Importance of the Gig Economy
The gig economy, also known as the sharing economy or access economy, refers to a labour market where individuals earn an income by providing on-demand work, services, and/or goods. It involves temporary, contract, or freelance jobs performed by independent contractors and freelancers rather than full-time employees. Gig work can include various activities, such as driving for rideshare companies, freelance writing, tutoring, caregiving, and more. In a gig economy, organisations typically do not engage workers as employees. Instead, they hire workers, as and when required, who may or may not have complete control over their working schedules. These workers are referred to as “gig workers”. Gig workers often enjoy flexibility and independence but may have little to no job security or traditional benefits like health coverage and paid vacation time.
The workplace in a gig economy is usually temporary, flexible, and choice-based. This definition of a modern workplace creates a wide and diverse range of opportunities for talents while at the same time posing challenges that the traditional employment model cannot relate to. Many industries are adopting the gig workers set-up, as it offers workers independence and a certain amount of control over their work. At the same time, it also provides businesses with sufficient labour supply without engaging the workers as employees. Whilst the model of gig-work is favourable in many ways, the uncertainty of job security and the sustainability of the employment model itself is to be explored. The flexibility that comes with the job also means that workers are not always guaranteed employment and employment benefits.
Global Approaches to Streamline the Status of Gig Workers
A worker’s rights and obligations are mostly determined by their legal status. Labour laws across the globe categorise employees or workers into different groups, such that each group is entitled to different rights and benefits. Hence, it becomes paramount for gig workers to be recognised under the law and entitled to employment benefits. Workers have frequently found themselves entangled in legal battles to secure rights and access to the benefits guaranteed under the law, including, among others, minimum wage, social security, health and life insurance. Unsurprisingly, many case laws deliberate the status of unorganised workers. This is because those who are not classified as employees but are held to be independent contractors have limited rights and protections under laws across the globe. This is relevant in the case of gig workers because the law tends to classify them as independent contractors in many instances. Globally, the three distinct approaches to classifying gig workers are as follows:
- Treatment as Employees – To address the unsettled status of gig workers, courts and governments in various jurisdictions such as the United States of America (“USA”), Australia, Spain, Netherlands, and Switzerland have ruled to classify these workers as ‘employees’. This classification aims to afford them the rights typically enjoyed by organised labour forces under the respective labour laws. However, granting gig workers an ‘employee’ status poses challenges. For instance, in California, the state government enacted Assembly Bill No. 5 (“AB5”), which reclassified gig workers as employees[i]. The AB5 mandated the use of the ABC test to determine the status of gig workers. As per the ABC test, a worker is an independent contractor if the worker is free from the control of the hirer, performs work that is outside the usual scope of business of the hirer and is regularly engaged in an independent business outside the scope of the work of the hirer. The result of this enactment is that many workers who were earlier classified as contract workers were treated as employees and given more benefits. Misclassification of workers by the hirer is subject to administrative review by the California Labor Commissioner, the Employment Development Department, the Franchise Tax Board, and other agencies and consequent penalties. However, platforms such as Uber and Lyft opposed the AB5 as it imposed on them the liability to classify drivers as employees and give such employees all the benefits that traditional employees were entitled to. The platforms initiated Proposition 22 (“Prop 22”), a ballot initiative which was passed by the Californian voters. Prop 22 classified drivers for app-based transportation and delivery companies as independent contractors[ii]. This has led to the drivers of these platforms not receiving the benefits that employees are entitled to since the benefits under Prop 22 fall short of such benefits.
As is seen in the above example, the move to classify gig workers as employees entitled to higher benefits is likely to be met with backlash from organisations that engage gig workers. This can lead to gig workers losing their jobs since organisations may no longer wish to engage them. Many gig employers in countries such as Spain and Germany, with high employment benefits, have opted to discontinue operations[iii] altogether.
- Treatment as an Independent Contractor – There are many countries where the laws are silent on the status of gig workers, predominantly in developing countries[iv]. They continue to treat gig workers as independent contractors but may also provide various social benefit schemes such as life and health insurance, voluntary retirement schemes, etc. The Philippines is one such example. In 2021 it passed the ‘Freelance Worker Protection Act’, which categorised all gig workers as independent contractors[v].
