Europe isn’t taking so well to Uber.
The ride-sharing service and the broader “collaborative economy” are under assault. The latest challenge is the way Uber treats its army of drivers as independent contractors. A tribunal ruled last week the company’s 40,000 drivers in the U.K. could potentially be classified as a type of employee who should be paid the national minimum wage, get breaks during shifts and paid holiday leave. And that’s only one piece of the business that’s under attack.
Uber said it will appeal the U.K. decision, but if it fails, it could also lose a key ingredient of its success.
“The reason Uber has the profit margin it has is that it does not contribute to society in the same way as people in the on-demand economy. That’s exploitation, isn’t it?” said Christina Colclough, a spokeswoman for UNI Global Union, an umbrella group for trade unions. “The on-demand economy is going to have to grow up.”
Europe is wrestling with how to approach digital innovation and the U.K. ruling is a prime example. The European Commission has taken a laissez-faire stance on regulation and barely moved on Uber’s multiple complaints over the past two years about national restrictions, despite declarations of support for the rising digital economy.
“The Commission has received complaints from Uber [related to transport sector] and is looking into these complaints … There are no deadlines for assessing complaints – obviously we try to handle all complaints as fast as possible, but complex matters require careful examination,” a Commission spokesperson said.
Uber has both fought and evolved, but its future — and that of the sharing economy — may hinge on a forthcoming European Court of Justice ruling on a Spanish case that should determine whether Uber is a passive technology or transport company.
“Tens of thousands of people in London drive with Uber precisely because they want to be self-employed and their own boss,” Jo Bertram, regional general manager of Uber in the U.K., said Friday. “The overwhelming majority of drivers who use the Uber app want to keep the freedom and flexibility of being able to drive when and where they want.”
If the court says it’s a transport company and an employer, Uber would potentially have to obey the obligations of traditional taxi companies, including insurance, health and safety training and new licensing requirements Europe-wide.
The ECJ “will now determine if the national rules currently being applied to digital services like Uber are legal and appropriate under European law,” Mark MacGann, Uber’s former head of public policy for EMEA, said when the case was referred to the court last year.
The ruling declared specifically that Uber drivers would be considered a type of employee called “workers,” in U.K. government parlance, who have some employment rights.
The U.K.’s case was the first labor-focused case in Europe, but a slew of national cases and laws across the Continent dealing with licensing and taxes have reined in how the app-based company operates. Other members of the sharing economy, including Airbnb, have hit their own share of roadblocks as they try to break into the European culture.
“Uber and others will have to adapt more to the European way of doing business. We do not have the same system as the United States,” said Dita Charanzová, a Czech Liberal Member of the European Parliament. “Uber must do more to engage with local and EU level policymakers to address any concerns.”
In France, the 2014 Thevenoud law required all chauffeured cars to go back to a home base between rides and limited the kinds of tech they could use to find work. Two Uber executives were arrested and fined in France for running UberPOP, the company’s cheapest service that lets drivers operate without professional licenses. UberPOP has since been suspended.
The California-based Uber operates in 21 countries in the European Union, from Belgium to Italy and Finland to Ireland. Uber’s success has spawned an industry, including Eastern Europe’s Taxify and France’s long-distance carpooling app BlaBlaCar.
In some parts of Europe, the company is still the belle of the ball. Uber has struck favorable deals in the Baltic states, including Estonia. There, they can operate in competition with local taxi services while still paying taxes. UberPOP is also still up and running in some European markets like Warsaw.
“The vast majority of people who work this way made an active choice to do so and cherish their self-employed status,” said Marco Torregrossa, the secretary-general of the European Forum of Independent Professionals.
However, critics say this U.K. labor case could be a watershed moment.
“It’s pretty damning to their reputation in terms of how they chose to conduct themselves and represent themselves. Their lobbying horsepower has been seriously damaged,” said James Farrar, one of the complainants in the employment tribunal. “Without a change in the law or changing their business model, I can’t see where they can go with this.”
This article has been updated to clarify the type of employees the U.K. court labeled Uber drivers to be. They would be classified as workers.