New Lawsuit Against European Food Delivery Service may Provide Clarity to Belgian Peer-to-Peer Economy Law.

By: Daniel Cermak

A Belgian act (the De Croo Act) that provides for favorable tax rates for those who participate in a peer-to-peer network may have its scope limited by a recently filed lawsuit. In 2016, Belgium became the second country in the EU to pass an act that allows for favorable tax rates for “peer-to peer income.”[1] Deliveroo, a European-based food delivery service comparable to GrubHub or Postmates, was sued for alleged labor law violations in connection to the 2016 act.[2] The company has had a number of legal troubles that provide an overview of new legal issues in the country that arise alongside the gig economy.[3]

The first question to consider is what the sharing economy means. The term evades a clean, formal, dictionary-like definition, but generally refers to utilizing digital technology to exchanges goods and services on a large scale, when such services would usually be exchanged only on an informal basis to those within a close circle of the service provider.[4] Examples of the sharing economy range from renting out a rental property, booking of cars driven by others, or help with housework.[5] The sharing economy is also commonly referred to as the peer-to-peer economy and the gig economy.[6]

Belgium’s law regulating peer-to-peer income and allowing for a favorable tax rate for such income came about in 2016, making them just the second country in the EU to enact such a law.[7] Alexander De Croo, the Belgian Federal Minister for the Digital Agenda believed the act would both encourage usage of peer-to-peer services while also increasing tax revenue.[8] De Croo stated: “The current tax system is not ready for the reality of this new economy. Many people called for a simple and transparent system and that’s what we will introduce now.”[9]

Before this law, the tax implications of peer-to-peer services was generally unknown, or at least ignored by those performing those services.[10] Peer-to-peer services were mostly untaxed, but if service providers did report their income earned in a peer-to-peer service, that income was taxed at 33%, an amount that Minister De Croo felt was too high.[11] In response to this gap in the tax code and unequal treatment, the new act provided that “[p]eople participating in the sharing economy who provide services through an app or digital platform, will be taxed at a straightforward and reduced rate of 10%.”[12]

The legislation does not provide the 10% decrease to everyone however, and instead provides that 10% rate to those shared economy service providers who earn less than 5,100 euros per year through the service.[13] If the individual falls within this limit, the employers are then required to withhold those taxes at the source and then provide the withheld income to the relevant tax authorities.[14] If the individual earns more than the 5,100 euro threshold, however, they are then considered a professional contractor, meaning that all of the income will be considered professional in nature for taxation purposes.[15] The act provides that the over-arching company does not have to pay social security taxes in Belgium.[16] Importantly, the De Croo Act applies only to the providers of services as opposed to the delivery of goods, and when the worker “does not act within their professional activity.”[17]

And, with a brief background into the sharing economy (aka peer-to-peer economy or gig economy), enter Deliveroo. Deliveroo is a United Kingdom-based company that connects consumers with local restaurants and allows for the restaurants that do not directly provide for delivery to provide delivery through Deliveroo.[18] Deliveroo provides this service by relying on their own deliverers, known as riders, that deliver the restaurants’ food to consumers.[19] Deliveroo emphasizes that it cares about their riders, but the relationship between the company and the riders is nothing short of contentious.[20] Many of the contentions lie in the type of employee riders are for taxation and labor law purposes, and this is the debate in Belgium.[21]

The issue is a relatively notable one, and the structure of Deliveroo’s contracts, specifically in Belgium provides the biggest controversy. Deliveroo’s riders in Belgium are actually contracted by a third company, SMart.[22] This arrangement with SMart gave riders employment status and protection to those who worked for Deliveroo.[23] While the SMart arrangement originally provided a tax break for Deliveroo, with the implementation of the De Croo Act, it was more advantageous for the company to treat their employees as essentially independent contractors, instead of employees through SMart, so Deliveroo ended the relationship with SMart.[24] As a result of this change, Deliveroo riders protested in January of 2018 after work conditions worsened and income security was lost.[25]

The Act generally does not provide a clear answer to important questions and ambiguities found within the act. Importantly, the De Croo Act applies to “services provided” and not to “the delivery of goods.”[26] There is generally no distinction between those two elements, and there are a number of other questions, including how to determine if the individuals are providing services within the scope of their professional responsibility.[27]

