Deliveroo faces pushback from investors and riders ahead of IPO

UK fund managers Aviva Investors and Aberdeen Standard have said they will not buy Deliveroo shares ahead of the firm’s initial public offering (IPO) in April, citing concerns over its riders’ working conditions and pay.

Deliveroo is currently targeting a market capitalisation of £8.8bn, which is expected to make the company’s founder, Will Shu, as much as £500m.

However, on 24 March, David Cumming, chief investment officer for equities at Aviva, told BBC Radio 4’s Today programme: “A lot of employers could make a massive difference to workers’ lives if they guaranteed working hours or a living wage, and how companies behave is becoming more important.”

Cumming added that because riders are classed as self-employed, rather than workers or employees, “they don’t necessarily get basic rights for minimum wage, sick leave or holidays, and [Deliveroo itself] states a reclassification of employees as an investment risk to the business”.

Andrew Millington, head of UK equities at Aberdeen Standard, also told the BBC’s Today programme that riders’ working conditions were a “red flag”, adding: “We wouldn’t be comfortable that the way in which its workforce is employed is sustainable.”

The funds that Aberdeen Standard and Aviva manage have a combined total of just over £800bn.

Alex Marshall, former gig economy courier and president of the International Workers Union of Great Britain (IWGB), said that while it is promising that the fund managers have centred workers’ rights in their decision-making in this instance, until riders are classified as workers – and therefore given their basic rights – Deliveroo will continue to face protests and challenges from them.

“While we welcome Aviva’s decision on Deliveroo, we note that they still have investments in Uber, Just Eat and Delivery Hero,” said Marshall.

“We encourage Aviva to show the same conviction across the gig economy, and use their influence to push these other companies to adopt more ethical business models that prioritise these key workers.

“Investors must know that Deliveroo is now the most protested app-based platform in the world and this is largely down to the fact that riders are denied basic rights, like minimum wage protections, and some earn as little as £2 an hour.”

In August 2020, the Centre for Employment Relations, Innovation and Change at Leeds University Business School found that, from an analysis of 527 gig economy-related protest incidents between 1 January 2017 and 20 May 2020, “the company with most incidents was Deliveroo, which accounted for more than a quarter of all protest events (28.5%)”.

According to IWGB general secretary Henry Chango-Lopez, riders last took strike action in Sheffield on 25 November 2020, and “there were 16 strikes self-organised by [UK-based] Deliveroo riders in September 2019 alone”.

He added: “Anyone investing in its exploitative business model should expect more public pressure and worker-led action until their rights are respected.”

Deliveroo contends that, on average, its riders earn more than £10 an hour for the time they are assigned to orders, which rises to an average of £13 at peak times.

“Deliveroo riders have the complete freedom to choose when and where to work and can choose which deliveries to accept and which to reject,” said a company spokesperson. “Some 50,000 riders choose to work with Deliveroo, and thousands more people apply to work with us every week.

“Our way of working is designed around what riders tell us matters to them most – flexibility. Riders in the UK are paid for each delivery they choose to complete and earn £13 per hour on average at our busiest times.”

However, in a first-of-its-kind analysis based on 2,669 invoices from 318 riders between April 2020 and March 2021, the Bureau of Investigative Journalism found that one in three riders made less than £8.72 an hour – the national minimum wage for over 25s – for their overall time per session in the app.

“Some earned even less,” said the Bureau’s report. “A cyclist in Yorkshire was logged in for 180 hours and was paid the equivalent of £2 per hour. This is perfectly legal because riders are treated by Deliveroo as being self-employed.”

The analysis suggests that more than half of riders earned less than the amount Deliveroo claimed.

In response to the Bureau’s findings, Deliveroo said the sample, which was based on data gathered from less than 1% of its UK workforce, was “not a meaningful or representative proportion”.

It added: “Riders do not work in hourly patterns, and time logged on does not mean they are working. Riders are free to reject work without penalty at any time and can work for other companies while logged in to our app. Almost half of orders are rejected at least once.”

Reacting to the Bureau’s findings, Tom Powdrill, head of stewardship at shareholder advisory group PIRC, said: “Investors considering taking a position in Deliveroo should familiarise themselves with these matters and the risks and responsibilities involved, along with all other relevant factors. Challenges to the current employment model are financially material.”

Prospectus documents released before Deliveroo’s IPO revealed that the firm had set aside more than £112m to cover potential legal costs relating to the employment status of its delivery riders.

Although Deliveroo has said it will continue to defend its position that riders are independent contractors, the UK Supreme Court ruled in late February 2021 that Uber’s 70,000 drivers should be classified as workers rather than self-employed individuals, giving them the right to be paid the national minimum wage, to receive statutory minimum holiday pay and rest breaks, as well as protection from unlawful discrimination and whistleblowing.

Labour law expert Alan Bogg said: “Given the evidence the Bureau has identified about the low levels of pay for Deliveroo riders, in circumstances where they have no control over the contractual documentation, I have little doubt now that they would be treated as workers.”

Although the Supreme Court ruling forced Uber to agree in mid-March it would pay its drivers the national minimum wage, the ride-hailing firm has chosen to do so only for the time drivers are assigned to trips, rather than, as the court explicitly ruled, from when they log in to the app.

Throughout four years of legal proceedings that started in 2016 with an employment tribunal, Uber similarly maintained that its drivers were self-employed.

In response to Uber’s payment offer, Yaseen Aslam and James Farrar – former Uber drivers who led the legal action against the company and are founders of the App Drivers and Couriers Union (ADCU) – said in a statement at the time that although they welcomed Uber’s decision, “they have arrived to the table with this offer a day late and a dollar short”.

Tweeting in response to the fund managers’ announcements, the ADCU said: “After our victory over Uber, mainstream investors are now looking twice and three times at workplace conditions in their portfolios. ADCU will keep scrapping until all our Uber and Deliveroo members get paid a dignified living.”