Since when is "the system" the thing that is supposed to win? To me, it seems more like the system is cheating the startup.

There's validity in working around or gaming systems so that a company has a chance of growing and thriving. The tactics used (contractors instead of employees, etc.) are perfectly legal. People are getting paid per an agreement, and they spend their income in their country/society, which disperses the benefits. A startup saddled with year (or two) long maternity leave and other such extreme requirements would make the risk too high.

These regulations create a regulatory capture situation where only large, established, or very well financed businesses can survive. Kudos to the agile and clever startups that find ways to make it, regardless. One should be on the side of the people, not the system.