Collaborative economy: evidence analysis

6 Workers' Rights

6.1 This section provides an overview of responses on workers' rights in relation to the collaborative economy. Findings presented over the following pages are based on responses from three business representative respondents with a specific focus on business and employment, and a broad range of other organisations and individual respondents.

Opportunities for the collaborative economy

6.2 Opportunities highlighted in relation to workers' rights focused primarily around the potential for collaborative platforms to create new employment opportunities and routes to market for workers. These points were raised by a range of respondent types including business and business representatives, public sector and other organisation respondents - the latter including a trade union respondent.

• A range of respondents (primarily business and business representatives, but also including public sector and other organisations) referred to the potential for collaborative platforms to provide additional employment opportunities. This included the potential for a greater diversity of more flexible opportunities that may suit those with parenting or caring responsibilities, or those in rural areas with more limited access to employment opportunities. Another organisation respondent also suggested that the collaborative economy could offer additional opportunities for supported employment for disabled or disadvantaged individuals. A business representative respondent noted that the collaborative economy could help to develop a more flexible labour market as a key competitive advantage for Scotland.
• A small number of respondents suggested that development of new collaborative platforms have particularly benefited the self-employed and small businesses by providing access to new markets. This included specific reference to the potential to improve what were described as below average business start-up rates in Scotland. A business representative respondent suggested that more start-ups and higher levels of self-employment can be associated with the wellbeing of individuals, and benefits for local economies. This included reference to a mapping exercise showing correlation between high levels of self-employment and wider prosperity, and government research showing that the majority of the self-employed are content. ^[15]

• As is discussed under later sections, several respondents raised concerns around collaborative platforms imposing self-employed status on providers where this may not accurately reflect their relationship. Reference was made here to a 2015 Citizens Advice Survey. ^[16] A business representative respondent suggested that efforts to tackle inappropriate use of self-employed status should be proportionate, and take care not to negatively impact on the majority of the self-employed community.
• A small number of respondents referred to opportunities arising through the collaborative economy for self-organisation, including cooperatives and bargaining for workers. This included a suggestion that the Scottish Government has a role in strengthening the institutional framework and the creation of new mechanisms to support worker participation, and specific proposals to support self-organisation.

Challenges for the collaborative economy

6.3 Respondents raised a number of concerns around protection of providers of collaborative economy services, and this was seen as a significant challenge for the collaborative economy. This includes points raised by three business representative respondents with a specific focus on business and employment, and comments from a broad range of other organisation and individual respondents.

• The most common concerns were around the extent to which the classification of providers as self-employed accurately reflects their status. This was identified by a number of respondents as a significant issue for the collaborative economy, with concerns raised around the extent to which providers are subject to substantial control from collaborative platforms, while lacking the benefits associated with employment. A small number of respondents also referred to potential risks for individuals' health and wellbeing, for example as a result of a blurring of the distinction between work and leisure time. A business representative respondent referred to having received a substantial number of calls from existing businesses with concerns around business and employment practices within the collaborative economy. However, others suggested that there have been long-standing uncertainties around the employment status of the self-employed, including reference to the lack of a statutory definition of self-employment. These respondents also referred to a series of reports and inquiries around self-employment. ^[17]
• Several respondents suggested that there is a need for greater clarity around employment status (and associated rights and taxation) for those working in the collaborative economy - to ensure equality of opportunity across the economy, to prevent providers from being exploited, and to provide certainty to collaborative economy businesses. Another organisation respondent noted that this would be a particular benefit for younger people, who account for a substantial proportion of providers within parts of the collaborative economy. A business respondent also referred to an employment tribunal in 2016 finding that providers contracted by Uber are workers, rather than self-employed. ^[18]
• The issue of self-employment status was raised as a particular concern in relation to the potential for the collaborative economy to support delivery of public services. In particular, a business representative respondent questioned whether the flexibility and autonomy of self-employment was appropriate for the delivery of essential services.
• Respondents raised a range of other concerns relating to working arrangements in the collaborative economy. This included reference to providers earning below the minimum wage after deduction of costs, a lack of control over charges levied by collaborative platforms, drivers being required to accept jobs based on partial information, and providers facing substantial charges if they are unable to secure sick cover.
• Several respondents noted the diversity of business models across the collaborative economy, such that individuals may engage with the collaborative economy under a range of working arrangements and potentially using a different employment status. The increasing number of individuals with multiple jobs was also mentioned as raising potential workers' rights issues. This included a suggestion that the focus should be on ensuring good working conditions for all providers, irrespective of their employment status. A business representative respondent also made specific reference to the potential role of 'worker' status, where working arrangements fall between self-employment and employee status. It was noted that this status confers some of the protections afforded to employees, while acknowledging the flexibility of many working arrangements in the collaborative economy - although the respondent noted that there may be a need to consider the tax treatment of 'workers' if the status is to be widely used.
• A small number of respondents raised specific concerns around job displacement and workers' rights associated with increasing automation. This was raised in relation to the collaborative economy and across the wider labour market, and included citation of a recent Institute for Public Policy Research Scotland report which identified a substantial proportion of jobs as being at high risk of automation. ^[19] Another organisation respondent expressed concerns that increasing automation could further exacerbate what was seen as a race to the bottom in terms of wages, terms and conditions.

