The Platform Economy – Employee Risk Under French Law and How to Address It

2016 has been a tough year for those operating in the so called ‘collaborative economy’. While some have encountered financial difficulties, others have faced a real “bashing” from unsatisfied competitors. 

But the commencement of judicial proceedings against these new players will have the biggest impact. 

The major risk resides in the possibility that a judge could attribute the status of ‘employee’ to a self-employed person (“collaborative entrepreneur”), who provides services to consumers (“the users”) through a digital platform, and the status of ‘employer’ in relation to the digital platform. 

The consequences of such a decision could be daunting for digital platform owners and may lead to the payment, in particular, of a minimum wage to the worker classified as an employee, severance pay in case of dismissal, compensation for undeclared work equivalent to six-month salary (perhaps even a criminal penalty), social security charges to the relevant bodies, etc. Therefore, the business model may well be a risky strategy for these companies to undertake.

Two recent French Labor Court decisions concerning a dispute between drivers and a well known digital platform is a reminder that beyond the terms of the contract between the platform and the collaborative entrepreneur, the court will ultimately examine the methods of exercise used in practice for the provision of services in order to determine if the collaborative entrepreneur exercises either a salaried activity for the benefit of the platform, or an independent activity (Paris Labor Court, December 20th, 2016 RG14/11044 and 14/16389).

Thus, the judge will classify an individual as an employee whenever he deems that, concretely, (i) the collaborative entrepreneur carries out work, (ii) in a relationship of subordination with the digital platform, (iii) in return for remuneration. 

A review of relevant case law precedent allows us to identify six factors that can reduce the risk of a relationship being requalified as an employment contract.   

1. The platform must ensure that the collaborative entrepreneur is registered with the “Registre du Commerce et des Sociétés” or an equivalent 

This registration creates a simple presumption of the non-salaried status (the contrary may also be established), which is an indication of the absence of the employee and employer relationship, but does not, intrinsically, avoid civil responsibility, nor criminal responsibility for undeclared work. 
On this point, the French Labor Court has held that the concealment of the employees’ employment was intentional in nature – element necessary for the award of damages – given that the digital platform 

(i) could not have been unaware that it imposed obligations characteristic of an employment contract, and (ii) had unilaterally established and modified the terms of contracts concluded with the collaborative entrepreneur 

2. The service provided by the collaborative entrepreneur must be exercised with respect to the user 

The collaborative entrepreneur must carry out an activity for the benefit of the user, and not the digital platform, to avoid the latter being recognized as an employer. The establishment of invoices in the name of the users (and not the platform) is a favorable indication of the qualification of the business relationship. The platform must remain a simple intermediary. 

3. The collaborative entrepreneur must be free to manage his or her workload 

For an employment contract not to be established, the platform must allow the collaborative entrepreneur to be free to manage his or her workload and schedule, that is, whether to accept a mission, a customer, or even being present or not on the platform without penalties being imposed.

Consequently, the contract indirectly requiring the driver to comply with a minimum number of hours by threatening to penalize in case of a turnover which is too low may be reclassified into an employment contract (Paris Labor Court, December 20th, 2016 RG14/11044). 

4. The collaborative entrepreneur must be free to carry out other activities

On this point, the French Labor Court considers that “the inability to access a distinct clientele is a prohibitive obstacle to maintaining the status of self-employment” (Paris Labor Court, December 20th, 2016 RG14/11044).

To avoid this situation, the collaborative entrepreneur must be free to carry out any other activity, specifically for competing companies. 

5. The digital platform must not supply and/or maintain the collaborative entrepreneur with the equipment to carry out the service or reduce the volume of requirements imposed on him or her

The ownership or responsibility for the maintenance of any equipment needed to fulfill the service are indications that the users are clients of the collaborative entrepreneur and not the platform. In the same way, too specific requirements, designed to ensure uniformity in the provision of services, could be characterized as directives, which would be indicators of an employee status. 

6. The power to sanction by the digital platform must be limited 

The sanctions, financial or not, which could be imposed on the collaborative entrepreneur by the platform during the course of the contract, could contribute to the classification of a relationship of subordination between both parties. 

In that respect, the rating systems applied by many platforms, even if they are part of an effective managerial system of the service providers, may be considered as sanctions if they have consequences on the provision of services (category of entrepreneurs having access to certain advantages, temporary suspension of access to the platform, etc.). 

This point is particularly sensitive, and has not been, to our knowledge, assessed by the French courts. The greatest precautionary measures must be implemented in this respect. 

The six focal points referred to above are part of a cluster of indications. 

The authors of the so-called “Labor” law voluntarily refrained from qualifying the status of collaborative entrepreneur, but inserted “social responsibility” for platforms in the French Labor Code. 

Thus, where (i) the self-employed person uses, for his or her professional activity, one or more platforms (ii) which determine(s) the characteristics of the services provided or the good sold and fixes its price, then the platform(s) must guarantee that the collaborative entrepreneur is given: 

• the right to refuse to provide the service in light of his or her defense of professional claims without being subject to sanctions, his or her being held liable or the termination of his or her relationship with the platforms, 
• the right to form a trade union, 
• the right (provided that a turnover threshold, set by decree, is not exceeded) to benefit from the platform’s payment of supplemental health insurance premiums and professional training costs.

The question arises whether it is necessary to further regulate the status of collaborative entrepreneurs. If it is, several options are conceivable: 

• the confirmation of the status of a self-employed collaborative entrepreneur, as stipulated in the draft “Labor” law in February 2016, despite the power of the platform to direct and sanction the entrepreneur, provided that he or she is free to determine his or her workload and clientele; 
• the creation of a new hybrid status between employee and self-employed similar to the English “worker” – attributed to drivers using the Uber platform by a London court on October 28th, 2016 – and by virtue of which English workers benefit from certain rights attached to the employee status (minimum wage, paid vacation), without all the related protections (no notice or written motive in case of dismissal);
• the creation of an ad hoc employment contract whereby the platform guarantees a monthly salary for a predetermined minimum period of time (example: 20 hours per month), which could be increased depending on the platform’s satisfaction and the entrepreneur’s availability. The entrepreneur would be salaried and the platform would have the power to direct and sanction enabling him to enforce his specifications. 

Anne-Lise Puget, Of Counsel and Julie Ebran, Associate, Bersay Associés, Paris, France, a Transatlantic Law International affiliated firm.

For further information or for any assistance with understanding and interpreting French labor law, please contact Anne-Lise at francelabor@transatlanticlaw.com

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