Leiden Law Blog

Harnessing Platform Cooperatives to Reconcile the Digital and Social Economies

Posted on by Morshed Mannan and Iris Wuisman in Private Law
Harnessing Platform Cooperatives to Reconcile the Digital and Social Economies

Developments in digital technologies have disrupted many traditional industries and market sectors.  Conventional businesses had to cut costs as a result of competition from internet-based companies that do not have brick-and-mortar stores, such as Amazon or Bol.com. Others had to rethink their strategies and financial models due to new online platforms providing similar services but without the burden of having to pay for their own assets and employees, such as Uber and Airbnb. These platforms utilise the labour and assets (i.e. cars and homes) of people who make use of the platform. Although the European Union has underscored the importance of vitalising the digital economy in its Entrepreneurship 2020 Action Plan and other policy frameworks,  believing that nourishing online enterprises will curb (youth) unemployment, the question is: what kind of jobs are being created by the digital economy? How can these initiatives stemming from the digital economy be squared with the EC’s aspirations for the European social economy? This is a particularly pressing issue in the case of online platform enterprises.

Roughly speaking, three categories of people who perform work can be identified. The first category consists of employees who have a labour contract with an employer. The employees are protected by social security arrangements including insurance, a flat (minimum) wage possibly supplemented with bonuses; they have vacation days, sick leave and some enjoy medical benefits. The employer pays the applicable taxes on the salaries. The second category consists of  workers who are self-employed, also known as independent contractors. They work freelance, on a project-by-project basis. They are responsible for taking care of their own insurance, taxes and so on. For a certain group of people this brings flexibility and the feeling of being your ‘own boss’ which outweighs the lack of protection traditional employees have. Others are strong-armed into becoming self-employed. A 2016 EU study has identified that ‘bogus’ self-employment, where an individual carries out the same tasks for a business as its employees but is nevertheless characterised as being self-employed, is growing in the Netherlands and the UK. There have been a variety of responses to the precariousness of such forms of work across communities and industries. A spate of misclassification lawsuits has been filed against companies like Uber in the UK, US and France, claiming that the individuals concerned are de facto employees or a third category of (independent) ‘workers’/ ‘dependent contractors’ rather than independent contractors and as such deserve entitlements such as a minimum wage, paid leave, collective bargaining rights and so on. The reason why employees are thought to need such protection is that they are in a subordinated and dependent position vis-à-vis their employers. The purpose is to extend protection to include workers who are substantively and economically in the same position.

Although we encourage the prevention of ‘bogus’ self-employment, we think that the focus should shift to a fourth category, the worker-owner. Instead of pressing for  protection, the conversation should evolve from one about protection to ownership as the discussion currently does not address fundamental issues underlying such platform-based business models, most notably the user’s lack of voice and agency, workplace surveillance and monitoring and poor working terms.

In Ours to Hack and to Own, the contributors lay out a manifesto for platform cooperativism, where e-commerce and online platform enterprises are owned by the users that give them economic life. The book is replete with examples of platform cooperatives, ranging from the Berlin-based, seller-owned online marketplace Fairmondo, that promotes the sale of ethical products and hopes to expand internationally by connecting local cooperatives, to taxicab cooperative Green Taxi that has developed a ride-hailing app for use in the Denver area. By conferring ownership on the users of the platform in the form of a cooperative, they gain a share in the firm that allows them to participate in decision-making and profit-sharing. If they work for the platform cooperative, they also gain enhanced bargaining powers to negotiate wages and working conditions. It has already been seen that these changes can be accommodated while still retaining the business’s competitive edge by reducing the commission received by the platform, by requiring the members to use the platform to a certain degree or by paying a small, periodic subscription fee. While platform cooperatives are still overshadowed by the behemoth of unicorn app-companies, their potential to ensure equitable pay, decent work, income security and co-determination deserves greater attention and requires an assistive legal framework. In this regard, Member State laws require closer scrutiny, particularly whether they facilitate the creation of the cooperative form and whether their anti-monopoly regulations may bar standard setting by cooperative groups.

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