Legal qualification of platform work
Platform work allows engaging workers through digital platforms for a potentially wide range of paid services. The legal qualification of platform work is still not comprehensively clear and numerous legal questions remain open. Whether platform workers qualify as employees or independent contractors depends on the actual circumstances and the business model of the respective platform. In May 2022, the FSC found that, from a contractual perspective, an employment relationship existed between the platform provider Uber B.V. and platform workers who offered their services through the platform. While this in essence concerned the qualification of platform work from a contractual perspective, until now the FSC had not decided on whether platform workers qualify as gainfully employed from a social security law perspective. Although social security authorities are typically not bound to contractual qualification and apply their own criteria, an individual who qualifies as an employee from a contractual perspective usually qualifies as gainfully employed from a social security perspective. However, this does not necessarily apply vice versa, i.e., it may well be that an independent contractor qualifies as gainfully employed rather than self-employed. With its new decision, the FSC found that UberX, UberBlack, UberVan and UberGreen drivers qualified as gainfully employed. Uber B.V. as platform provider was found liable for social security contributions for the year 2014 and must provide details of paid wages to the local social security authorities. In parallel, the FSC also delivered a similar decision regarding UberPop drivers with respect to Rasier Operations B.V.
Background of the case
In 2019, the compensation office (Ausgleichskasse) of the Canton of Zurich stated in its order that the drivers of UberX, UberBlack, UberVan and UberGreen were gainfully employed by Uber B.V. Uber Switzerland GmbH was considered to be the permanent establishment of Uber B.V. and, as such, liable for the settlement of the corresponding OASI contributions. Consequently, Uber B.V. and Uber Switzerland GmbH were held liable for social security contributions for 2014 in the amount of more than CHF 4 million plus default interest of almost CHF 1 million. Uber B.V. and Uber Switzerland GmbH unsuccessfully objected to these determinations and filed an appeal against the subsequent decision with the Social Security Court of the Canton of Zurich. In 2020, this court ruled that Uber Switzerland GmbH was not liable for contributions, which was confirmed by the FSC. One year later, the Social Insurance Court referred the case back to the compensation office for a new decision; the compensation office had to examine each individual relationship between the drivers and the two companies, determine the corresponding wage totals and reassess the companies' OASI contributions. The court further held that the activity of the drivers in 2014 qualified as dependent gainful activity. Both the compensation office and Uber B.V. lodged an appeal against this decision with the FSC.
Considerations of the FSC
Among other topics, the FSC had to examine the lower court's qualification of the "typical" Uber driver as a gainfully employed person (in contrary to a self-employed person).
As a general rule, anyone who is dependent on an employer, subordinated in the employer's work organization and does not bear any specific entrepreneurial risk is considered to be gainfully employed. On the contrary, a person is considered to be self-employed if it participates in economic activity through the use of labor and capital in a freely determined self-organization visible to the outside world, with the aim of gaining profit by providing services or creating products. The qualification of a person as being gainfully employed or self-employed is to be made on a case-by-case basis taking into consideration various criteria.
In its detailed considerations, the FSC discusses the controversial opinions of various legal scholars and weighs up the applicable criteria in remarkable thoroughness. In short, according to the FSC, the following aspects indicated that Uber drivers are gainfully employed:
- Uber's right to issue instructions
Based on the contractual basis between Uber B.V. and the drivers, the FSC came to the conclusion that the drivers are subordinated in Uber's organization and that Uber B.V. is entitled to instruct the drivers. In particular, the FSC considered the "recommendations" to, in fact, be instructions that were enforced by Uber B.V. through customer ratings and potential sanctions related thereto.
- Lack of entrepreneurial autonomy
Also, the FSC was of the opinion that the fare was not only "proposed" but rather determined by Uber B.V. Drivers were only entitled to demand a lower fare than the one proposed by Uber B.V. (but not a higher one), and this lower fare would not mean a decreased service fee owed by the drivers. Moreover, Uber B.V. was entitled to adjust the fare if the driver chose an unfavorable route and reserved the right to adjust the service fee at its sole discretion based on local market factors. The rating system served primarily to ensure quality and to enforce a uniform standard serving customer satisfaction. In the event of non-compliance, Uber B.V. could even terminate the service contract "immediately and without notice" or "deactivate" the driver via the app. Further, Uber B.V. could check compliance with its instructions through GPS monitoring. The Uber app only showed the destination after the driver accepted a customer request and thereby eliminating the possibility of selecting only profitable orders.
- Lack of entrepreneurial risk of the drivers
Moreover, the drivers did not have to bear any entrepreneurial risk because no considerable investments were needed. The purchase and maintenance of a vehicle could not be considered a significant investment. The IT infrastructure and software provided by Uber B.V. was also considered an indicator against any entrepreneurial risk of the drivers. Financial risks to be borne by the drivers were marginal.
Considering the above and taking into account that the drivers for UberX, UberBlack, UberVan and UberGreen were dependent on the instructions of and were paid by Uber B.V., the FSC considered the drivers to be gainfully employed by Uber B.V.
Furthermore, the Federal Supreme Court confirmed the assumption that Uber B.V. maintained a permanent establishment in Switzerland within the premises of Uber Switzerland GmbH. In its considerations, the FSC refers to similar criteria applied from a tax law perspective to determine a permanent establishment. The FSC considered as relevant the fact that Uber B.V. was able to influence Uber Switzerland GmbH on how to use its premises. Also, contract signings, registrations, trainings and meetings with the driver took place at the latter's premises.
Conclusion and recommendation
With this decision (and the parallel decision with respect to Rasier Operations B.V. and UberPop drivers) the Federal Supreme Court ends a long discussion among scholars and draws another line in the Uber case. Nevertheless, it has to be pointed out that the qualification of gainfully employed persons cannot be per se adapted to any other digital platform. Any digital platform follows its own concept and the workers offering their services through another digital platform are not considered gainfully employed in every case. When offering platform work, a thorough analysis of the legal qualification from a contractual and social security perspective well in advance is crucial. The retrospective qualification of platform workers as gainfully employed might result in significant social security liabilities (employer and employee portion).
* Thank you to Alexander Eichenberger, Trainee Lawyer, who also contributed to prepare this alert.
