Wednesday 31 March 2021 1:00 pm

Deliveroo IPO: Is the gig economy empire crumbling?

Phil Bloomer is the Executive Director of the Business and Human Rights Resource Centre

This morning, a courier came to drop off a package. He was almost back inside his van before I could open the door. Last week, another showed me a 10 second timer on his performance device – the time he said he was allocated to ‘drop off’. Neither of these were probably classified as ‘workers’, but rather self-employed, though both drove vans emblazoned with gig platform logos.

The past month has seen a stream of news suggesting this gig business model might just be crumbling. After years of heavy toll for meagre gain, gig workers are challenging their exclusion from standard employee benefits such as minimum wage, holiday and sick pay, and pension contribution. 

Investors are also recognising the unsustainability of the current system. Aviva Investors and Aberdeen Standard both publicly declared they will not participate in the public flotation of Deliveroo due to the misclassification of workers as self-employed. Today’s bottom end pricing for Deliveroo shares and opening price tumble is an indication investor unease has the power to hit companies where it hurts and must be seen as a wake-up call for platform businesses to reform their current model and treat workers fairly. 

Brazil’s Labour Auditors have redefined Rappi delivery riders as workers. The Spanish Government has announced an agreement with trade unions and business associations that defines delivery platform couriers as employees. The UK Supreme Court has ruled that Uber drivers are employees. And union foment around the world is growing, often linked to legal action, in countries such as UK, Nigeria and Kenya.

As these examples show, diverse actors are involved – from responsible investors, to courts and government bodies, to trade unions and civil society. The increased assertiveness possibly arises from a shift in public sentiment. For many, the pandemic made gig – or platform – workers essential to lives under lockdown, and the inequality of power between worker and platform was increasingly exposed. The change in public mood is now changing the calculus of reputation, legal, regulatory and investor risk for these supremely consumer-focused brands. 

The platform business model appears as one of the most extreme forms of power imbalance between workers and capital – the logical climax of decades of undermining workers’ rights. The company holds the tech platform, the algorithms and the data, yet sheds any social responsibility for the workers who make the platform profitable.

But announcements from investors is a new turn of the screw on the business model.

Vaidehee Sachdev, Impact Analyst at Aviva Investors explained “We have a responsibility to recognise when employment models pose risks to workers and fail to respect human rights. These risks are particularly striking in the gig economy and can have serious consequences for companies.”

“Deliveroo’s business model relies on placing undue risks on drivers and riders, denying them their basic rights and protections. That simply isn’t a sustainable way of conducting business. In addition, the company has openly cited reclassification of workers as an investment risk to the business. We see these as key issues in our assessment of the company.” 

Aviva’s clear distaste for the unfairness of the model, combined with the ‘investor risk’ arguments should also reverberate through the ever-growing responsible (‘ESG’) investment portfolios. If the social responsibility (‘S’) of ESG means anything, it must mean avoiding the worst form of exploitation of workers – both gig workers, and those caught in modern slavery in global supply chains. It should also mean that workers earn a living wage.

The platforms continue to fight back, repeating the tired excuses that ‘our ‘collaborators’ enjoy their freedoms and flexibility’. From California, to London, Brussels and Sydney, they are fighting PR and legal battles.

But since the UK Supreme Court ruling, the tone from Uber has shifted. In February, Uber was lobbying for deregulation for platform workers in Europe. In March, Uber senior vice-president, Andrew MacDonald, said “Our view is our current employment system is outdated, unfair, and somewhat inflexible and some workers get benefits and protections and others don’t. We feel that Covid has exposed some of those fundamental flaws and think this is a good opportunity for change.”

With action from workers, unions, investors, courts, and governments, the platforms may yet realise that respect for workers’ fundamental rights is unavoidable.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.