But treating gig workers as independent contractors entitled to piecemeal benefits does not effectively plug the gaps in the current labour laws and social protection schemes. Additionally, this approach runs the risk of adding to the administrative burden of companies because of the multitude of schemes that they need to cater to. Regardless, the approach adopted by countries such as the Philippines, where the legal framework for independent contractors was amended to include rights and benefits for gig workers, is worth noting.
- New Employment Category – As noted above, some countries extend the traditional employment classifications that already exist to include gig workers, while some introduce a brand-new, distinct category for the new kind of worker. For instance, the term “para-subordinate worker” was added to the definition of “employee” in Italy[vi] , whereby gig workers such as riders for food and other delivery platforms were made eligible for minimum wage, social security contributions, and the right to sick leave. Canada has also introduced a ‘Dependent Contractor Status test’, which aims to confer workers with a new employment status, unlike California’s ABC Test, which determines whether a worker fits the existing definition of ‘employee’[vii]. The Dependent Contractor Status Test helps classify workers into an intermediate category between employees and independent contractors. A worker is classified under this category if the worker is an independent contractor, earns more than 50% of income from a single client, and is contractually restricted from working outside of the relationship with the mentioned client. Dependent contractors are entitled to more benefits than independent contractors and are eligible for minimum wage, overtime pay, vacation pay, etc[viii].
- This strategy shows greater promise in preserving the workers’ autonomy while providing enhanced protection. It also aligns with the control exerted by gig employers and other employers, including government entities.
Law in India
As a welfare state, India has identified the concerns that emerge with this new category of workers. Hence, the Central Government Ministry of Labour and Employment introduced the Code on Social Security, 2020 (“Code”), consolidating and updating several existing labour laws such as the Employees’ Compensation Act, 1923, the Maternity Benefit Act, 1961 and the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. However, the Code is yet to be implemented. Meanwhile, the State of Rajasthan has already passed the Rajasthan Platform-Based Gig Workers (Registration and Welfare) Act, 2023 (“Rajasthan Act”), becoming the first state to regulate gig workers at the state level. The Rajasthan Act has been enacted along the lines of the Code, whereby platform-based gig workers are recognized as a separate class of workers to whom it seeks to provide various benefits.
On the one hand, the Code acknowledges all traditional employees in the same manner as the previous labour laws and has separate provisions for gig workers. On the other hand, the Rajasthan Act is made exclusively for platform-based gig workers. However, both legislations treat gig workers as a separate class of workers who fall outside the scope of the traditional employer-employee relationship.
Definition of Gig Workers
The Code defines a gig worker as “a person who performs work or participates in a work arrangement and earns from such activities outside of a traditional employer-employee relationship”[ix]. The Rajasthan Act describes a gig worker as “a person who performs work or participates in a work arrangement and earns from such activities outside of the conventional employer-employee relationship and who works on a contract that results in a given rate of payment, based on terms and conditions laid down in such contract and includes all piece-rate work”[x].
The Rajasthan Act defines the term more profoundly and exhaustively. Both definitions agree that gig workers operate outside conventional employment frameworks, and hence, it is inappropriate for traditional employment laws to apply to them. However, the Rajasthan Act provides more clarity to the definition by stipulating that the employment terms of gig workers are governed by their contracts and that gig-work includes all work compensated on a piece-rate basis. Piece-rate refers to payment made based on the number of units of the work performed rather than on time spent on the job.
Schemes
While the Code mandates various provisions for the benefit of employees, Chapter IXof the Code requires the Central as well as the State Governments to frame and notify suitable Social Security Schemes for gig and platform workers on matters relating to their life and disability cover, accident insurance, health and maternity benefits, crèche, and old age protection. It also recommends that each such scheme include:
- The methodology for the administration of the scheme
- The involvement of employers within the scheme
- The financing sources of the scheme
- The designated agency responsible for executing the scheme
Registration Requirement
Gig workers who are registered with the government are deemed eligible to avail of the benefits offered by the scheme formulated by the government under the Code. As per the Code, workers aged 16 (sixteen) and above, having submitted a self-declaration, are mandated to apply for registration, providing necessary documents including, Aadhaar details.
