Food Delivery and Ride Hailing Apps Will Have to Shell Out Billions Under an E.U. Plan

Deliveroo Plc has a food delivery courier that cycles with a customer ordering from Franprix supermarket in Paris. It is operated by Casino Guichard Perrachon SA.

Under a new European Union plan to increase the labor rights of gig workers, up to a 4.1million people could be reclassified from food delivery and ride-hailing apps as employees.

According to EU estimates, Bloomberg News saw the draft proposal and estimated that it could cost the quarter as much as 4.5 billion euros ($5.1billion) more per anum. It would give millions of workers access to legal protections and minimum wage for companies like Uber Technologies Inc. and Deliveroo PLC. Another 3.8 million workers would be confirmed as self-employed.

Deliveroo shares dropped as high as 5.6% during early trading Friday. Delivery Hero SE was down 2.7%

Digital platforms are urging against the commission’s proposal, which they claim will lead to substantial job losses. Deliveroo pulled out of Spain earlier this year after Spain designated food delivery workers couriers.

In a risk assessment, the European Commission noted that it was not possible to estimate potential job losses and that rule changes might “negatively affect” workers’ flexibility. The rules will likely increase the cost of delivery and rider apps. However, the EU executive stated that consumers might be confronted with increased costs.

The executive arm of the bloc said that the proposals were the most effective ways to improve the working conditions of staff and allow them to access social security benefits. The annual increase in social security and tax contributions could amount to 4 billion euros for member states.

According to the proposed rules, which are expected to be made public next week and made available publicly, any worker whose job role is controlled by a platform on the internet can assume they are employees, regardless of what their contract calls them. The legal obligation for digital media to prove that the worker doesn’t work for them would be there.

Two of the five criteria would be affected by the rules:

  • Setting the pay of workers.
  • Setting appearance standards.
  • Supervising work quality.
  • Restricting the ability for employees to accept or reject tasks.

The proposal will be presented by the commission next week. Before becoming law, it will still need to receive support from EU countries and the European Parliament.