Article Israel: Labor Court Clarifies Labor Relations Rules Applicable in Platform-Economy Businesses

On August 3, 2022, the Tel Aviv Regional Labor Court approved a motion to file a class action against an app-based food delivery service company to require the company to contribute to its couriers’ retirement savings, travel expenses, and paid leave, and to recognize their eligibility for paid sick leave and severance pay. (Class Action 35327-08-20 Khazanovitch v. Wolt Enterprises Israel Ltd. (Wolt).

According to the Class Action Law, 5766-2006, a class action is a lawsuit on behalf of a group of people that raises substantial questions of fact or law that are common to all members of the group. The filing of a class action requires permission by a court, including, when relevant, the labor court.

Labor courts consist of a panel of three, including one judge qualified as a district court judge, one representative of labor organizations, and one representative of employers’ organizations. (Labor Court Law, 5729-1969.)

Facts of the Case

The respondent’s (Wolt’s) business operation enabled restaurants to sign up for Wolt to deliver their food to customers who ordered the food through its app. Upon receipt of an order, Wolt charged the customer’s credit card. After the charge was approved, Wolt transmitted the order’s details to the restaurant to prepare the food for the customer. Wolt’s algorithm simultaneously located an available courier near the restaurant and notified the courier of the details. The courier would then pick up the order, verify that it matched the order number or the customer’s first name, and confirm receipt of the ordered food on the app. The courier would then receive details of the client’s first name, address, and requested time of delivery. The respondent charged both restaurants and customers for the service: the restaurants, a commission at a rate of 25% of the total order plus added value tax; and customers, a delivery fee in correlation to the distance.

To provide delivery services on behalf of Wolt, couriers had to receive training, uniforms, and temperature-insulated containers with Wolt’s logo, as well as deposit 300 Israeli new shekels (about US$91) to be deducted from their first payment. Couriers were informed of their status as independent contractors during the recruitment process (Wolt para. 10), and committed in their written contract to refraining from raising any claims to an employer-employee relationship with Wolt and to reimbursing Wolt for any expenses resulting from any such claims or from a judicial determination recognizing such a relationship. Couriers are generally paid a fixed amount for each delivery, plus additional compensation for distance, bad weather, long waiting time in the restaurant, and other circumstances.

Applicable Law

The platform economy, in which economic activities are facilitated by digital platforms, has been subject to legal challenges in Israel, including those regarding determining labor relations between participants. In February 2022 Israel’s minister of the economy and industry appointed an interministerial team to examine the implications of the platform economy and its regulation. To date, the court noted, no recommendations have been published and legislation has not yet been formulated on the matter.

Israeli courts have developed criteria for determining appropriate rules that apply to labor relations in response to changing work patterns. According to a decision by the National Labor Court on April 7, 2021, in LA 18-04-15 Gavriel Kota v. Ministry of Justice (Kota):

The test for determining the employee-employer relationship has evolved over the years in a way that has allowed more and more discretion in its implementation. It has been [previously] clarified in case law that the test must be dynamic, one that varies according to changes in the different employment patterns. … [Because of the changes, courts have] changed the determining test to a “mixed test”, which includes at its center the integration test as well as other subtests. … In difficult cases the tests set out in case law have turned from tests of absolute weight to relative tests, when in answering the question of whether an employee-employer relationship exists, the court learns from the cumulative weight of the totality of the tests. (Kota para. 9.)

According to the Wolt decision, in applying the integration test the court will examine issues such as

whether there is an enterprise in which the service provider has integrated, whether the work performed is a necessary action for the normal activities of the same enterprise, whether the person performing the work is part of the organizational system of the enterprise and not an external factor to it, and whether the work of the service provider is at the core of the client’s occupation. (Wolt para. 10.)

Previous judicial rulings have considered the following issues in the context of

the degree of supervision of the employer on the hours worked, the place where the work was performed, the division of tasks between employees, the composition of work teams, and the hierarchy between different employees; the centrality and vitality of activities of the performer of labor to the employer’s overall activities; the engagement procedures with the employed person; the continuity of contact between the parties; the power of the employer to assign changing tasks to the performer of the work; the employer’s control of the manner in which the work is performed; the subordination of the performer of the work to the employer; the exclusivity of the work performer and the performer’s linkage to the enterprise; the need for the person performing the work for assistance from other employees to perform the work; the place where the work is performed; the method of payment; the supply of materials to carry out the work, and more. (Kota para. 11.)

Decision

The court rejected Wolt’s claim that it served merely as an intermediary between the restaurants and the couriers. The court held that the respondent “operated a platform in the gig economy model.” Although the relationship between the parties appeared to be a more flexible than the classic labor relationship, as long as the courier was connected to the app and was available for work, Wolt had control over and the ability to supervise the courier’s work. Wolt’s core business was deliveries, and most of its work was carried out through its couriers. The court held that the app through which the couriers received their work instructions was merely a substitute for the classic instructions given by employers to employees. The app also enabled Wolt to supervise and monitor the couriers’ performance. The fact that a courier, such as the requester, might maintain additional jobs did not indicate the courier’s lack of financial dependency on the job, and did not negate the courier’s status as a Wolt employee. The court rejected the claim that the app constituted merely assistance with gaining access to virtual space. Instead, the court held, the app was a work tool through which a courier was sent to the destination (the restaurant) and from there to another destination (the customer), and through which Wolt supervised, monitored, and communicated with its couriers.

The court determined that the case was suitable for adjudication as a class action, and that the requester was able to prove that his chances of winning the claim for retroactive recognition of him and other Wolt couriers as the respondent’s employees were reasonable. The court therefore prescribed the scope and procedures to be followed in connection with filing the class action requested.

Wolt has reportedly expressed its intention to appeal the decision.

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Israel: Labor Court Clarifies Labor Relations Rules Applicable in Platform-Economy Businesses. 2022. Web Page. https://www.loc.gov/item/global-legal-monitor/2022-09-13/israel-labor-court-clarifies-labor-relations-rules-applicable-in-platform-economy-businesses/.

APA citation style:

(2022) Israel: Labor Court Clarifies Labor Relations Rules Applicable in Platform-Economy Businesses. [Web Page] Retrieved from the Library of Congress, https://www.loc.gov/item/global-legal-monitor/2022-09-13/israel-labor-court-clarifies-labor-relations-rules-applicable-in-platform-economy-businesses/.

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Israel: Labor Court Clarifies Labor Relations Rules Applicable in Platform-Economy Businesses. 2022. Web Page. Retrieved from the Library of Congress, <www.loc.gov/item/global-legal-monitor/2022-09-13/israel-labor-court-clarifies-labor-relations-rules-applicable-in-platform-economy-businesses/>.