Spanish delivery app Glovo, owned by Germany's Delivery Hero, has announced a significant shift in its business model, opting to hire around 15,000 riders as employees, a move that is expected to result in a €100 million hit to its earnings. This decision comes amid mounting pressure over labor rights in its home market, where the company has faced multiple fines and legal challenges.

The move is seen as a response to the 2021 Spanish labor reform, which recognized riders gigging for delivery platforms as employees. Despite this, Glovo had continued to operate with most riders classified as "self-employed," using subcontractors to avoid the requirement. However, the company has now acknowledged the need to "avoid further legal uncertainties" and comply with the law.

Glovo's decision is likely a result of the increasing scrutiny it has faced in recent months. The company's CEO and co-founder, Oscar Pierre, is due in court this week over alleged breaches of the 2021 Riders Law. Additionally, Glovo is facing a competition lawsuit from competitor Just Eat, which is seeking €295 million in damages. The company has already faced multiple fines for labor infractions predating the 2021 reform.

Spanish labor minister, Yolanda Díaz, has welcomed Glovo's decision, stating in a post on X that "companies were not used to being told 'no.' Glovo thought it could act outside the law." The minister's comments highlight the growing sentiment in Spain and across Europe that gig economy companies must take responsibility for the labor rights of their workers.

The implications of Glovo's decision are far-reaching, with potential consequences for the broader gig economy. As companies like Glovo, Uber, and Deliveroo face increasing pressure to reclassify their workers as employees, the business model of these platforms may need to undergo significant changes. This could lead to increased costs, changes to pricing structures, and a reevaluation of the role of gig economy companies in the modern workforce.

In the short term, Glovo's decision is likely to have a significant impact on its earnings, with the company warning of a €100 million hit. However, in the long term, this move may help to establish a more sustainable and equitable business model, one that balances the needs of riders, customers, and investors. As the gig economy continues to evolve, Glovo's decision serves as a reminder that companies must adapt to changing regulatory landscapes and societal expectations.