Glovo fined $78M for labor breaches in Spain

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Spain's homegrown on-demand delivery app, Glovo -- which since the end of last year has been majority owned by Germany's Delivery Hero -- has been fined €79 million (~$79 million) for breaches of labor laws related to the employment classification of couriers, local press reported yesterday.

El Pais reported that the record sanction for the company was issued for a finding that the startup had 10,614 workers falsely classed as "autónomos" (aka self employed) in Barcelona and Valencia, after the Department of Labour found the couriers were in an employment relationship with the company.

Labor minister, Yolanda Díaz, accused Glovo of harming the rights of workers and obstructing the Department's inspection, El Pais reported. A minute part of the fine was issued for this obstruction -- with the bulk (€63.2 million) pertaining to misclassified couriers working in Barcelona (where more than 8,300 riders were found to have been falsely classed as self employed), and a smaller chunk (€15.7 million) issued over the close to 2,300 misclassified riders in Valencia.

The total size of the penalty was equivalent to over 13% of Glovo's 2021 revenue, per the newspaper.

Glovo has previously been sanctioned smaller amounts for similar labor infractions following inspections in other regions in Spain, including Tarragona, Girona, Lleida and Seville.

A self employment classification means riders would not receive the full sweep of benefits provided to employees. Autónomos are also typically required to make payments to the state to contribute towards social security coverage -- payments Glovo would otherwise have to make had these tens of thousands of riders been classed as employees.

Spain has seen regular protests over 'precarious' work on platforms like Glovo since they started operating in the country. And last year, the government passed a reform of labor laws that applies specifically to delivery couriers on platforms -- aka, the Riders Law -- which recognizes couriers as employees in a bid to combat bogus classifications of self-employment.

However the breaches Glovo has been sanctioned for now pre-date that law coming into force, according to Glovo.

A spokeswomen for the company sent the following statement in which it confirmed it intends to challenge the penalty:

Glovo was notified of Spanish Labour inspection proposals for retrospective social security payments and a fine of up to EUR 79 million for the years 2018 to 2021, based on the grounds that Glovo’s rider employment model during this timeframe was not legally compliant.

These inspections occurred prior to the introduction of Spain’s Riders’ Law, which is why Glovo intends to challenge the proposal and expects a judgment only in the coming years. Glovo remains fully committed to complying with Spanish labour regulations and the new Riders’ Law.

Glovo's spokeswoman also specified that the penalty relates to inspections carried out between May 2018 and August, 11 2021. (While Spain's Riders Law came into force on August 12, 2021.)

It also claimed that the cited amount of the fine is not final -- saying it accounts for "potential Social Security contributions", as well as penalties -- implying that if it's able to successfully challenge the Department's assessment by convincing a court that all (or some) of these riders were not incorrectly classified it could, presumably, reduce the size of the penalty.

However Glovo has had mixed fortunes in the courts defending its model against labor classification challenges prior to the labor law reform.

In September 2020, Spain's Supreme Court rejected its classification of delivery couriers as self employed -- finding them to be in a laboral relationship with the platform. So it remains to be seen how much success it will have in trying to unpick the government's sanction via the courts.

We reached out to the Department of Labour to ask for more details about the penalty but at the time of writing it had not responded.

The Spanish government is bullish about its labor reforms -- with Díaz recently rebutting criticism in parliament from the far right Vox party by saying the country now has more workers with stable, permanent contracts than ever before.

However since the Rider Law came into force Glovo has continued to operate with self employed couriers, rather than switching all riders to employees -- claiming it has adapted the model to ensure it complies. Glovo's spokeswoman told us she was unable to confirm how many autónomo couriers it works with currently as she claimed the number "is very flexible and fluctuates a lot". "We can have riders that are registered but it doesn't mean they make any orders, or they make one order per month. They have a free login and flexibility," she added.

Glovo's stance has led to complaints from rival, Uber Eats, which initially switched to a subcontractor model -- but, last month, it was reported to be exploring a revised self employment model. (Deliveroo left the Spanish market entirely last year.)

Inspections of compliance with the Rider Law law clearly take time -- so it could be years before any such 'revised' self-employment models are found to be in breach (or otherwise), leaving the platforms free to operate in the meanwhile (if under the threat of future fines).

Hence there have been calls by riders rights groups for the wording of the law to be tightened up to prevent platforms arriving at self-serving interpretations and simply kicking off fresh cycles of multi-year litigation over employment classification decisions.

At the same time, the European Union is in the process of hammering out agreement on draft legislation to establish a pan-EU framework aimed at tackling bogus self employment on digital platforms -- by introducing a rebuttable presumption of employment. So free-riding gig platforms whose models depend upon swerving workers rights do look to be operating on borrowed time in the EU.

Glovo and its parent company, Delivery Hero, meanwhile, have a separate matter on their plate too -- after being targeted for antitrust inspections by the European Union this summer.

It's not clear whether the preliminary antitrust inspections will lead to a full blown investigation or not.

This report was updated with an additional response from Glovo