Predicting the weather for legislation and collective action
Crowdsourcing or crowdworking will dramatically change employment law principles as we know them.
Crowdsourcing may create a new form of working outside employment law protection.
A global marketing agency has won an important pitch to create a marketing strategy for a large international bank, producing filmed advertisements, creating a new brand and establishing new concepts of communication. The money is big, the work load exceptional. However, this marketing agency does not have an office anymore. It consists only of an international board which determines the global strategy of the agency, wins work and structures financial issues. There is no employee who walks into “the office” in the morning and leaves it after work in the evening. Neither is there a Human Resources department which
would take care of vacation applications or sickness-notifications. Our marketing agency does not need an HR-department. Any work order is tendered by it into the “crowd” on an internet platform. Individuals (or teams of them) can respond and negotiate a price. If the individual is successful he can work wherever, whenever and how she wants. Total flexibility!
Mechanical Turk and other novelties
What is it? Currently the human cloud is most easily used in the performance of millions of micro-tasks, with a 2014 global spend of USD11 billion, according to a Staffing Industry Analysts report. The process of obtaining services, ideas, or content by soliciting contributions from an online community, rather than from traditional employees. Many jobs which can be performed using a computer
can be done by crowdworkers anywhere. Indonesian or Chinese workers can compete with those in the US; students or working parents with older workers. While much work may amount to data gathering or basic market research input, medical services can
be provided, and there is even a legal network, Upcounsel.
Public opinion on crowdsourcing appears indifferent. The unions mostly criticise crowdworking for creating unethical competition between individuals on prices in the mega-market internet. Most companies, in particular those of dot.com character, support crowdworking as a new form of working in liberty beyond old fashioned structures, such as offices and without regulatory limits e.g. migration restrictions or collective outsourcing laws (see “Lost in transit” and “Somebody else’s problem” elsewhere in this report). Regardless of one’s opinion on crowdworking, it is probably unstoppable. Its growth poses huge challenges for established “social contracted” working models, typically seen in Germany. Core principles of much employment law, and especially in Germany, do not fit the phenomenon.
This must be the place: the importance of an establishment
The idea of an establishment is a central term in German employment law on which various protection laws are based. Originating as a physical concept, the term establishment (“Betrieb”) determines if a works council
may be established by employees. The works council is a key component in workplace “self- regulation” between business and workers. The existence of an establishment also dictates
whether there are certain fixed protections,
e.g. against unfair dismissal. It is unclear whether a company like marketing agency above may have a works council or whether general unfair dismissal legislation applies. Are working structures like this capable of having a works council? Is the Protection Against Unfair Dismissal Act (“KUndigungsschutzgesetz”) still applicable? And if yes, how to apply fair rules in restructuring scenarios?
The legal definition of an establishment is very old and was founded by a famous German scholar, called Alfred Hueck. It requires some form of common structure of employees, means of production and leadership – which crowdsourcing usually completely lacks.
It is not visible (to anyone other than the commissioner) how many crowdworkers are engaged and who they are.
Although it is not required that employees work together on one single site, at least some sort of organisational connection between means of production, employees and leadership is needed. This organisational connection – most easily found in place or co-location – seems completely absent in the case of crowdworking. Online attempts by crowdworkers to co-ordinate and exert collective pressure on the manager of these platforms could create tension with existing representation structures and unions, as much as the model can create tension with established labour.
But it would be wrong to think that mutual support networks like peers.com or the Freelancers Union are all about replicating established labour-manager relations. They are not: they are, rather, strong advocates of the different benefits crowdworking brings to both sides.
For conventional businesses, including temporary work agencies, it may be most welcome if legislators react to these developments by establishing new laws in order to forms of employment outside employment law protection, to avoid a
distortion in competition. But for those outside the established workplace there is much to recommend the model.
Status as the source of rights, costs, rates and litigation
Crowdworkers regard themselves as being completely free on when they work and where they work. They do not receive directives from their clients on this. This is a loose and nonbinding form of cooperation. The code of conduct of most crowdsourcing platforms in Germany and elsewhere stipulates that crowdsourcing shall not establish a permanent employment relationship. Yet in case law an
employment relationship exists if someone renders services to someone else and, by doing so, depends on him (“persönliche Abhängigkeit”). An individual integrated in an employer’s organisation and receiving instructions on place, time and the content of the work early paves the test of dependency and therefore for being an “employee” with the associated rights.
