Startups create innovative business models. One example is the shared economy, which emerged from the broadening of the concept of the gig economy[1] (also known as the "freelancer economy"). In it, online platforms serve as a broker between freelancers or service providers and people or companies that need their work and guarantee these professionals autonomy to work when and how they want.

According to a study by McKinsey,[2] which accompanies the growth trend in this segment, 27% of the economically active population in the United States and Europe has developed some kind of self-employment, and 40% of users of these applications are only seeking income that is supplementary to their main source of income.

Another study by EY[3] reveals that 80% of online platform users appreciate the flexibility provided by this business model. The absolute majority of respondents say they have made a conscious choice to work in this manner, and it is not a choice out of necessity.

In the difficult economic moment that Brazil has experienced for some years, this new business model has gained prominence, offering valid options to guarantee a second source of income or for unemployed workers in search of professional replacement.

However, for this business model to be economically viable and attractive for users, it needs to be structured so as to avoid the risk of recognition of an employment relationship,[4] which causes for startups and users all duties and taxes applicable to employees, such as control of working hours, overtime, breaks, 13th salary, holidays with an additional 1/3 premium, FGTS payments, and INSS and IRRF taxes, among others.

The key to defining recognition of an employment link is direct subordination. However, it should not confused with business guidelines. While direct subordination entails subjection to the commands and hierarchical domain of direct orders, business guidelines are merely an indication of business rules that may or may not be accepted by users.

Recent decisions by the labor courts[5] show that startups may:

  • Require personal and non-transferable registration;
  • Define the price of the service;
  • Provide guidance on how to provide the service;
  • Stipulate a fixed rate for brokerage fees;
  • Receive directly the amount paid for the service and pass on the user's part;
  • Carry out incentive campaigns; and
  • Disconnect users due to misuse of the platform.

This occurs because online platforms allow users to connect and disconnect whenever they want, thus having autonomy to use it. On the other hand, judicial decisions[6] also show that startups should avoid:

  • Providing self-employed users with the means to render the service (e.g., a car for a driver or a motorcycle for a motorcyclist);
  • Sending direct orders to users;
  • Applying penalties if users do not respond to the command;
  • Requiring a minimum frequency to provide services;
  • Taking direct control over how services are being provided;
  • Excluding drivers/motorcyclists from the platform based solely on assessments by users; and
  • Carrying out promotions that end up requiring self-employed users to continue using the platform for certain periods (e.g., a promotion based on the number of minimum trips or travel time for deliveries).

In these cases, the Courts have found that these are requirements that create an employment relationship, especially direct subordination and/or structural subordination (when the worker is inserted into the business dynamics), and there is a risk of recognition of an employment link.

Therefore, it is crucial to analyze your business model in order to determine how best to structure it to eliminate the risk of direct or structural subordination, thereby avoiding unwanted risks that could hinder the development of your startup.

Next Wednesday, we will speak about the possibility of balancing informality in the workplace with certainty in hiring workers.

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[1] "Gig" is an English slang word similar to the slang “bico" in Portuguese and refers to temporary jobs.

[2] McKinsey & Co. “Independent work: Choice, necessity, and the gig economy”, 2016. https://www.mckinsey.com/featured-insights/employment-and-growth/independent-work-choice-necessity-and-the-gig-economy

[3] EY. “Is the gig economy a fleeting fad, or an enduring legacy?”, 2016. https://gigeconomy.ey.com/Documents/Gig%20Economy%20Report.pdf

[4] There is a risk of an employment relationship whenever the requirements of subordination, onerousness, habituality, and personality are present in the relationship between the parties.

[5] 0000155-67.2015.5.17.0005; 0011258-69.2017.5.03.0012; 0010795-02.2017.5.03.0183; 0011359-34.2016.5.03.0112; 1001574-25.2016.5.02.0026; 1000026-79.2018.5.02.0321; 1002392-25.2017.5.02.0613

[6] 1000123-89.2017.5.02.0038; 0001161-69.2018.5.11.0006; 0100294-09.2017.5.01.0003