Fine is four times larger than previous sanctions for ‘false self-employment’ breaches by the company, and is unlikely to be the last
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SPAIN’S largest food delivery platform has been sanctioned with the largest ever fine in the country for ‘false self-employment’, in a move by the Labour Inspectorate which significantly raises the stakes in the battle over the ‘Rider’s Law’.
The €79 million fine to Glovo, which was founded in Barcelona but is now owned by German multi-national Delivery Hero, is about four times larger than any fine the Labour Inspectorate has previously dished out for similar breaches. It relates to 10,614 food delivery couriers (‘riders’) in Barcelona and Valencia, who have all been considered to have an employment relationship with the company and therefore should have been on the payroll, rather than hired on a self-employed basis, and have now had their situation regularised.
The record-breaking fine breaks down as follows: in Barcelona, €39 million for false self-employment and a further €24 million for unpaid social security contributions. In Valencia, €10.7 million for false self-employment and €5.5 million in outstanding social security payments.
Spain’s Minister of Labour, Yolanda Díaz, said shortly after the news broke on Wednesday: “We are facing a genuine act of false self-employment and the weight of the law is going to fall on this company, as it has already fallen with the Inspection.”
“This company is obstructing the work of the Labour inspection. It is very serious in a social and democratic state of law, in which companies also have to comply with the law”.
Responding to the news, Felipe Corredor from campaign group RidersXDerechos (‘Riders for Rights’) said that the government should go further, and look at criminal ramifications, as has occurred in France.
“In other countries there have been criminal consequences, including prison, exclusion from working on company boards, this is possible,” he said, adding however that the fine was a “step forward in the fight against false self-employment” because it’s “not a cheap fine for skipping the law.”
The fine comes just over a year after the Rider’s Law entered into force, which backed up the judgement of numerous court rulings in Spain, including the Supreme Court, by creating a presumption of employment for food delivery couriers. However, Glovo has refused to comply with the new law, with only 2,000 of its couriers made employees, less than 20%, the rest remaining as freelancers.
There has been conflicting reports in the Spanish media about whether this fine is the first to relate directly to the Rider’s Law, but the Gig Economy Project understands that the inspection period from which the fine relates to was between 12 May and 12 August, 2021. The Rider’s Law entered into force on 12 August 2021.
Nonetheless, the fine is worth more than 15% of Glovo’s current expenditures, and is unlikely to be the last, with ongoing investigations in Madrid and other parts of Spain. There are thought to be about 16,000 Glovo riders currently in Spain, so further big fines could be on the way.
That spells trouble for a company which is also facing an investigation by the European Commission for possible anti-trust activity. The EC carried out a raid on Delivery Hero and Glovo offices in July. If found guilty they would face “hefty fines”, Reuters reported.
Following Delivery Hero’s takeover of Glovo on 31 December 2021, the German company has been heavily criticised for the move due to the Catalan-founded firm’s big losses. One HSBC bank analysis downgraded its recommendation to clients on Delivery Hero from ‘buy’ to ‘hold’, finding that they were “baffled” by its acquisition of Glovo due to the latter’s €330 million in losses, adding that “it’s looking more and more like a bailout”.
Glovo is not the only food delivery platform in Spain with reason to worry following the fine. Uber Eats officially began re-hiring couriers on a self-employed basis two weeks ago, after announcing on the eve of the one year anniversary of the Rider’s Law that they would be switching from using a sub-contractor system of employment to self-employed because they believed they faced a situation of unfair competition with Glovo as the company refused to comply with the law from day one, and thus could have many more riders on its app because it did not need to pay them by the hour.
In an open letter to the Minister of Labour in March, Courtney Tims, general director of Uber Eats in Spain, said: “We watch helplessly how the government has failed to enforce the Rider Law. And how the disadvantaged situation of all the companies that do comply with it gets worse every day. Faced with this situation, we all ask ourselves the same question: Should we follow the example of Glovo and work with freelancers to be able to compete on equal terms?”
The Labour Inspectorate responded that they will be “relentless in complying with the law”. Now we are beginning to see what that looks like.
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