Spanish delivery startup Glovo could potentially face legal costs of up to €400 million related to the employment status of its couriers, according to estimates by its parent company, Delivery Hero. These potential costs are associated with ongoing investigations by Spanish authorities, which may result in the reclassification of Glovo’s self-employed riders as employees. Such a reclassification could lead to fines and retrospective taxes and social security contributions amounting to an estimated range of €200 million to €400 million, as outlined in Delivery Hero’s latest half-year financial report.

In August 2021, the Spanish government passed legislation known as the “Riders’ Law,” which introduced a “presumption of employment” between gig platforms and couriers. Despite this law, Glovo has continued to engage freelance couriers through subcontracting agencies.

While the report acknowledges that such a reclassification could be challenged in the courts, it notes that Glovo might be required to provide bank guarantees while awaiting a final verdict.

Glovo responded to the situation by stating, “Glovo has always maintained and welcomes an open dialogue with the Spanish Ministry of Labor. There is no court decision in relation to the labor model in Spain, launched in August 2021. We are confident in the legality of the model, adapted to the Supreme Court Ruling, the Rider law and the doctrine of the Court of Justice of the European Union.”

Delivery Hero, a German multinational, acquired a majority stake in Glovo in early 2022. The first-half revenue for Delivery Hero reached €4.84 billion in 2023, marking a 27% increase compared to the previous year, partly attributed to the contribution from Glovo’s business.

This legal challenge reflects the ongoing debates and regulatory changes surrounding the employment status of gig economy workers, particularly delivery couriers, in many parts of the world.