Hargreaves Lansdown’s Susannah Streeter comments on the rise in Deliveroo shares following Court of Appeal ruling that Deliveroo riders are self-employed and not eligible for worker’s rights.
Susannah Streeter, Senior Investment and Markets Analyst at Hargreaves Lansdown, says:
‘’The gig economy fortress has successfully defended itself against the latest flurry of arrows designed to pierce its walls.
Deliveroo has consistently argued in court that the way it engages with its riders means that they are self-employed and so should not be classed as workers. Now the company has won the latest skirmish in its legal fight with judges dismissing an appeal, ruling that because riders are not in an employment relationship with the company, they could not form a collective bargaining unit.
The company’s success appeared to hinge on the fact riders are able to ask another person to take on a job for them. This was the crunch factor which led to the UK Supreme court ruling that because of the lack of substitution rights, Uber drivers should be classed as workers.
The fact that Deliveroo successfully defended its business model once again has cheered investors with the share price climbing rapidly, up by 8.5% in afternoon trading.
Concern about the company’s reliance on the gig economy model was one of the factors which contributed to its disastrous IPO in March.
But the battle for improved working rights being fought by contractors is far from over with a European Commission review of how the gig economy operates still underway.
In its prospectus at IPO, Deliveroo said ongoing success in defending its contractor model could not be guaranteed. The boss of Deliveroo’s rival Just Eat Takeaway, which plans to increase its reach in the UK, has already adopted an employment model for its workers.
Although the gig economy stronghold is for now staying largely firm, over time there may be fresh capitulations as companies tweak their models to satisfy ongoing concerns under the spotlight being increasingly trained on firms by institutional investors.
There is now much more attention being placed on environmental, social and governance issues, with workers’ rights increasingly under scrutiny. So while Deliveroo might have still won for now on legal grounds, the jury is still out in the court of public opinion.’’