Under the Rajasthan Act, employers of gig workers are required to submit a database of all platform-based gig workers engaged by them to the State Government within 60 (sixty) days of enforcement of the Rajasthan Act. Once registered with a platform, gig workers are automatically registered with the State Government. The State maintains a database of gig workers, regardless of the duration of their engagement with any platform, and assigns each of them a unique ID applicable across all platforms.
Establishment of a Board
Legislations at both the central and the state levels have been crafted to cater to the requirements of gig workers, recognising the distinct nature of their employment arrangements. Both the central and the state enactments have provided for establishing dedicated boards tasked with overseeing and implementing policies concerning the welfare and protection of gig workers. The Code has provided for the constitution of the National Social Security Board. Similarly, the Rajasthan Act proposes the constitution of the Rajasthan Platform-Based Gig Workers Welfare Boards. These boards serve as crucial bodies responsible for giving recommendations to their respective governments for framing suitable schemes, monitoring the social welfare schemes, reviewing record-keeping, reviewing the expenditure from the fund and account, and ensuring registration of platform-based gig workers and aggregators with their governments.
Funding
For schemes introduced by the Central Government, the Code mandates the establishment of a social security fund to which employers of gig workers are bound to contribute 1% (one percent) to 2% (two per cent) of their annual turnover as cess to this fund. Such payment should not exceed 5% (five percent) of the total payment made to gig workers. Additionally, both the Central and State Governments and corporate social responsibility funds of companies may also contribute to the social security fund.
The Rajasthan Act, similarly, has provisions mandating the State Government to establish the Rajasthan Platform-Based Gig Workers Social Security and Welfare Fund. Under the Rajasthan Act, the fund will receive contributions by imposing a welfare fee on every transaction related to platform-based gig workers, like transactions made through food delivery and ride-sharing applications. The Rajasthan Act does not clarify whether the customers of the platforms will have to bear the additional cost. State government grants and contributions by gig workers will also be pooled into the fund.
Karnataka’s take on Gig Workers’ Law
After Rajasthan, Karnataka is soon expected to enact the Gig and Platform Workers’ Bill to safeguard the interests of gig workers. Further, the Karnataka government has already notified the Karnataka State Gig Workers Insurance Scheme, which is being implemented by the Karnataka State Unorganised Workers’ Social Security Board. This insurance scheme provides coverage for both full-time and part-time workers engaged by food and grocery delivery platforms, as well as courier platforms. The INR 4,00,000 (Indian Rupees Four Lakhs) insurance cover includes an INR 2,00,000 (Indian Rupees Two Lakhs) life insurance cover and an INR 2,00,000 (Indian Rupees Two Lakhs) cover for accidents. Gig workers aged between 18 (eighteen) years and 60 (sixty) years, those not liable to pay income tax under the Income Tax Act 1961, and individuals not currently availing the Employee’s Provident Fund (“PF”) / Employee’s State Insurance (“ESI”) benefits are eligible for the insurance.
Case Law Analysis
Indian case laws have defined the degree of control that needs to be exerted by the employer to establish an employer-employee relationship[xi]. Similarly, there are case laws that have examined the status of gig workers and their rights. In Kavita v Uber India[xii], the complainant had booked an Uber cab to the airport. However, the complainant could not reach the airport on time for her flight due to the driver’s fault. She filed a complaint against Uber India Systems Private Limited (“Uber India”) before the District Consumer Disputes Redressal Commission (“Commission”) in Mumbai, claiming compensation. Uber India took the defence that it was only a technology service provider that provided a platform for drivers and riders to interact with each other to avail transportation services. Uber India argued that it was not liable for the driver’s default since the driver was an independent contractor and was individually responsible for his acts. The Commission in its final order dated August 25, 2022, observed that Uber India managed and controlled the Uber application which the complainant used to avail the services. The complainant paid for the services through the app and did not pay the driver directly. While the Commission did not examine whether there existed an employer-employee relationship between Uber India and the drivers, the Commission held Uber India liable for the deficiency of services provided to the complainant. In this case, the complainant relied on the landmark Uber BV v Aslam [2021] UKSC 5 (“Uber”) case decided by the Supreme Court of the United Kingdom (“UK”).
