK. Uber is awaiting a ruling from the UK Supreme Court on the status of its drivers.

Uber is appealing the findings of lower courts classifying Uber drivers as workers. The ‘worker’ designation entitles drivers to paid leave and a minimum wage. 

The Supreme Court ruling is important because it will set a legal precedent for the status of gig workers in the UK more generally.  

Reimagining the gig economy

UK authorities have already begun inquiries into more effective ways to regulate the gig economy

As the UK government notes, “when the UK introduced VAT in 1973 the phenomenon of mass digitalisation was still many years ahead in the future. The digitalisation of the economy in the intervening period has created substantial challenges to the international tax framework.”

The investigation seeks to clarify VAT liability, among other issues. If the underlying contractors are liable for VAT, then the gig platforms themselves arguably have a competitive advantage. The inquiry into the gig economy seeks, among other goals, to potentially create a regulatory VAT framework that creates a level playing field for platforms and more traditional businesses.

Not either/or?

Dutch union FNV insists that if a delivery driver is not an independent contractor then they must be workers.

Uber is proposing a ‘third way’ to European regulators. The company suggests that Europe adopts a regulatory framework in which gig workers are classified as independent contractors but are still entitled to certain benefits.

Uber claims that classifying gig workers as employees would force it and other gig economy companies to increase the cost of services. The increase would be borne by customers, the company says. 

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Vatglobal is carefully analysing the political and legal outcomes that continue to define the gig economy. Get in touch with Vatglobal for total clarity on your company’s VAT obligations. Our expert team will provide the strategic advice your business needs to adapt to regulatory change.

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