How can national law be enforced in a global context if the platform operator resides in or even outsite Europe?

Dr.WSW – 10/2018

This question has been raised by Professor Dr Enzo Weber. Prof. Dr. Weber is senior staff member at the Institute for Employment Research (IAB) since 2011 and professor at the University of Regensburg, presented his international solution for the social protection of workers in the gig economy to representatives of the German Social Insurance in Berlin on 10 October. He sparked a lively discussion in which the full implication of the globalisation of labour markets came to light. 

Weber started his presentation with some figures. In Germany, it is estimated that 12% of the population have done platform work at some point, 6.2% do so on a regular basis (at least once a week); they generate at least a quarter of their income from this type of work. These estimates may be slightly exaggerated. A recent study by the JPMorgen Chase Institute found that, in the US, 1.6% of the population regularly do platform work and 4.5% of households have been active as a provider at some point via a platform, although this includes accommodation sharing platforms such as AirBNB.  

Nevertheless, it is obvious that platform work is no longer just a marginal phenomenon and the social security of platform workers, who often work under precarious conditions, is anything but a success. This situation is not unique to Germany. According to Weber, traditional social security systems are not prepared for the reality of the gig economy, which often consists of small and very small work orders, and urgently need to be adapted. New and innovative forms of work alone won’t result in social risks ‘vanishing into thin air’. 

The global dimension of the phenomenon also impacts national structures – service providers, customers and platform operators can exist under three different legal systems. There is a need for clear rules on who is responsible for taxation, consumer protection, competition law issues and, last but not least, the organisation and funding of social protection. In terms of the last aspect, Weber left no doubt that it is the countries where the worker lives or works. However, this does not solve the issue of how national law can be enforced in a global context, especially if the platform operator resides in or even outside Europe. Weber has a well-thought-out answer to this, namely the creation of an international authority. However, the intriguing, and also contradictory, challenge is the effect on the material level and the ‘price’ of social security itself. The platform worker would ultimately be subject to a special regime that differs significantly from the one which applies to workers who are ‘purely national’. 

The simplicity of Weber's ‘basic model’ is appealing. All Internet platforms that act as an intermediary for work and services are required to transfer a reasonable, flat-rate proportion of all revenue from platform workers to an individual Digital Social Security (DSS) account. This is completely independent of the status of the platform worker as ‘self-employed’ or ‘employee’. The DSS system still needs to be created and would be located at an international institution such as the ILO or the World Bank. It would then transfer this ‘contribution’ to the competent national institution or national contact point, together with any data necessary for identification. This national body would then decide how the contributions will be used. Thus, an international social security system is not created, but rather this remains a national competence. However, Weber proposed a hierarchy, a logical sequence in which the funds should be allocated to each branch of social security. The focus should be on making an appropriate contribution to the social security branches that do not operate according to the principle of equivalence, such as health insurance. Any residual could then be used to acquire ‘scalable’ social benefits such as pensions. The latter would make sense if the person concerned already had health insurance via another ‘main job’. 

That’s everything really. The risk of fraud or non-compliance is low in this solution, Weber said. This is especially true because platform workers have a vested interest that the deductions will actually be attributed to themselves. 

The biggest problem with this model is that the contributions collected and forwarded by the DSS system are not enough to meet the contribution requirements imposed by the competent state authority. However, the Weber model is flexible enough to remedy this situation. For example, it could be changed so that the responsible state authority informs the system of the applicable individual (total) social insurance rate and the system demands this from the platform operator. 

The problem of incomplete (or overpaid) contributions to the DSS account could also be avoided by setting up an international data register. The platform operators would be obliged to save all financial transactions, including the correctly identified recipients, and to make them available to the responsible institutions. However, Weber is clearly against such a slimmed down version. It would go against the purpose of the DSS to create acceptance and incentives for cooperation from the point of view of the platform workers, in particular by correctly identifying their person. Also, the potential benefits of his proposed deduction ‘at the source’ would be lost, namely immediate availability of contributions and avoidance of arrears. 

Finally, a critical point is the legal source of the obligation for platform operators to transfer the required contributions. According to Weber, this requires bilateral agreements with the countries in which the operator is based. Although it would be technically possible to block access to each respective platform without such an agreement, Weber warned against national unilateralism. Even though a lot is still open, it would first be necessary to take a look at existing world trade rules, especially with regard to trade in services (GATS).  

An attempt at an initial evaluation of the model makes it clear that the most serious point of criticism is setting the course for a kind of social security ‘light’ with comparatively reduced levels of social security, smaller contributions or both. This could send a fatal signal to those who, as ‘traditional’ workers or self-employed workers, have no way of avoiding full contributions. However, Weber’s approach can be adjusted so that it largely avoids such system interventions. Most importantly, his proposal for an international digital social security account should be understood as a guide to finding global solutions where national ones are likely to fail. 

See also the recent Eurofound study of September 2018 on this subject.