In Uber BV v Aslam, the claimants, who were working or used to work as private hire vehicle drivers, performing driving services booked through the Uber application, filed an appeal primarily seeking the right to minimum wages and the right to receive paid annual leave. These rights are available only to “workers” under the laws in the UK. Under the Employment Rights Act 1996 a worker is “an individual who has entered into or works under (or, where the employment has ceased, worked under) – (a) a contract of employment, or (b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual; and any reference to a worker’s contract shall be construed accordingly.” Examining Uber’s primary argument that the drivers were not workers, the Supreme Court referred to the difference between workers and independent contractors identified in Hashwani v Jivraj [2011] UKSC 40. The distinction between workers and independent contractors was made based on whether the services were rendered for and under the direction of another person in return for which remuneration was paid or whether the rendering of such services was without a relationship of subordination to the recipient of the services. It was also noted that the ability to exclude the application of the statute contractually would defeat the purpose of the law. This is especially true when the contract terms are susceptible to influence by the employer, considering the power disparity between the employer and employee. In the case of Uber, the court observed that drivers were compelled to accept the contracts put forth by Uber to be able to use the application, and the drivers did not have the power to negotiate the terms of the contracts.
In this case, five factors were taken into consideration to hold that the drivers of Uber were workers. First, Uber decided the remuneration that was paid to the drivers and the drivers did not have a say in this. Second, Uber decided the terms on which services were rendered by the drivers including the terms on which passengers were transported. Third, the drivers were not given an unlimited right to decline requests for rides once they logged on to the application. The drivers were penalised for declining requests. This indicated that the drivers were in a position of subordination to Uber. Fourth, Uber also exercised control by vetting the types of cars that were allowed to be used and used customer reviews to decide whether to terminate drivers, once again signifying subordination. Finally, the court noted that Uber ensured that the drivers and passengers communicated only through the application and did not communicate other than for necessary reasons. However, surprisingly, the UK Supreme Court, in the Deliveroocase[xiii] held that Deliveroo riders who deliver food were independent self-employed contractors and not workers. The employment relationship between Deliveroo and its riders was examined to determine whether the riders were entitled to the right to freedom of assembly[xiv]. The court differentiated the Uber case from the Deliveroocase on the ground that, unlike in Uber’s, Deliveroo did not exert significant control over its riders. It was observed that the riders had the freedom to substitute a rider in their place, and therefore there was no obligation on the riders to perform the work personally, which was an indispensable feature of the relationship between employer and employee. Since the court was interpreting the provisions of the European Convention on Human Rights, which was different from the domestic standards in the UK that qualified a person as a worker, it held that the Uber case was irrelevant.
Indian platform workers are also keen on securing rights and the benefits of schemes and preferred a writ petition led by the Indian Federation of App-based Transport Workers (“IFAT”) before the Supreme Court of India on September 24, 2021[xv]. The petitioners have sought a declaration that various ministries, including the Ministry of Commerce and Industry; Ministry of Labour and Employment; Ministry of Consumer Affairs, Food and Public Distribution; Ministry of Electronics and Information Technology; Ministry of Road Transport and Highways, violate Article 23 of the Constitution of India for not recognising gig workers as ‘workers’ under social security laws. The petitioners have also sought recognition as unorganized workers under the Unorganised Workers’ Social Welfare Security Act, 2008, since the Labour Codes are yet to be notified. The matter is currently pending before the Indian Supreme Court.
Conclusion and Suggestions
The discussion above sheds light on the status of gig workers in India. As noted, while the Code and state legislations attempt to provide this clarity, it is possible that implementation of these laws may not be in harmony with each other. Companies that are based in several cities and states across India might find the implementation of the law difficult when gig workers of different states are subject to differential treatment.