If an individual is:
X just integrated in an internet platform of a crowdsourcing company;
X not rendering services for him but an end user;
X not subject to any directives of his client; and
X not obligated to accept an offer tendered in the “crowd” then she does not look like any kind of dependent employee.
It is quite arguable that crowdworkers are not holding an employment relationship, but are indeed freelancers. As a result every German employee protection law, such as vacation, sick pay, unfair dismissal protection is not applicable.
Many modern forms of work could in time be done by crowdworkers. Protected employment roles will increasingly compete against crowdworking, which appears to be unregulated by employment law. It will be interesting to observe how case law may react to this. Germany’s federal labour court systems means there is a wide range of discretion to rule on the status of employment relationships.
Thus, there is already now a risk for crowdworker agencies and clients that a court considers a crowdworker as an employee rather than a freelancer. But whose employee? This would have a massive immediate impact on the duty of the employer/client to remit contributions to the social security. Unlike freelancers, employees are subject to the employer’s contribution to social security. If the
employer mistakenly deems a crowdworker a freelancer he must retroactively remit contributions to the social security unlimited in scope, while the employee must indemnify the employer for employee contributions only for the last three months.
Protection against unfair dismissal
There is very likely to be litigation or regulation in Germany to define the existence of an employment relationship in some crowdworking models. If employment status is established, the question needs to be addressed whether the Protection Against Unfair Dismissal Act (“KSchG”) applies to crowdworkers. This Act requires an employment relationship, and to some extent the integration of an employee in the employer’s establishment. As the Federal Labour Court has already decided regarding field sales managers, it is not necessary that the employee permanently works in a local establishment of the employer: she needs to be organisationally integrated in the establishment.
It appears doubtful whether this is the case with crowdworkers. The test of organisational integration in the establishment presently requires at least that the employment relationship is administrated in the establishment, with bureaucratic signs such as pay slips, leave requests and sickness certificates: the only administrative link between worker and employer in our example is the tender into the crowd. After accepting the task, the only remaining contact between the crowdworker and the company is to deliver the work or the project on the agreed date (often, to an acceptable standard).
Integration of the crowdworker into the organisation of the employer, which would render the Protection Against Unfair Dismissal Act applicable, is hard to find. Thus, crowdworkers lack protection against unfair dismissal for so long as neither the legislator or case law establish new rules.
And yet, it could be that courts or regulators are willing to look beneath the keyboard, and examine the patterns of connection and depth of relationship to find signs of integration. The more crowdworkers collaborate with each other or use mutual referral networks or support services, the more easily one might find signs of something like “employment”. And how suggestive may public documents like SEC filings be? Uber’s regulatory notices can be pored over for evidence of the nature
of its service (technology company or transportation provider?), materials such as Amazon’s SEC filing of 2006 might be considered. This referred to the business’s plan to “integrate a network of humans directly into their [computers’] processes”.
The digitalisation of the working environment is proceeding and with it, deviation from and the ability to abandon traditional company structures. Our working environment as we know it becomes radically altered. Crowdsourcing may lead to a form of working outside employment law protection. To date German labour law, like that of EU jurisdictions in general, requires a link to the organisation of an employer. Specifically: an establishment (“Betrieb”) requires an employer’s organisation. An employment relationship requires employer’s control within an organisation. Finally, the application of the Protection Against Unfair Dismissal Act requires that an individual is integrated in an organisation.
The rise of crowdsourcing challenges the conventional employer’s organisation and, perhaps, the strength of the current social contract. Work outside labour law protection could be prevented if the labour law of the future abstains from the organisation doctrine, but rather takes the contractual or pseudo-contractual
relations between company and crowdworker into consideration, along with forms of virtual integration. For now, one thing should be clear: crowdsourcing is unchartered water for labour law jurists. It will massively challenge lawmakers, jurisprudence and legal scholars – just as it challenges old economy competitors.
Marc Gimmy/Jan Vogel