What role do sub-contractors play in the platform economy? Can they really be considered employers? The Gig Economy Project spoke to trade unionist and labour law expert Sunčica Brnardić to explore the Croatian case, where sub-contractors are central to the platform economy and the government has just passed a law formally recognising their role. Interview available as a podcast or in written form.
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A Wolt courier in Zagreb (Picture by Sharon Hahn Darlin)
SUB-CONTRACTING in the platform economy is an increasingly pertinent issue in numerous countries across Europe, but no more so than in Croatia. In the south-east European nation, 80% of platform workers operate through sub-contractors, which are known locally as ‘aggregators’.
The aggregator system has been widely condemned by unions and workers in Croatia due to the shady, and sometimes illegal, practices of the managers, and that they also take around 10% of the workers’ wage, despite offering very few services to the worker. This has led many workers to re-name them ‘the alligators’.
In December, the Croatian Government passed legislation which formalised the role of aggregators as employers in Croatia’s platform economy. The law is due to come into force in January 2024. The Croatian Government has also advocated for these intermediary companies at EU level, in the context of the Platform Work Directive, which remains under debate among member-states at the Council of the EU.
To discuss all of this and more, the Gig Economy Project spoke to Sunčica Brnardić, Executive Secretary for Labour and Social Law at the Union of Autonomous Trade Unions of Croatia (SSSH/UATUC). Brnardić has been lobbying the Croatian Government to amend the law so that the platforms are the direct employers, not the aggregators. In this podcast, we discuss:
1:41: The Croatian platform economy
06:28: What is the aggregator system in Croatia?
15:20: Croatia’s new platform work law
22:50: Sub-contracting and the EU Platform Work Directive
26:11: Wolt, sub-contracting and strikes in Zagreb
34:05: Key challenges for union organising in the gig economy
AN ABBREVIATED TEXT VERSION OF THIS INTERVIEW IS ALSO AVAILABLE BELOW
Gig Economy Project: Can you start by telling us a bit about the platform economy in Croatia, in the context of the wider economic and labour market situation in the country?
Sunčica Brnardić: Like most countries, we lack sufficient data on the platform economy. The best data we have comes from Eurofound, which estimates that 10% of the labour force has participated in some way in the platform economy. This sounded like a lot before, but it’s starting to become really visible, as most of our gig workers are working on-location.
Another thing that is really characteristic of most European labour markets is that the platform economy grows due to a lack of decent jobs. When the digital labour platforms launched in Croatia, around 2012-2013, the country was in the middle of a major economic crisis, and the gig economy was the answer to a lack of jobs. We started seeing more and more people getting into the gig economy because the jobs in Croatia aren’t very good quality, and all of a sudden you have these jobs advertised as flexible, ‘you are your own boss’, and more people were starting to see this as an option instead of other crappy workplaces.
GEP: I understand there are a lot of non-EU migrant workers in the food delivery sector in Croatia?
SB: The migrant workers in Croatia is a recent development. Unlike a lot of western European countries, we don’t have a lot of migrants who come through regular migration channels. What we do have in recent years is a lot of emigration, as many Croatian workers move to work in older member EU states. We are seeing something that is universally recognised as a lack of workers, and this is mostly in the construction and tourism sectors.
However, two years ago the government changed the immigration legislation, and this is now very liberal and very employer-driven. So if you are an employer there are very liberal conditions where you can apply to hire migrant workers from abroad and there is not much room for the government to say whether you need those workers or not.
This relates to what’s very specific about the Croatian gig economy, because we are the first country to recognise intermediate companies – what we call the aggregators – as the legitimate employer under the platform economy chapter of the new labour legislation. The aggregators can now say that they cannot find courier workers in Croatia and they need to employ someone from a third country, and this is actually what’s happened. So the aggregator anomaly, as I call it, is also encouraged by the immigration law changes, which are used to import workers specifically for these jobs.
