The Gig Economy And Future Of Labor Law
Author: LawSphereX
Category: Labour & Employment
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THE GIG ECONOMY AND FUTURE OF LABOR LAW
Meharnit Bhamrah, Maharashtra National Law University Mumbai Introduction What is a gig economy? The gig economy simply relates to a labor market trend within which workers engage temporarily and in projects rather than holding permanent positions. This model has proved popular in the last few years because of improvements in technology such as the internet and apps that help link workers with employers or clients. Platforms include:
1. Uber: A transportation network company which enables drivers to be available to work
at certain hours.
2. Airbnb: An agency to let out private space for tourists and visitors for e.g. homestays.
3. Freelancer.com: A platform for independent workers offering writing to graphic design
services among them. Gig workers operate outside the traditional realm of employer-employee relationship, often engaging in part-time work provided by platforms like swiggy, Zomato, Urbanclap, Blinkit, Zepto etc. Since they are allowed to work on their own time and terms this flexibility is attractive especially if they are looking for a supplementary source of income or just entering the workforce. However, this is a double-edged sword as it comes with little to no labor law protection and unstable income. In India, existing labor laws primarily recognize three categories of employees: 1) government employees 2) employees in public sector undertakings, and 3) private sector employees. Unfortunately, gig workers do not fit neatly into any of these categories, which results in a lack of access to essential benefits such as minimum wages, overtime pay, and social security protections. The absence of specific legislation addressing gig work means that these workers often face exploitative contracts and are unable to form unions to advocate for their rights. A
significant problem is the misclassification of gig workers as independent contractors rather than employees. This distinction is critical because it determines the application of labor law and the employer's obligations regarding wages, social security and working conditions. Growth of gig work in India According to a report, India is home to 230 million smartphone users, with the advent of the internet and technology has facilitated the rise of digital apps. Workers can now directly provide their services and get in touch with clients. After COVID-19 pandemic, with the closing down of establishments and factories indefinitely, workers from the unorganized sector were left severely unemployed, so they utilized the digital platforms. In India, on the other hand, the capacity utilization is much more aggressive – Zomato delivers 1.3 m orders a day from 150k restaurants across India at more than 10 orders per restaurant per day1. According to International Labour Organisation, the gig workforce is expected to expand to 2.35 crore (23.5 million) workers by 2029-302. Due to economic liberalization of the country in 1991, the government is slowly moving towards a laissez faire model, India is now an open market, to keep up with the growing competition. Young adults and workers prefer flexibility over a 9-5 model of work, thus they take up jobs on the side to sustain themselves, while simultaneously pursuing other things. The fast rise to E-Commerce has resulted in huge increase in demand for delivery and logistics services3, thus leading to expansion of the gig economy in both metropolitan and small cities. The Supreme Court of India is currently considering a case that could redefine the employment status of gig workers, highlighting the need for a hybrid category that recognises the special nature of gig work. There is a growing consensus on the need for a hybrid employment model for gig workers. This model offers limited rights and benefits and shares responsibility between the hiring company and the gig worker. Such a structure helps ensure that gig workers also have the same protections as traditional workers, while essentially maintaining the flexibility that gig work offers. The Indian government realizes that the gig economy has the potential
1 “How India Is Coming of Age – A Zomato Story” <https://blog.zomato.com/real-india>
2 NITI Aayog and others, “India’s Booming Gig and Platform Economy: Perspectives and Recommendations on the Future of Work” (2022) <https://www.niti.gov.in/sites/default/files/2022- 06/Policy_Brief_India%27s_Booming_Gig_and_Platform_Economy_27062022.pdf> 3 “Rise of the Gig Economy in India” (Drishti IAS) <https://www.drishtiias.com/daily-updates/daily-newseditorials/rise-of-the-gig-economy-in-india>
and has implemented measures towards encouraging the masses to venture into gig work since it enhances entrepreneurship. Globally, various jurisdictions are exploring regulations to protect gig workers. The European Union, for instance, has proposed a Platform Work Directive aimed at improving working conditions for platform workers (elaborate). These international efforts highlight the need for comprehensive legal frameworks that address the unique challenges posed by the gig economy Challenges to Traditional Labor Laws Gig workers often lack job security as they are employed on a project or assignment basis rather than as permanent employees, due to the peculiar nature of their employment, gig workers are often misclassified as independent workers rather than employees, facing several challenges like lack of basic employment benefits like minimum pay, no access to healthcare, no social security benefits like maternity benefit, sick-leave etc, thus leaving them more vulnerable as compared to traditional employees. This precarious employment situation can lead to financial instability and uncertainty about future income and this irregular nature of their job makes it difficult to make ends meet and plan for the future. For e.g. a delivery driver may not be able to be granted maternity benefit by any authority. Currently, the code of Wages, is the only labor code in operation that aims to provide for universal minimum wage and floor wage across organized and unorganized sectors which include gig workers. It, inter alia, provides for fixation of minimum rate wages on a time work basis with any one or more wage periods, namely by the hour, by the day or by the month. Besides, the Code mandates the Central Government to fix floor wage applicable across the Central and the State sphere. Section 9 of the Code lays down that the minimum rates of wages fixed by the appropriate Government under section 6 shall not be less than the floor wage4. These provisions are not in force. These are the following challenges:- Low Pay A study conducted by People’s Association in Grassroots Action and Movements, and the
Indian Federation of App-based Transport Workers, with technical support from the University
