7 May 2021
Download – Disruptive tech 2021 – 2 of 6 Insights
The gig or 'sharing' economy has unashamedly transformed modern life. In a time of lockdowns and restaurant closures, the global effort to move restaurant food to people's front rooms has been staggering. With budding start-ups such as Supper fundraising to bring Michelin starred dishes to kitchen tables, and Pret launching a monthly subscription for unlimited coffee, the food delivery economy is booming but this has inevitably attracted scrutiny.
Earlier this year, Deliveroo's float on the London stock-exchange reflected the benefits of a year of global at-home eating, but the prospect of regulatory action also made investors nervous, leading to a lower than expected initial valuation and a significant fall in share price as trading started.
Exponential growth often leads to compliance gaps and regulatory uncertainty. The stakes for food delivery platforms are high. Challenges to their business model include the regulation of the employment status of delivery riders as well as a focus on food safety of partner restaurants.
In February 2021, the UK Supreme Court unanimously held that a group of Uber drivers were workers. The impact of this decision was to end a legal battle spanning half a decade. "Worker" status provides individuals with a subset of basic employment rights, including minimum wage, pensions, holiday pay and protection in discrimination claims, which are not afforded to independent contractors (as Uber had previously been categorising its drivers).
Uber's CEO commented on the decision that "UK drivers will now be able to earn with greater security, helping them to plan for their futures while maintaining the flexibility that is integral to the private-hire industry" and Uber has since confirmed that all drivers will receive at least national minimum wage, paid holidays and pensions contributions for the time they spend on and going to trips, although not when they are logged into the app but not actually working. However, its competitors in the ride sharing space have not, so far, followed through on the consequences of the decision, with some of them likely to be seeking to distinguish the facts of how their platform works from the specific circumstances considered in the Uber case.
Food delivery riders are largely also waiting to see whether there will be a change in their employment status. Uber, Deliveroo and other large food delivery platforms, have yet to extend worker protections to the food delivery riders in the UK. Just Eat did announce it would be offering worker status to 1,500 riders in Liverpool, joining 2000 riders in London and Birmingham, although its business model also has partner restaurants which make their own deliveries.
One significant consequence of being classed as self-employed (rather than employed) for riders is the lack of sick pay. Food delivery riders face the perils of road traffic whenever they work, and the number of rider accidents globally is increasing pressure on platforms to provide sick pay for work injuries. The call comes as the Workers Observatory (an Edinburgh University led project to support platform workers) prepares to launch a manifesto in response to rider safety concerns which asks councils to step into legislative gaps by monitoring riders’ road accidents.
The issues over the status of riders is not confined to the UK. Across Europe, the battle for recognition of employment rights has commenced, with Italian riders striking and Italian courts fining four platforms a total of EUR 733 million and demanding the direct employment of 60,000 riders by the companies.
With the courts increasingly acting to protect gig workers, and with employment legislation likely to be published shortly in the UK and expected to at least touch on the issues, there should be more clarity soon on the employment status of food delivery riders working for platforms.
Another significant challenge facing the food delivery platforms is the application of food safety legislation. In 2019, the BBC uncovered the astounding number of restaurants offering food for sale on the world's largest delivery platforms with one-star and zero-star hygiene ratings. Amid public policy concerns that there are compliance gaps in platform-initiated food supply chains, we anticipate regulation catching up with the shifting models soon.
The rise of the 'dark kitchen' and a move towards delivery-only restaurants has underlined the importance of food safety laws. Take allergens by way of example: customers who may have previously relied on the serving staff's assistance for allergy-related enquiries now have little to no contact with the company preparing their food so the risk of error increases.
While regulation of information on allergens in food has been a hot topic of late, it applies only to food packaging, rather than advertisements. This means that when ordering food from a third-party platform, there is no legal requirement for the platform to list allergens. For liability reasons in fact, many major platforms shift this responsibility to the restaurants and suggest customers with allergies contact the restaurant before ordering, adding a generic statement on their websites that the products may contain allergens.
In the UK, food businesses must register with the Food Standards Agency (FSA) as Food Business Operators (FBOs). For these purposes, a food business is "any undertaking, whether for profit or not and whether public or private, carrying out any of the activities related to any stage of production, processing and distribution of food". FBO status brings with it many obligations including ensuring essential pre-sale information is provided to customers (ie 14 mandatory allergens) and that food is safe and hygienic when it is delivered to consumers. FBOs are also required to withdraw unsafe food from sale or recall it if necessary.
Given the FBO requirements were designed with direct business to consumer sales and deliveries in mind, it is not clear whether or not this requirement applies to food delivery platforms. The FSA has released a research report highlighting the emerging consensus that such platforms should be treated as FBOs. The classification of riders is key, because if riders are employees or workers, the platform may be more likely to be deemed a business "distributing food" and therefore required to register as an FBO.
For platforms which do not classify riders as employees, there is room for argument that a platform is not an FBO on a plain reading of the legislation. While some platforms have chosen this route, others have opted to register with their local authorities, but unless registration becomes mandatory, compliance gaps will remain across the market (including for some of the largest players).
Most actions taken by platforms in the UK to comply with food hygiene standards tend to be voluntary. Measures adopted across platforms (to varying levels) include:
These actions have been lauded by the FSA and the Chartered Institute of Environmental Health which have encouraged uptake across the industry. As the law in this area develops, some if not all of these actions are likely to become regulatory requirements for third-party platforms.
Our view is that the fight for riders' rights will continue to gain ground and strategic litigation will be a key driver in change. Some food delivery platforms are reportedly setting aside hundreds of millions to fight rider-right related legal battles, given the costs of recognising such rights could be business-curdling for many.
However, regulation may be on its way and not just in the UK where an employment bill is expected imminently. The European Commission has started work on a Directive which will regulate platform work in all EU Member States. If we've learnt anything over the past 12 months, it's the power of a global social-movement, so watch this space!
To discuss the issues raised in this article in more detail, please reach out to a member of our Technology, Media & Communications team.