6.4 Respondents referred to a range of potential approaches to addressing these issues:

• A business representative respondent proposed a detailed matrix as a means of providing clarity around what constitutes self-employment. The matrix is presented as a tool for individuals and businesses across all sectors (including the collaborative economy), and is based on a range of factors relating to autonomy, control of working process and environment, business risk, and level of integration in the business. These factors are used as indicators of whether a provider is genuinely self-employed, and to identify changes required for working arrangements to achieve self-employed status.
• It was suggested that negotiation of proper self-employed contracts with providers would resolve concerns around their classification, and ensure a fairer sharing of profits across the sector.
• Reviewing business regulation and policy to reflect the diversity of modern business models.
• Consider piloting initiatives to help self-employed people to work collectively to mitigate the risks they face.
• Re-evaluating the Scottish Government's labour market strategy to take account of the increasing significance of self-employment.
• Assessing the support available for the self-employed to develop their skills.

Protection of contributors

6.5 Respondents raised a broad range of issues relating to protection of providers of collaborative economy services. These reflected some of the challenges noted earlier, and are also consistent with findings discussed later in relation to regulation and the role of government.

6.6 In terms of the protection of providers of services, respondents made the following points.

• A range of business, business representative and public sector respondents made reference to what were seen as insufficient protections for providers. These comments included reference to a research report focused specifically on workers' rights in the transport sector of the collaborative economy ^[20] , and included reference to
  • the absence of limits on numbers of contractors (and the implications for providers' ability to secure sufficient work);
  • a lack of control over how much providers will be paid for a job/task leading to individuals earning below the minimum wage;
  • providers bearing sometimes substantial costs associated with the provision of services;
  • a lack of control over charges levied by collaborative platforms;
  • the potential for ratings systems to have an unfair influence on providers' ability to earn;
  • providers facing substantial charges if they are unable to secure sick cover;
  • extensive use of zero hours contracts;
  • use of agency workers as a matter of the permanent culture in some workplaces; and
  • a suggestion that overly complex contracts can be a barrier to ensuring providers have access to sufficient protections.
• A substantial number of those providing comment on workers' rights raised concerns around the employment status of providers across the collaborative economy, and a need for greater clarity on the appropriate status of providers - and on their rights. ^[21] Some suggested that existing employment statuses (employee, worker, self-employed) should be sufficient to capture the range of working arrangements, but questioned whether these categories are used appropriately. It was also suggested that the lack of clarity around employment status is enabling some businesses to exploit providers by using a self-employment status that does not accurately reflect working arrangements, and which denies providers the rights associated with other types of employment. Specific reference was made here to a recent report by the House of Commons' Work and Pensions Committee. ^[22] A public sector respondent also noted examples of collaborative economy businesses changing terms and conditions to ensure compliance with self-employed status.
• Another organisation respondents referred to increasing numbers of individuals in insecure work. This included evidence from the TUC that a growing proportion of those in insecure work are doing so on an involuntary basis, and Chartered Institute of Personnel and Development research suggesting that most collaborative economy providers want employment rights. ^[23]
• A small number of business respondents raised concerns around the potential for platforms to develop monopolies, and for this power differential to harm workers' rights.
• A small number of respondents raised specific concerns that resourcing of enforcement is insufficient to protect workers' rights.
• Another organisation respondent noted that the issues highlighted in relation to growing numbers of people in insecure work, and inappropriate use of self-employment, also apply outwith the collaborative economy. Indeed, it was suggested that traditional sectors such as retail, hospitality and care provision may account for the majority of individuals affected by these issues.

6.7 Reflecting these concerns, respondents made a range of suggestions for approaches to improve protections:

• Ensuring appropriate employment status of all providers across the collaborative economy was suggested by a range of respondents. A small number suggested that effective enforcement of existing legislation should be sufficient to address concerns. However, others suggested a need for a statutory definition of self-employment. This included a detailed proposal from a business representative body, based around:
  • control over day to day tasks;
  • providers not being obliged to undertake work beyond that specified by their contract;
  • a right to use a substitute to do their work;
  • payment linked to completion of a job rather than time worked; and
  • multiple clients in a 12-month period.
• Respondents suggested a range of specific changes to address inappropriate use of employment statuses. These included:
  • strengthening of penalties for companies using contract clauses to prohibit litigation over employment status;
  • suspension of tribunal fees for workers challenging their employment status;
  • introduction of a summary process for workers wishing to challenge their employment status at tribunal; and
  • placing the burden of proof on employers to show that providers of services are not 'workers' or employees.
• A business representative respondent also noted that approaches to deal with inappropriate use of self-employed status should not disadvantage the majority of self-employed individuals for whom this status is an accurate reflection of their working arrangements.
• Other changes proposed by respondents to improve workers' rights in the collaborative economy included:
  • Restricting numbers of licences issued to collaborative economy businesses;
  • A ban on use of zero hours contracts;
  • Ensuring all workers have a right to a written statement of pay and conditions, including expected hours or work;
  • Providing low-paid workers with access to Statutory Sick Pay equal to that of other employees;
  • Extension of pensions auto-enrolment to include the self-employed (via tax returns);
  • Legislation to ensure all providers receive a minimum level of pay;
  • A 10 per cent upper limit on commission charged by platform operators;
  • A requirement for all collaborative economy drivers to use meters to ensure they are paid correctly for each trip;
  • Consideration of conferring additional rights on providers classified as 'workers' - including specific reference to the right to challenge unfair dismissal; and
  • Consideration of models for self-organising that may help the self-employed to collectively work to address the risks they face.
• In relation to achieving change, another organisation respondent noted that areas of employment legislation are reserved to the UK Government, but suggested that there remains scope for the Scottish Government to drive change. This included reference to the creation of new social security benefits, and potential for the Scottish Government to use its leverage through procurement and assistance grants to improve workers' rights in the collaborative economy.

