Deliveroo announced plans to pull out of Spain just months after the government promised legislation to give workers in the odd-job economy more employment rights.
Deliveroo, which is headquartered in London, said staying in Spain would require too much investment compared to its other markets, given the scale of its operations in the country.
The take-out app company blamed its relatively small market share, saying that “achieving and maintaining a leading market position in Spain would require a disproportionate level of investment with very uncertain potential long-term returns that could have an impact on the economic viability of the market for the company ”.
A spokesperson for Deliveroo said Spain’s labor rights law was not the determining factor, but added that it had resulted in an earlier withdrawal from the country.
The Spanish government in March announced plans to legislate to give workers at food delivery companies and other online platforms more employment rights after a landmark legal ruling, as the country’s first EU to do so.
Known as the “Cavaliers Act,” the changes will mean that a worker is presumed to be an employee rather than an independent contractor. The changes will also force digital food platforms to educate delivery people about how computer algorithms and artificial intelligence are affecting their working conditions.
Deliveroo said its withdrawal from Spain was subject to a month-long consultation with affected employees, starting in September, with its services in the country ending in October.
The company said the move would not have a significant financial impact, with less than 2% of its gross sales in Spain. Deliveroo operates in 12 markets, including Australia, Belgium, France, Hong Kong and Italy, but the UK and Ireland account for half of its revenue.
Although the company did not explicitly mention the Madrid government changes in its announcement on Friday, the Spanish reforms were seen as a direct challenge to the business models of companies such as Deliveroo, which rely on granting ‘Delivery jobs to workers who are classified as independent contractors.
Deliveroo says it gives workers the flexibility they want, but some workers have campaigned for rights like sick pay and vacation.
Workers at Deliveroo in the UK are still treated as contractors. In June, the company successfully argued in the appeals court that the workers were self-employed, much to the chagrin of unions seeking to improve conditions in the odd-job economy. However, the UK Supreme Court had previously ruled that Uber workers should be treated like employees.
The status of workers was seen as a particular issue by the city’s big investment funds, with some large investors saying it was a key reason not to buy shares in a disappointing initial public offering. Deliveroo shares in March. An investor told The Guardian that the workforce issues were a “time bomb” for the company.
Spain’s exit plan comes as Deliveroo faces stiff competition from rivals, including Uber Eats, which is owned by US taxi apps company Uber, Anglo-Dutch Just Eat Takeaway and local Spanish competitor Glovo.
Glovo said he plans to hire 2,000 delivery people on a permanent basis, but will still try to retain some self-employed workers. Uber Eats outsources its passenger services to other companies.
“The decision to propose to end our operations in Spain is not a decision that we have taken lightly,” said Hadi Moussa, International Commercial Director of Deliveroo. He thanked his riders, and said employees would be supported throughout the consultation period.