Glovo, a prominent Spanish delivery app under the ownership of Germany’s Delivery Hero, has recently yielded to the mounting pressure regarding labor rights within its native territory. On Monday, the company disclosed its intention to hire approximately 15,000 riders. Notably, the majority of these riders are currently classified as “self-employed” according to Glovo. As per Reuters, the company has also issued a warning of a substantial €100 million impact on its earnings.

Spanish Labour Reform and Glovo's Stance

In 2021, a significant Spanish labour reform recognized riders engaged in gig work for delivery platforms as employees. However, Glovo persisted in operating with a large number of riders not officially on its books. Instead, it resorted to using subcontractors in an attempt to evade the legal requirements. This approach seems to have come to an end. In a public statement, Glovo expressed its desire to “avoid further legal uncertainties.”The company has already faced multiple penalties for labor violations that predated the 2021 Riders Law. In addition to this, CEO and co-founder Oscar Pierre is scheduled to appear in court this week due to alleged breaches of the latter law. Furthermore, Glovo is also embroiled in a competition lawsuit from its rival, Just Eat, which is seeking €295 million in damages.In a post on X regarding Glovo's change of attitude, Spanish labor minister Yolanda Díaz stated, “Companies were not accustomed to being told ‘no’. Glovo believed it could operate outside the bounds of the law.”

Impact on Glovo's Operations

The decision by Glovo to hire a significant number of riders and address labor rights issues is likely to have a profound impact on its operations. With the recognition of riders as employees, Glovo will now be responsible for providing them with various benefits and protections that were previously overlooked. This includes aspects such as social security, health insurance, and fair working conditions.Moreover, the company's shift in stance may also lead to changes in its business model. It will need to reevaluate its relationships with subcontractors and potentially restructure its operations to ensure compliance with labor laws. This could involve increased costs and logistical adjustments, but it is a necessary step for Glovo to maintain its credibility and operate within the legal framework.

Legal and Financial Ramifications

The fines and legal battles that Glovo has faced due to labor infractions have not only affected its financial standing but also its reputation. The €100 million hit to earnings as warned by the company is a significant blow, and it will need to find ways to mitigate these losses.In addition to the financial consequences, the legal battles and regulatory scrutiny that Glovo is currently facing pose a challenge to its long-term viability. The company will need to demonstrate a commitment to complying with labor laws and address the concerns raised by various stakeholders.Overall, Glovo's concession on labor rights is a significant development that will have far-reaching implications for the company and the delivery industry as a whole. It remains to be seen how Glovo will navigate these challenges and emerge stronger in the future.