Driven by e-commerce and the radical changes that technology has brought about in European consumption habits, logistics has become one of the fastest growing sectors in the EU economy. But it is also undergoing changes that, in the final stage of online order distribution and delivery, it has become a veritable laboratory of precarious work and labour abuses.
European society is buying and consuming online at an ever growing rate, and the need to transport and deliver all these items has led to far-reaching changes in the sector. Working conditions have declined to such an extent that staff turnover has reached levels that would have been inconceivable just a few years ago.
The business model emerging from this shift uses an intricate web of subcontracting arrangements and leans heavily on extremely precarious contracts, low pay and digital surveillance of the transport and delivery workers’ every move. The big multinationals profiting from this business, be it Amazon, eBay, Allegro, Zalando, Temu, Shein or AliExpress, are indifferent to the health and safety of these workers but have no qualms about reaping the benefits of outsourcing goods transportation, storage, redistribution and final delivery – exploiting a subcontracting chain that allocates these tasks to workers who, although not employed by the multinationals, have to work in line with their dictates and under conditions that keep delivery costs to a bare minimum.
The workers are placed under brutal pressure. Many of them are migrants, who often work on a self-employed basis and do not usually know or interact with their colleagues, which limits their ability to organise and bargain collectively. What’s more, the ‘divide and conquer’ approach pits them against each other, in a race to meet the automated demands imposed on them by the multinationals’ algorithmic management systems – a race spurred by the fear that a poor rating could lose them their job.
The logistics sector has become emblematic of the recent decline in rights and conditions for workers in Europe, while labour inspectors struggle to come to grips with the opaque, short-lived and ever-changing subcontracting arrangements and widespread precariousness underpinning this business valued, last year, at €1.16 trillion in Europe.
Against this background, the weakest and most decisive link in the chain takes on all the more relevance: the link that ensures the final delivery of orders to any point on the continent in record time, or what is known as last-mile logistics. A recent study by the European Trade Union Institute (ETUI), Sorry we subcontracted you, is based on research and interviews with trade unionists, lawyers, labour inspectors and other experts, and largely inspired by Ken Loach’s film Sorry We Missed You (2019). It highlights the problematic changes underway in the four largest European markets for this sub-sector: opaque subcontracting chains in Germany (the largest of all, valued at €286 billion), operations on the fringes of the labour law in Spain (the second largest, worth €263 billion), widespread violations of labour rights in France (€169 billion) and widespread labour exploitation in Italy (€145 billion).
In an interview for Equal Times, the report’s coordinator and principal investigator, Silvia Borelli, labour law professor at the University of Ferrara (Italy), explains how the business of storage and home delivery has ended up relying on a model that makes outsourcing, precarious work and automated supervision the perfect artificial storm for keeping multinationals’ logistics costs as low as possible, at the expense of the safety and working conditions of employees from whom profits are conveniently squeezed without the least responsibility towards them.
What can we learn from the conclusions of this report?
What we have learned from the report is that subcontracting is the main business model in delivery, which is the final stage in the chain, or the last mile logistics. Logistics is increasingly dominated by huge multinationals such as FedEx, DHL or Amazon Transport, all of which typically outsource delivery services to smaller companies, over which they have considerable power, given the huge imbalance between the multinational at the top of the chain and the subcontractors, which are usually SMEs. Essentially, multinationals can impose almost any terms on them, such as the time they have to deliver the products and the price they charge for doing so. And in cases where algorithmic management systems are used, the control exerted is even stronger.
Amazon, for example, requires its subcontractors to use its automated system, which allows it to monitor all their activities at all times. As subcontractors are legal entities that are separate from Amazon, they take on the risks and the responsibilities [for deliveries and workers], while the multinationals benefit from the ‘corporate veil’: as separate entities, they cannot be held liable for the risks or responsibilities pertaining to workers who are not part of their company. And this makes it possible to cut labour costs and maximise profits, as each subcontractor has different terms and working conditions, and the multinationals tend to choose the cheapest option. They may be small companies, with no trade union presence, that violate the labour laws, at times, to be able to meet the multinational’s demands. But since they are separate companies, the violation is only attributed to the final subcontractor.
So the system encourages subcontracting to the cheapest companies, in other words, those with the worst working conditions, the greatest instability and the most scope for abuse. Is that right?
That’s right. In fact, outsourcing gives the multinational a huge advantage. The problem is that subcontracting chains emerge because each company wants to profit from the process. Let’s say, for instance, that Amazon entrusts part of its logistics to a subcontractor, and this subcontractor to another subcontractor, and so on and so forth: the company that places the order is the one that has the power to benefit from delegating in this way. And in some countries, such as France, the final subcontractors are often self-employed individuals, and there the imbalance of power is that of a single person versus large companies.
Nothing can be negotiated in that case: either the employee accepts the conditions imposed, unreservedly, or there is no order.