It’s very contradictory because you are supposed to have to prove that the employer actually needs these workers and that they are needed for the Croatian economy as a whole, but in reality this is only serving four very big multinational companies – Wolt and Glovo in food delivery, and Uber and Bolt in ride hailing – and a bunch of semi-legal aggregators who are using this really as a way to exploit workers.
GEP: What are the origins of the aggregator system in Croatia and why has it become so prevalent in the platform economy?
The aggregators didn’t and do not exist outside the platform economy. The term was invented with the platform economy. These are intermediary companies and are colloquially called the aggregators, although a lot of gig workers now refer to them as ‘the alligators’, because of how they act in the market.
There is some research showing that when platform companies come into different countries they identify the weaknesses of the different labour markets. In most western European countries you have this self-employed model where if you start working you will be classified as a self-employed worker. In Croatia, however, you have to register with the government to be self-employed, and this can be quite burdensome and quite risky for the individual, because you are working as a kind of semi-company and that brings a lot of obligations in terms of [tax] contributions. So that is why when platform companies wanted to operate in this market, they had to find a model of how to draw people in and get them somehow legalised. When we talked to some platform companies basically what they told us is ‘when we got here, the aggregator model was already here’, so we think it was with Uber’s arrival that the aggregator model first emerged.
This is basically outsourcing, however, there is no legislation that supports this model. We are the first country in trying to regulate the platform economy which has actually recognised aggregators as legitimate employers. The government say ‘problem solved, these are workers and they all have workers’ rights and everyone benefits’, but this is actually quite the opposite of what has happened in real life.
GEP: I read one report about the aggregators in Croatia and it said that there were at least 42 of them, most were less than three years old – they have a very short period of being in existence – and there is widespread problems: workers have of not being paid on time, not being paid properly, often they are paid cash-in-hand, they can’t access sick pay or holiday leave, they have to pay for their own equipment. And the revenue of the aggregators has grown quickly, from €1 million collectively in 2019 to €14.6 million in 2021.
What is the way in which these companies operate in relation to the riders and drivers? What is the extent to which they manage the workers, and what is the extent to which they act just as a middleman between the platform and the worker?
SB: There has been some effort from both the government and the platforms to rebrand aggregators as employers who do something, but there is actually very little truth to that.
Whenever we talk to workers we are aware of the fact that the aggregators just hand someone a work contract. There is a lot of money in that. I think a good way to think about it is as a profit-sharing scheme between platforms and aggregators.
Most of the aggregators take money from the workers, usually about 10% of the wages. The worker gets the money in their account and then they bring it to the aggregator, and then the aggregator pays the tax contributions. It is always minimum contributions, because if you employ someone on a fictitious work contract then you employ them for the lowest number of hours, you give them a 2-hour per week contract. Everything points to the idea that they are actually just there to provide the work contract.
If you go to Bolt or any of the platforms’ websites in Croatia and you want to know how to become a ‘partner’, they will give you a list of these companies. And of course amongst workers you have lists of better and worse aggregators depending on whether these aggregators are actually known for not paying salaries to someone, for example.
There is no way to make the aggregator system clean because aggregators can’t exercise any kind of control over the worker. They aren’t going to tell them ‘oh I see that you have a notification on your app, you should take this job’, which is what employers do: they give out tasks and they pay out money. But the aggregators have nothing to do with either the tasks or the wages.
GEP: I think that’s a key point. Even the most clean aggregator that does everything by the book – pays the worker properly, maybe buys them equipment – they still aren’t managing work, because the work is managed via the platform’s algorithm.
SB: We have a much harder job here because it’s already hard to prove that what the algorithm does is a way of managing tasks and managing work – this is the battle that is being fought in many countries in western Europe. But in Croatia, we also have to disprove that the aggregators are the real employer of the worker just because they give them the labour contract. That’s the official position of the government here, and that makes it very, very complicated.
