Mexico City — The Mexican government proposed in September to regulate the working conditions of service providers for digital platforms such as Uber, Didi, Rappi, Beat and Cabify so that they are formally recognized as employees and are able to receive the corresponding benefit of social security coverage.
The proposal was explained to Bloomberg Línea by Labor Minister Luisa María Alcalde in an exclusive interview.
Alcalde said that work is already underway with the various companies engaged in the gig economy, such as Uber, Didi, Rappi, Cabify, Beat and InDrive, to present a consensus reform proposal to be discussed and eventually approved in the current Congressional period, which runs from September to December 2022.
The collaborative economy, or gig economy, has brought new ways of working and earning an income that are here to stay as such platforms allow people to generate an income with their own resources, and their legal status is similar to that of an independent worker or freelancer.
However, under the initiative to reform Mexico’s federal labor law, such digital platforms would have to recognize their ‘partners’ or ‘collaborators’, as they are currently referred to, as workers, and register them with the Mexican Social Security Institute (IMSS).
But, in order for the reform to move forward, an analysis needs to be carried out into whether there really is an employer-employee relationship, or whether it is a service relationship, and whether a worker would be entitled to benefits from one or all of the platforms, according to Hugo Hernández-Ojeda, managing partner of law firm Hogan Lovells’ labor, employment and social security practice.
What do the apps say?
Bloomberg Línea consulted the platforms concerned for their opinions on the proposal. In a joint response from Didi, Uber and Rappi, the three companies said they understand that the dynamics of employment have evolved in recent years, especially following the pandemic, and which has prompted a rethinking of regulatory frameworks globally.
Didi, Uber and Rappi said they are open to participatory dialogue and communication with the Mexican authorities.
The three companies and ride-hailing company Beat, which also reiterated its willingness to collaborate with authorities and legislators, are organizing in order to reach the best agreement with the Mexican government, and are discussing how the social security system in Mexico could be adapted to facilitate the integration of drivers and delivery workers on digital platforms.
The dialogue involves academic institutions such as Mexico’s National Autonomous University (UNAM) and the Center for Economic Research and Education (CIDE).
Cabify said that while the company does not yet know the details of the proposals, it is open to exploring any initiative that improves the conditions of its drivers.
“We express to the federal government and Congress our interest to actively participate in the discussion of this matter,” the company said in a written response.
InDrive, a mobility app that began operating in Mexico in 2019, also said it would collaborate to resolve these legislative issues. The company recently transformed itself into a marketplace for urban services, and is now in talks with the government regarding its operations.
“We know that the challenge is big because there are gaps in the sector,” Eduardo Abud, head of PR and communications for Mexico and Latin America at inDrive, told Bloomberg Línea.
Would regulation stymie innovation?
Didi, Uber and Rappi expressed their desire that “this evolution protect and maintain the flexibility and positive features of the collaborative economy offered by mobility and delivery apps, qualities that, we know, are widely valued by those behind every delivery and every trip”.
The reform is not considering some practices of workers on a day-to-day basis. For example, it does mention night work, or for example if there are long periods in which a collaborator does not connect to an app because they are connected to another, according to Victor Aguirre, founding partner of Blackbox Startup Law, a law firm specializing in startups.
These private companies are maturing and have already been regulated in some way, with Mexico’s antitrust watchdog COFECE having already carried out a review of them, and there has also been a tax reform for such companies, which has been successful, Aguirre said.
“It will be necessary to review what interesting formulas might be the best for the regulation of their labor situation,” said Hogan Lovells’ Hernandez-Ojeda.
“We must not take our eyes off the ball, because in the next few years we are going to live with these types of companies and if we don’t regulate them we are going to have a serious issue,” he added.
For its part, Beat said any regulation must reconcile the flexible nature of the collaborative economy with access to new models of social security for those who use digital platforms to generate income, while Cabify said innovation in regulation is a sign of modernity for governments. “
Taking into account and making room for the new reality imposed by these economic models is important so that they continue to develop and their social impact is as desired,” Cabify said.
Cabify, a Spanish company that became a unicorn in 2018 after achieving a $1.4-billion valuation, added that “regulations should not be an inhibitor of innovation, but rather an opportunity to create a suitable ecosystem for new technologies, for emerging industries and economic development, always recognizing the logic of the collaborative economy and the reality of the country in question”.
Beat believes that through a plural dialogue it will be possible to build a regulation that ensures a further step in social protection and sustainability of a new economic model that represents the livelihood of hundreds of thousands of families in Mexico.
The story so far
In September 2021, the IMSS began a pilot project so that people working for such platforms would have access to medical care, disability payments and access to payments to cover occupational risks, daycare and retirement savings.
The IMSS signed agreements with Beat, DiDi, Rappi and Uber to disseminate and promote the participation of drivers and delivery riders for their voluntary incorporation into the mandatory social security regime for self-employed workers.
In March of this year, an initiative by the opposition Institutional Revolution Party (PRI) was published in the Parliamentary Gazette in which a modification of the federal labor law was proposed, which would give workers of digital platforms benefits like any other employee.
The issue has been discussed for some time and the Labor Ministry’s aim is that the new legal framework will be a reality in Mexico in 2023 in order to regularize and recognize the labor relationship of around half a million workers who today work without social security protection in the informal sector.