iFood wins its day in court and what it means for other startups

ifood wins its day in court and what it means for other startups
ifood wins its day in court and what it means for other startups

Contxto – The court has spoken and the verdict is in! A Labor Court in Brazil has determined that Brazilian unicorn, iFood, does not hold an employer relationship with its couriers. 

Why is it a big deal? Because last December, in a separate lawsuit, a judge determined that startup Loggi had to formalize its ties to its delivery people. Not to mention pay a not-so-pretty fee.

As a result, now there are two different legal precedents in Brazil over a startup’s responsibility regarding this part of its workforce.

Related article: Loggi must formalize work relations with couriers, and pay over US$7.2 million in fines

Startups may find some breathing room, for now

Shirley Lobo Escobar was the Brazilian judge who determined that personnel hired as couriers by iFood are to be considered freelancers. And as such, they aren’t entitled to employee benefits.

Meanwhile, the cases against 99, Uber, and Cabify are still pending. But now, since there are two diverging precedents, what happens next is anyone’s guess.

The gig economy debate will continue to heat up in Brazil, that’s for sure. And even in Mexico the topic is stirring up talk.

And it’s understandable.

The gig economy: an ongoing discussion

Startups like Uber kick-started the gig economy of partnering up with individuals to complete a service such as driving someone home. Or delivering food or other items, as is the case of couriers for Brazilian iFood and Colombian Rappi.

But there’s a lot of controversy surrounding the rights of these middlemen to healthcare, paid sick leave, etc. since it can be viewed from multiple angles.

On the one hand, gig workers freely choose to operate under the rules of these startups. The benefits of work flexibility and the size of their income depend on how much time they dedicate to working on the platforms.

Nonetheless, they are exposed to hazards such as car/motorcycle accidents, risks of being attacked while on the job, etc. For which something like healthcare is greatly needed.

But on the other, many of these startups work on economies of scale. And the profit margin they gain may be greatly severed if they cover expenses for their gig workers. If startups are no longer profitable, they may shut down entirely. Consequently, many of these couriers and drivers could lose a valuable source of income. And that’s no good either.

I’m still trying to wrap my head around some of these considerations and I’ve yet to make up my mind. But what do you think? 

Where should the law stand in protecting gig economy workers?

Wanna hear more? We recommend you listen to the following podcast episode: Reguladores contra emprendedores. You can find the time stamp available in the description.

Related articles: Tech and startups in Brazil!


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