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Regulation of the “on demand” economy

26/09/2016 | Louisa Hartley

Imagine being able to book your next stay in an exciting new city, get a lift home from a night out with friends within 2 minutes or even being able to order whatever you fancy for your Saturday night dinner, all at the click of a button? In fact, you don’t need to imagine anymore as this is now reality. Modern advances in technology have led to what is being termed the “on demand” economy, that is, economic activity being created by online companies serving consumer demand for the immediate provision of services and goods. Examples include Airbnb, Uber and Deliveroo.

However, this evolution in technological innovation and consumer behaviour presents challenges to traditional business models. With new start-up companies and large corporations introducing new ways of conducting business, questions have been raised regarding how this can be regulated and whether the law can keep up with such rapid pace of change.

Advocates of the on demand economy argue that people are offered the chance to work independently and flexibly, in order to supplement their main source of income or fit around their lifestyle. On the other hand, many argue that there are not enough rights for workers and businesses are taking advantage of the people working for them as well as those who use their services as certain regulations do not apply to them.

The main consumer legislation provisions in the UK stem from the 1970s and 1980s, long before the internet and smartphones were around. Even the law governing digital commerce is over a decade old. Trying to govern new business models with old law is proving to be near impossible.

Take Uber as an example, the taxi app service which is currently litigating in courts around the world as to the employment status of its drivers. Uber classes its drivers as partners who are self-employed contractors, whereas many argue that they should be afforded the protection of employees or, at the very least, workers. The status of worker or employee would give drivers basic rights such as the minimum wage and paid statutory holiday, whereas Uber has fewer responsibilities for its drivers when they are viewed as contractors. Similarly there is Deliveroo, the meal delivery service, whose workers are also classed as independent contractors who are responsible for their own insurance as there is no statutory sick pay if they are injured whilst working.

By treating drivers as partners, Uber argues that they have more freedom and flexibility which in turn allows the business to continue to provide customers with the service they demand. Deliveroo puts forward the same reasons for its business model; that contractors benefit just as much as the customer and flexibility would be lost if an employee structure with strict rules and regulations was in place.

Airbnb, the home rental company, also presents challenges as there is little regulation compared to the hotel industry with which it competes. Despite there being safeguards in place, not all of the accommodation advertised meets local laws and regulations, such as City tax which is compulsory in many European countries. Hosts are required to confirm their home complies with applicable local housing laws but there is no regulatory body to check whether they do or not. Some cities, such as Amsterdam and France, have introduced legislation which gives legal support to those wishing to use the site, for example legalising short term rentals. However, when there are reports of landlords evicting long-term tenants in order to instead rent their properties through Airbnb, it is clear that more needs to be put in place in order to uphold the standards and safeguards that traditional business models and companies have to adhere to.

It is hard, if not impossible, to legislate for advances in technology when products and services of the future have not yet been developed. However, the way in which we work and live is continuously changing. Innovation is the key to business success and the law needs to both catch up with, and be efficient in, the ever changing world in which consumers live.

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