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A driver uses the Uber app to drop off a passenger in London.
Chris J. Ratcliffe | Bloomberg via Getty Images

Legislators in Europe have proposed tough new rules for gig economy companies such as Uber and Amazon-backed Deliveroo.

The proposals — published Thursday by the European Commission, the executive arm of the EU — are a major step toward requiring gig economy companies to classify drivers, couriers, cleaners, fitness coaches, masseuses and other workers who use apps and online platforms to find work as employees.

Employee status entitles workers to a minimum wage, holiday pay, unemployment and health benefits, and other legal protections depending on the country where they worked.

The proposals, which have been welcomed by labor unions, could affect an estimated 4.1 million gig economy workers across Europe. They have to go through several legislative steps before they become law. 

Gig economy companies have long classified their workers as independent contractors, allowing them to minimize their expenditures and constrain legal liabilities.

Working for these companies appeals to those who don’t want to get a permanent 9 to 5 job and the platforms have made things like moving around and ordering food easier for consumers.

But the Covid-19 pandemic has showed how fragile these platforms can be. Work quickly dried up for Uber drivers during lockdowns, forcing many of them to find new jobs elsewhere, often with better protections in place.

Unsurprisingly, Uber and other gig economy companies are against the commission’s reforms, which could severely impact their business models. The new rules could result in billions of dollars in new costs for them.

The ride-hailing giant said costs would be passed onto consumers and approximately 250,000 couriers and 135,000 drivers across Europe would lose work under the proposed rules.

“Uber is committed to improving the working conditions for the hundreds of thousands of drivers and couriers who rely on our app for flexible work,” an Uber spokesperson said in a statement shared with CNBC.

“We have worked with national governments across Europe and the rest of our industry on ways to strengthen platform work without risking the flexibility independent workers say they want.”

“But we are concerned the Commission’s proposal would have the opposite effect — putting thousands of jobs at risk, crippling small businesses in the wake of the pandemic and damaging vital services that consumers across Europe rely on.”

However, Just Eat is in favor of the reforms. Jitse Groen, the company’s CEO, said on Twitter that Just Eat supports the “proposals to improve conditions for workers and help them access social protections.”

Certain countries have already introduced their own gig economy laws but the legislation proposed by the European Commission is the most widely applicable legislative attempt.

The EU estimates that the number of people working for digital platforms across the bloc will grow from 28 million today to 43 million by 2025.

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