Luckily there’s been some protests recently, and the reality of the aggregators has been widely recognised by the workers. There has been a lot of work with the workers and the media to show that there are no good aggregators and that the aggregators just need to be got rid of.
GEP: A new labour law was passed by the Croatian parliament in December, the Labour Act, which seeks to address the question of employment in Croatia’s platform economy and the role of aggregators within it, and is due to enter into force in January 2024. What is it that is specifically contained in that law that places the role of the aggregators in the platform economy onto a legal footing?
SB: There’s a lot of wording in that legislation, but there is very little content. What we found most problematic, and which is basically the only thing we wanted to fight about, is one sentence which says ‘a platform or an aggregator can be an employer’. This means that they have basically given the platform the choice to not be the employer by giving them the opportunity to organise their business model through the aggregators.
Legally, this is a sentence which is problematic because what a law is supposed to do, and what we argued for, is to recognise who is the real employer. That should be it – there should be no need to introduce a third party into the law. And if you do introduce a third party, you have to regulate what conditions there are in order for this third party to be an employer or to qualify as an agency. I can’t think of anyway to put the entity of the aggregator in the shoes of an employer, not within this economic and organisational relationship we have in the platform economy.
GEP: Given that, is it possible that you could challenge the law in the courts, on the basis that it doesn’t correspond with Croatian labour law?
SB: We have really tried to fight this. We tried to critique the logic of the law and say that it is incompatible with Croatian legislation. However, if we were to challenge it in the court it would have to be incompatible with constitutional obligations, and actually it is not incompatible because the government is very convinced that it can legislate also in accordance to what they found in the market.
I also have to be fair and admit that although we fought very hard to get the aggregators out, it would be difficult to make happen because it is such a widespread and accepted model. Eighty per cent of platform workers operate through aggregators. So there is a lot of political interest from the aggregators and the platforms – it’s a big market and it is worth a lot of money.
It’s very hard to challenge it, but the worst thing about this legislation – which thankfully hasn’t come into force yet and we are hoping it won’t come into force – is that it prevents us from taking action in the courts and pursuing the digital platform as the employer, because they will be protected by this law.
GEP: The platforms are satisfied with the legislation, they are all supportive of it. The one thing they seem to be unhappy about is they have to conduct monthly monitoring of the aggregators, which they say is an administrative burden. Do you think there is any chance that through this legislation the aggregators could be cleaned up, so that there is less illegal activity?
SB: It is in the platforms best interests to pick aggregators that are least likely to get them into trouble. There’s been a little bit of order introduced to this market.
But it’s important to understand that we started with a text that was pretty decent, because it envisaged subsidiary liability of the platforms for the workers’ obligations if they are employed by the aggregators. This was inspired by sub-contracting chains in international posting in the EU, where we know that the chains are so long and its risky for the workers not to get their pay, so everyone in the sub-contracting chain is liable.
This is what we suggested when we realised they were not going to take the aggregators out of the law. We said ‘okay, if you keep the aggregators, make the platforms liable for any kind of unpaid obligations’. However, by the end of the process – which as I said, was only two meetings – there was another provision in the law which said ‘they will not be liable if they collect the information from the aggregators that the wage is being paid out’. Which is basically just a paper collection exercise for platforms.
GEP: It’s interesting to consider the EU Platform Work Directive in the context of the Croatian law, because as you know the issue of sub-contracting in the gig economy is very relevant in many European countries, not just Croatia. There was nothing in the European Commission’s initial draft proposal which directly addressed the question of intermediaries and whether they can be legitimate employers of platform workers.
In an article published by Balkan Insight on the Croatian law, they asked the European Commission about the Directive and the role of intermediaries, and the Commission replied that both the Council and the Parliament “are looking into the issue of intermediaries with a view to ensuring that the use of intermediaries does not lead to a lower level of protection for persons performing platform work”. That suggests that the Directive could legitimise the role of intermediaries in the platform economy. Would that be a concern for you?