Balancing regulation with competition and innovation

6.8 Several respondents suggested that existing regulations are broadly fit for purpose to achieve the required balance between protecting contributors and allowing competition and innovation. However, most of those providing comment on workers' rights highlighted concerns or potential areas for change.

• A need for regulations to better protect workers' rights. This included reference to clarifying the legal status of providers, and tackling the bogus use of self-employment by some collaborative economy businesses.
• A small number of business representatives saw a need to ensure that regulation reflects the diverse range of business models and working arrangements that characterise the collaborative economy - and which is a key attraction for some providers. This included a suggestion that there is a need for regulation to adapt in response to new business models.
• A business representative respondent drew a distinction between non-collaborative and genuinely collaborative and sharing platforms - the latter enabling providers to manage their interactions and protect their interests, and where the imbalance of power between platform and provider is minimised. It was suggested that existing regulation should apply to platforms that replicate established consumer and employment arrangements, but that new, lighter touch regulation would be more appropriate for genuinely collaborative platforms.
• A small number of business and other respondents referred to the risk of monopolies developing across the collaborative economy. These concerns were reflected in suggestions that regulation should extend beyond protection of contributors, to encourage businesses away from monopoly and dominance of a sector. The potential for development of peer-to-peer transport services to ultimately result in automation, and associated loss of job opportunities for providers, was also referenced by these respondents. Again, this was reflected in suggestions that regulation needs to be prepared for the implications of increasing automation.
• Another organisation respondent recommended regulation to support collective bargaining for providers of collaborative economy services, including a specific suggestion for trade union members at board level. This included proposals for the development of new sectoral bodies bringing together unions and employers to negotiate pay and conditions.
• The use of public procurement to support regulation was also proposed by another organisation respondent. This included the introduction of fair wages resolutions to public procurement, and a ban on umbrella companies and bogus self-employment being awarded public contracts.
• Another organisation respondent proposed the creation of a broad based 'Future of Automation' Commission in Scotland, to include representation from employers, trade unions, research councils and academics.

Barriers to growth of the collaborative economy

6.9 A relatively small number of respondents made specific reference to workers' rights in the context of barriers to growth of the collaborative economy. Comments from these respondents reflected some of the workers' rights issues highlighted earlier:

• Several respondents referred to poor job security and workers' rights as a particular issue for the collaborative economy. This included reference to a perceived lack of legal protection for providers of services, and concern that any further removal of barriers to the collaborative economy should not be at the expense of workers' rights.
• A small number of respondents pointed to a lack of employee voice and representation as an issue within the collaborative economy. This included a representative of traditional service providers warning against workers' rights being presented as a barrier to growth, or as an element that should be removed to support growth.
• A small number of respondents perceived a lack of investment in skills and training, and a shortage of skilled workers across parts of the collaborative economy.
• Another organisation respondent referred to low wages as a problem within the collaborative economy, including the risk of workers having to accept low wages due to job insecurity.

The role of government

6.10 A range of respondents referred to workers' rights, and clearly saw the protection of rights as a significant element of the government's role. This included business, public sector and other organisation respondents. Specific points raised by respondents were:

• Several respondents referred to the role of the government in ensuring stronger protections for workers in the collaborative economy. This included specific suggestions for modernising the Competition Act to include workers' interests, and to making it easier for workers to hold their employers accountable.
• Several respondents considered how government could help to frame and shape the collaborative economy in Scotland. This included suggestions for government guidance or charters on workers' rights, and encouraging collaborative models that integrated workers' rights from the outset. Reference was also made to the potential role of government in preventing monopolies as also offering better guarantees to workers.
• A small number of respondents referred to a need for stronger support networks for workers - such as an advice service for providers of collaborative economy services.
• A small number of respondents referred specifically to the issue of low wages across the collaborative economy, and the potential application of the Scottish Living wage to the collaborative economy.
• Another organisation respondent wished to see government action on zero hours employment and bogus self-employment within the collaborative economy. This respondent also suggested that regulation of the collaborative economy should take account of other initiatives such as a Universal Basic Income. It was also suggested that government should create structures to help workers hold companies to account.