Exactly. And the imbalance is even worse when algorithmic management systems are used. Amazon is a particularly significant case in point, because it has legions of subcontractors, many of whom are self-employed workers who are bound by this automated system and have no freedom over their work whatsoever. And that’s what also happened in Italy, where Amazon has been prosecuted for the crime of digital gang-mastering (a criminal activity consisting in the recruitment of vulnerable people to exploit their labour under illegal and abusive conditions, sometimes akin to slavery). The Italian courts held that Amazon should be considered the real employer of all its subcontractors, based precisely on Amazon’s ability to control them at all times through its algorithmic management system.
The problem with this case is that it was a criminal proceeding, so the judge can impose a penalty on the offender without affecting the relationship of the people involved. In other words, Amazon has to pay a hefty fine and reorganise its business, but the subcontractors employed through this criminal procedure [that of listing them in a pool of subcontractable delivery drivers, to whom Amazon’s own algorithmic system assigned specific orders] do not, however, obtain the right to be hired directly by Amazon. Civil proceedings would have been required for that. But that’s another problem, as what we have ascertained through the report is that workers don’t want to go to court, precisely because they have to work and they need that job. And those working in last-mile logistics are often migrants. Less so in Spain, but they are people who need to make a living, and they are afraid of no longer being called for new orders if they go to court, because if they lose the work they have, they may not be able to get back into the sector.
Large multinationals like Amazon virtually control the entire market in this sector, so losing your job could mean having to leave the sector.
Exactly. We have workers who need the money on the one hand, and a company that earns a huge amount of money on the other, so the situation is completely unbalanced.
In what way does technology shape this situation, what does working with this algorithmic management system mean in practice, and how does it affect this already unbalanced relationship?
As regards Amazon’s subcontractors, for example, the report refers to cases where delivery drivers have to fit devices in their vans that track where they are going and instruct them to deliver goods in a certain order, following certain routes. The system indicates the route and Amazon knows where the delivery drivers are at all times. And the delivery times of each package are tracked, so Amazon also measures that in real time and decides who are ‘good subcontractors’ and who are not. And there it is, like in Ken Loach’s film: the main company controls where you are at any given moment and can give you instructions continuously through its system.
And I guess this must create constant tension between the theoretical delivery schedule, predicted by the machine, and the real world, full of unpredictable setbacks. Meanwhile, the pressure to offset this imbalance and meet the demands of the machine, for fear of losing the work and being excluded from the sector, falls solely on the shoulders of the individual delivery driver.
Yes, that’s absolutely right. Bear in mind that if you are self-employed, it’s very easy for Amazon to terminate a contract with you, as you don’t have any kind of protection against dismissal, so if you don’t have a good assessment, Amazon can fire you without a second thought. And it’s the same with small companies, as illustrated by another case we discovered in Italy: the main company’s system was able to make its subcontractor dismiss a particular worker, or dispense of its subcontractor altogether; either way, there is no protection against dismissal. For the workers, it means a huge amount of pressure, of course, because they know they are being monitored, their performance is being tracked minute by minute, and that creates problems. They work under immense stress, and the risk of occupational accidents is increased, due to the pace and speed at which they have to do their job.
On top of this, nowadays, it’s very quick and easy to set up a new company, so subcontractors who don’t meet the requirements are easily replaceable. There is a lot of business volatility: there are many companies available, for short-term periods, and switching from one to another is easy. Our research found that, in practice, all subcontractors are regularly replaced. And the French case is also quite distinctive. We learned that the labour inspectorate doesn’t tend to check on a company during the first three years, which is why they often last for three years, so when the time comes to inspect it, the company no longer exists. And a new one appears.
Much of this is because the new situation is not fully regulated. Is the current legislation sufficient? Are there regulations that already apply to these practices at European level? And if not, is there any political awareness in this respect? Can we expect to see more comprehensive legislation?
These kinds of problems are not only encountered in subcontracting but in all kinds of algorithmic worker management. European trade unions are pressing for the regulation of algorithmic management systems. What we have for now is the platform work directive, which only applies if there is a digital work platform as defined in the directive. But as we know, this technology is used in fields other than delivery, so regulation is needed to cover all possible labour applications. Algorithmic management is also imposed in warehouses, for example. And in the case of global platforms such as Glovo, Deliveroo and others, the current rules don’t apply to them. The problem is always the same: the automated system increases the power to control and redirect workers, but in an opaque way, because you don’t see it, you don’t have a specific person giving orders. This type of control is becoming increasingly more intense and less transparent.
That said, there is political awareness in the European Parliament, both about the subcontracting and the algorithmic management issue. A report is being drafted proposing that the European Commission regulate outsourcing, and there will soon be an initiative on these algorithmic management systems. The problem is that, broadly speaking, the Council’s current configuration and the position of this Commission are not pro-worker, and the Parliament recently received a communication from the Commission regarding its wish to simplify EU legislation. Having a new regulation adopted is very difficult in this context. I think that everybody is aware of the problem. The main issue is that there is no political will to regulate it.