SB: Yeah, for Croatia it would be a concern. Judging from our own very extensive experience, we do think that intermediaries are just a bad idea and are taking us away from what we need in the Directive as a European response.
Our government has bragged about the fact that it was they who initially proposed that the Directive should recognise the third-party intermediaries. The Croatian government have lobbied for this in the Council. I understand in the Czech Republic’s proposal [when it was president of the Council of the EU until January 2023] there was something about intermediaries in the text, but lately it’s been removed. But I think this is still a topic within the Council.
Also, after the Croatian legislation was passed, I read about similar legislation in Malta. The situation with the Directive was really dynamic and we saw how the platforms were trying to adjust, and I think the intermediaries is a kind of back up strategy for them.
GEP: In Germany, a sub-contractor for Wolt disappeared. It vanished into thin air. Over 100 workers had protested at Wolt’s offices in Berlin, demanding that Wolt pay them the unpaid wages they are owed from this company, going back to September. They say that over €120,000 in total is owed to the workers.
Is this an issue also in Croatia, whereby because these companies are not transparent and exist for short periods of time, they can just legally dissolve themselves, not paying workers the wages that they are owed, and the platforms wash their hands of the issue?
SB: Yes, absolutely, exactly this happens all the time. As I said we have a very liberal model for setting-up a company. As soon as these companies accumulate a turnover which increases their tax burden, they basically just shutdown, often leaving workers without paid wages, and then they just start a new company. In Croatia you just have to sign to say that you don’t have any debts, and you can start a new company basically over the internet in seven days.
This is what we are seeing more and more. Our first try at organising workers was also mostly about Uber workers who were complaining about unfair competition from these companies. They are just exploiting this shell company model and then starting over.
GEP: One of the things GEP has been closely following recently is a wave of strikes at food delivery platform Wolt this year due to the company introducing a new payment system which has cut pay. And one of those countries where there has been strike action is Croatia, where a trade union initiative called the Wolt Delivery Initiative has been established, largely by migrant riders, and they have organised strikes and protests. The riders say they pay has been cut and they want a 30% increase, which Wolt has refused. What can you tell us about this?
SB: My understanding is that this whole thing has to do with the change in ownership. Wolt used to be a Finnish company and then they were bought by the American company DoorDash, and this is what instigated the changes to the payment system and the protests in many of these countries. I also heard there were delays in payments, which is not a new thing – there were delays in payments at Uber two years ago and a big strike about that.
A lot of the workers wanted to work as self-employed, they didn’t want to work for an aggregator, so initially they started this as an ‘allow us to be self-employed’ protest. Which I think it tells you so much about how bad the aggregator system is, because they don’t want to work for a company where you literally have to give 10% of what you earn to them just because they give you a labour contract.
It’s difficult, because three of the protestors got deactivated from the app, and when you are protesting, striking and organising to challenge a company that is not your employer, you are not protected by trade union rights.
GEP: You are part of the Union of Autonomous Trade Unions of Croatia. What are the key challenges for worker organising in this sector? How can we build the strength of the trade unions in this sector, and what role do you think politics has to play in that as well?
SB: I think the difficulty is still most rooted in the fact that these workers see themselves as being temporarily in this type of job. This is the trap that workers fall into. I’ve seen workers say at the start that they are just doing it for fun, and then very soon it will turn into a full-time job, and at the same time they don’t want this to be their job for the foreseeable future. So it feels like a ‘gig’, but it’s not.
When we go out and try to organise people they say ‘oh thanks for fighting for our rights’, but without the consciousness that it is their rights and it is a common fight. At the moment the Croatian labour market is quite volatile: if you don’t want to work for Wolt anymore, you can find another job. Which also affects how people think about organising. With Wolt now there is some transnational organising and we are seeing some of the same problems, but in the end it has to work out, right?
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