Notably, the National Social Security Office announced that they were bringing a civil suit against Deliveroo for labor law violations in connection with De Croo’s act that provided favorable tax rates to companies like Deliveroo.[28] Deliveroo, notably, encouraged their employees to define themselves as “service providers in the collaborative economy” and as a result, many riders lost employment perks.[29] LeadersLeague noted that Deliveroo made this change because of De Croo’s 2016 Act and that the lawsuits will “play no small part in determining the future direction of the digital economy in Belgium.”[30]

This lawsuit may help provide clarity to the vagueness of the De Croo act. Deliveroo is a food delivery service, something that could potentially be defined as “delivery of goods” as opposed to providing a service, as required by the De Croo law. Additionally, it is generally unclear what it means to be working within a professional activity as required by the law; though the idea is that Deliveroo is a side gig, that may not necessarily mean they are not working within their professional activity.

Conclusion

With a number of questions surrounding the De Croo act implemented in Belgium, a new lawsuit filed against delivery service Deliveroo may provide some valuable clarity to some of the acts most important provisions, most notably whether Deliveroo is a deliverer of goods or a service provider, and whether Deliveroo riders act in a professional capacity.

#Blogpost #DanielCermak #InternationalLaw #Europe #Belgium

[1] Alexis de Biolley, Belgium 2d EU Country to Set Up Tax Rate for Peer-to-Peer Income, Political Intelligence (Apr. 14, 2016) https://www.political-intelligence.com/fr/belgium-2d-eu-country-to-set-up-tax-rate-for-peer-to-peer-income/.

[2] Deliveroo Sued in Belgium, Leaders League (Dec. 27, 2019), https://www.leadersleague.com/en/news/deliveroo-sued-in-belgium.

[3] FNV Wins Two Lawsuits Against Deliveroo, Fair Transport Europe (Jan. 15, 2019), fairtransporteurope.eu/fnv-wins-two-lawsuits-against-deliveroo/.

[4] R. Basselier, G. Langenus & L. Walvens, The Rise of the Sharing Economy, NBB Economic Review (2018), https://www.nbb.be/doc/ts/publications/economicreview/2018/ecoreviii2018_h3.pdf.

[5] Id. at 59.

[6] Id. at 56.

[7] Biolley supra note 1.

[8] Id.

[9] Id.

[10] Id.

[11] Id.

[12] Belgian Government Approves Simple and Low Tax Rates for Sharing Economy, Alexander De Croo (Jun. 6, 2016), https://www.decroo.belgium.be/en/belgian-government-approves-simple-and-low-tax-rates-sharing-economy.

[13] Michael Lang, Taxation in a Global Digital Economy, (edited by Ina Kerschner & Maryte Somare) (2017).

[14] Id.

[15] Id.

[16] See Leaders League supra note 2.

[17] Sophie Berg, Collaborative Economy: New Legal Framework Enters into Full Force on March 1, 2017, CMS Law Now (Feb. 27, 2017), https://www.cms-lawnow.com/ealerts/2017/02/collaborative-economy-new-legal-framework-enters-into-full-force-on-1-march-2017.

[18] About, Deliveroo (ast visited Dec. 28, 2019), https://deliveroo.co.uk/about-us.

[19] Id.

[20] See Id.; see also Leaders League supra note 2; see also Fair Transport Europe supra note 3.

[21] See Leaders League supra note 2; see also Fair Transport Europe, supra note 3 (noting that a court in Amsterdam found that Deliveroo drivers are not independent entreprenuers).

[22] Jan Drahokoupil and Agnieszka Piasna, Work in the Platform Economy: Deliveroo Riders in Belgium and the SMart Arrangement, European Trade Union Institute (Jan. 2019), https://www.etui.org/content/download/35820/356254/file/WP-2019-01-deliveroo-WEB-2.pdf.

[23] Id. at 5.

[24] Id. at 39.

[25] Id. at 39; see also James Crisp, Deliveroo Riders Go on Strike in Belgium and Netherlands, The Telegraph (Jan. 20, 2018), https://www.telegraph.co.uk/news/2018/01/20/deliveroo-riders-go-strike-belgium-netherlands/.

[26] See Berg supra note 16.

[27] Id.

[28] See Leaders League supra note 2.

[29] Id.

[30] Id.