As noted above, there is a need to balance interests while conferring a status on gig workers. While providing the ‘employee’ status to gig workers might be beneficial for the workers, there exists the looming threat that organisations may lay-off gig workers altogether owing to the huge liability of providing employment benefits. A solution to resolve this could be the Government choosing to step in and share the financial burden that falls on the employers. Alternatively, gig workers could be classified into a new category of workers, with clarity on who qualifies as a gig worker. The entitlements of this new category will have to be designed in such a manner as to strike a balance between burdening the employers and ensuring labour rights to the gig workers without affecting the flexibility that is attached to the nature of gig work. While it seems that India is moving towards the latter option, there is a need to ensure that gig workers are entitled to some benefits, if not on par with employees. With the legal battle initiated by IFAT pending before the Indian Supreme Court, the fate of gig workers may be rewritten by the court. In any case, organisations may be reminded that contractual terms may not alone determine who an employee is and that courts and tribunals consider the actual treatment of workers in determining the category that a worker belongs to and the consequent rights that the worker may be entitled to.
Authors: Nargees Basheer, Hemant Srivastava, Naasha Anklesaria
Publication Date: June 20, 2024
[i] Assembly Bill No. 5 available at https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB5
[ii]California Proposition 22, App-Based Drivers as Contractors and Labor Policies Initiative (2020) available athttps://ballotpedia.org/California_Proposition_22,_App-Based_Drivers_as_Contractors_and_Labor_Policies_Initiative_(2020)
[iii]Food-delivery giant Deliveroo is pulling out of Germany available at https://qz.com/1685962/food-delivery-startup-deliveroo-exits-germany
[iv]Rajasthan’s Gig Workers’ Legislation: Paving the Way for Transformation?available athttps://indiacorplaw.in/2023/09/rajasthans-gig-workers-legislation-paving-the-way-for-transformation.html#:~:text=Therefore%2C%20developing%20countries%20with%20substantial,costly%20for%20workers%20and%20consumers.
[v]Unique gig economic situation in PH calls for nuanced approach available at https://www.manilatimes.net/2021/05/30/opinion/unique-gig-economic-situation-in-ph-calls-for-nuanced-approach/1801152
[vi] The current scenario for delivery workers in Italy: does a new future await? available at https://portolano.it/en/newsletter/portolano-cavallo-inform-employment-equality/the-current-scenario-for-delivery-workers-in-italy-does-a-new-future-await-
[vii] The Dependent Contractor Test – What Is The “True Substance” Of The Relationship? available at https://www.mondaq.com/canada/employment-litigation-tribunals/973766/the-dependent-contractor-test-what-is-the-true-substance-of-the-relationship
[viii] What courts Say About Rights of Dependent Contractors Should be a Wake-up Call for Businesses available at https://toronto-employmentlawyer.com/blog/employment-contracts/what-courts-say-about-rights-of-dependent-contractors-should-be-a-wake-up-call-for-businesses/?utm_source=organic_search&utm_medium=organic
[ix] The Code on Social Security, 2020 available at https://labour.gov.in/whatsnew/code-social-security-2020-no-36-2020
[x]The Rajasthan Platform Based Gig Workers (Registration And Welfare) Bill, 2023 available at https://aioe.in/wp-content/uploads/2023/09/Gig_Workers_Bill_2023_1690274461.pdf
[xi] Tests to Determine Employer-Employee Relationships in India: Looking towards the Future? Available at https://www.iima.ac.in/sites/default/files/2023-04/WP%202023-04-02.pdf
[xii] Consumer Complaint No: 61/2021 filed before the District Consumer Disputes Redressal Commission on September 15, 2021
[xiii] Independent Workers Union of Great Britain v Central Arbitration Committee and another [2023] UKSC 43
[xiv] Article 11 of the European Convention on Human Rights
[xv] The Indian Federation of App-Based Transport Workers, (IFAT) v Union Of India, WP (Civil) No. 1068 of 2021
