In recent years, Rappi, a Colombian e-commerce platform, has gained immense popularity and a valuation of over $5 billion. However, the platform’s business model has sparked controversy, particularly regarding the employment status of its delivery workers, or “rappitenderos.” This issue has gained national attention in the context of Colombia’s proposed labor reform, which aims to modernize the country’s labor laws but has sparked debate about how to balance worker protections with the needs of startups and small businesses. As Rappi continues to operate in Colombia and beyond, the question of how to draft a labor reform that protects workers’ rights but at the same time corresponds to current market dynamics remains a pressing issue with implications for economic growth and social justice.

 

What is Rappi?

Creating sustainable, scalable, and replicable business models is crucial in countries like those in Latin America, and especially in Colombia where we face unique challenges. This approach is essential for driving economic growth and generating new, efficient income streams. Rappi´s work is invaluable in this regard.

Rappi, a Colombian e-commerce platform (sometimes confused as a delivery platform), has become one of the country’s most successful startups in recent years, boasting a valuation of over $5 billion. 

But Rappi’s impact goes beyond the numbers. It serves as a source of inspiration for those committed to creating new companies and provides opportunities for thousands of people to earn extra income. Rappi also boosts the sales of partner businesses, improves city mobility, enhances quality of life for its users, helps position Colombia as a global leader in technological entrepreneurship, and attracts foreign investment to the country, generating internal wealth and increasing competitiveness.

Originally, Rappi was an app that delivered products from a local store. However, the creators of Rappi noticed that their customers needed more assistance, so they began offering services provided by assistants, called “rappitenderos,” who complete tasks that people typically find burdensome in exchange for money. Today, Rappi not only delivers products in under 30 minutes but also provides 24/7 services.

 

Does Rappi have an employment relationship with its rappitenderos? 

Rappi’s business model attracted investors as it operates as an intermediary between users and couriers, or “rappitenderos”, who work as self-employed contractors. They can turn on and off their availability on the app and choose which orders to fulfill, rather than being classified as employees.

Rappi has provided income to thousands of people through the sharing economy. In the last 6 months, 150,000 Colombians have earned money through the app. However, the labor reform has brought back controversy about the relationship between rappitenderos and Rappi. To establish an employment relationship, three requirements must be met: personal service provision, subordination, and remuneration.

Rappi argues that rappitenderos do not meet the subordination and personal service provision requirements, but demands payment of social security and imposes indirect restrictions such as inability to delegate tasks and blocking accounts without justification. Moreover, the algorithm reviews the number of orders fulfilled, the time taken, and the ratings received to give them more or fewer orders and award them with prizes or sanctions (like a boss would). Subordination? 

Rappi now pays liability insurance for all rappitenderos and proposes to pay social security based on hours worked and not as stated in the labor reform (which demands that digital platforms must verify that the workers are affiliated to the social security system or else they must assume 100% of the payment). If a rappitendero works only 10 hours a month, it is valid to contribute based on actual income rather than the minimum wage (which makes sense)

 

What does Colombia need more: Rappi or a Labor Reform?

If Colombia’s new labor reform is passed, Rappi may be forced to make significant changes to its business model, which could impact its profitability and growth potential. 

In Colombia, the process of hiring an employee can be lengthy and bureaucratic, which can be a barrier for startups and small businesses.  

Colombia definitely needs labor reform, but it should take into account the current market dynamics and the interests of today’s workers. With the rise of remote work, freelancing, and other non-traditional forms of employment, there should be tailor-made labor relations for each type of worker. While it’s important to discuss contractual types and working conditions, the conversation should be guided by the new forms of work demanded by the new generations.

Unlike 20-30 years ago when only two types of contracts existed, there are now an infinite number of variables that must be considered when legislating. To achieve a successful reform that doesn’t put companies at risk, it’s necessary to involve the industry, modern workers, and companies in the conversation. The harmful narrative that businessmen want to exploit people must be eradicated.

It is worth considering the role of individual responsibility in the debate around labor reform. 

While government regulations can provide important protections for workers, individuals also have agency in shaping their own lives and careers. The gig economy provides opportunities for individuals to earn money and gain valuable work experience, and many people may prefer the flexibility and autonomy of gig work over traditional employment.

Rappi is not hiding, they are proposing, negotiating and listening to their stakeholders. Hopefully, the Colombian government will work with industry and workers to come up with a reform proposal that makes sense and doesn’t hinder the generation of employment in the country.

 

Michelle Bernier is an attorney specializing in international law and commercial law. She is currently studying Master of Laws and International Business with a double degree from the Universidad Internacional Iberoamericana in Mexico and the Universidad Europea del Atlántico. She is also a part of Students for Liberty’s inaugural cohort of Fellowship for Freedom in India.