4 AMARAPPA S and others, “MINIMUM WAGE FOR GIG WORKERS” (2021)
<https://sansad.in/getFile/loksabhaquestions/annex/177/AS308.pdf?source=pqals#:~:text=(a)%3A%20The%20 Code%20on,day%20or%20by%20the%20month.>
of Pennsylvania and Friedrich-Ebert-Stiftung India, a German foundation founded that around 43% of gig workers, despite working for more than 15 hours a day, earn less than Rupees 500 to 15,000 a month after deducting all their expenses5. In addition to that the meager amount of tips provided by a small percentage of users weakens their case thus making it difficult for them to make ends meet. Unequal Bargaining power Gig workers often lack the power to negotiate for fair pay and compensation, given there is no dearth of workers, this vulnerability is often exploited by various employer platforms, a report of 2023, suggested that only a no. of digital platforms pay minimum wages to their gig workers, in addition to this the temporary nature of their work forgoes the need to build a long- standing relationship between employer and employees. Freelancers may not hold health insurance for medical care, unemployment benefits or pensions like those,”desk-jockeys” do. What this leaves them with is no financial safety nets to rely on anytime the economy turns a negative corner or in case individuals experience disastrous incidents. Platform accountability Platforms misclassify gig workers as independent contractors thus absolving themselves of all liability in case of accidents and mishaps, thus the government should impose responsibility on platforms to draft clear and proper terms of contract to provide necessary support in the times of crises as well as have transparent policies related to pay structure, work hours and grievance redressal. Inability to form legal organizations Due to the remote nature of their work, they do not fall under the ambit of ‘employee’ which prevents them from forming labor unions to advocate for their rights such as minimum pay, social security benefits and right to proper working conditions as guaranteed by the Indian constitution under article 43. 5 Jigeesh AM, “Gig Workers Suffer from Lack of Social Security, Regulations: Study” (The Hindu, March 11, 2024) <https://www.thehindu.com/news/national/gig-workers-suffer-from-lack-of-social-security-regulationsstudy/article67936093.ece>
Employment in the gig economy is often informal which means that gig workers do not have a formal bank account and unpredictable earnings. That is why employment history or at least stable earnings are necessary to get loans or credit. However, when the gig workers are able to secure credit, they might get it at a higher interest rate mainly because of perceived risks by the lenders which makes the situation worse. However, financial institutions and banks are recognising this nature of work and are taking appropriate measures to cater to the needs, recently HDFC Bank launched GIGA, a financial suite specifically built for gig workers and freelancers. The plan attempts to meet the financial demands of India's growing gig economy. The services offered to freelancers by GIGA cover a wide range of flexible financial solutions, savings and retail financial products and investment forms. Additionally, having a GIGA business debit and credit card gives a freelancer cashback, rewards, and carefully selected deals. Health insurance from HDFC Ergo TPA is also possible, offered at Rs 20 per day. Payment orchestration is simplified through SmartHub Vyapaar while payment collection across the world is made possible through integration with Razorpay and Payoneer in 190 + countries6. They include the services which will be targeting the financial and operating needs of gig workers.
3. Recent judicial precedents and Proposed solutions
The Indian Federation of App-Based Transport workers (IFAT), has filed a PIL questioning the “Right to Social Security” for all working individuals. While seeking the legal recognition of gig workers as ‘unorganized workers’ under the social security laws indicate that the Zomato, Swiggy, Ola, Uber and similar other forms of digital platforms’ workers need to be protected by law. It focuses on problems they encounter including being exploited, earning little, and no access to medical care. It wants particular social security provisions for equitable gig economy workers that have not been extended to them in their entirety such as health insurance, maternity benefits and pensions. Gig workers challenge the platform's framing of their work as a partnership, asserting they have an employer-employee relationship with the platforms7.
6 “HDFC Bank Announces GIGA, Financial Product for India’s Gig Workers” (Business Standard)
<https://www.business-standard.com/finance/personal-finance/hdfc-bank-announces-giga-financial-product-forindia-s-gig-workers-124083000549_1.html>
7 Naveen Kumar and Naveen Kumar, “Regulatory Framework and the Protection of Basic Rights of Gig
Workers” (Bar And Bench - Indian Legal News, May 16, 2024) <https://www.barandbench.com/law-firms/viewpoint/regulatory-framework-and-the-protection-of-basic-rights-of-gig-workers>
All India Gig Workers Union v. Uber India Systems Pvt. Ltd8, where gig workers have taken a stand against Uber's practices, challenging the company's refusal to provide minimum wages and social security benefits. This highlights the prevalent struggle for fair compensation aiming to redefine the employer-employee dynamics within these digital platforms with the evolving gig sector. Kavita S. Sharma v. Uber India9, due to negligence of an Uber driver,the passenger missed his flight and sued uber under the Consumer protection Act, Uber while acknowledging the conduct of the driver absolved itself of the liability by pleading that partner drivers are “ independent third party contractors not employed by Uber”10,thus adopting a hands-off approach. The court held Uber liable under the Consumer Protection act but did not engage with the questions of social security and employee-employer relationship. In the case of Birdhichand Sharma v. The First Civil Judge, Nagpur 11The Supreme Court addressed whether bidi rollers were workers and concluded that if the operation was basic and did not require constant monitoring, control might be applied at the end of the day by rejecting bidis that did not meet the necessary standard. Such control by the employer was sufficient to constitute the workers employees of the employer, rather than independent contractors. In another case, “A person can be a servant of more than one employer. A servant need not be under the exclusive control of one master... There is, of course, no reason why a person who is only employed part time, should not be a servant and it is doubtful whether regular part time service can be considered even prima facie to suggest anything other than a contract of service” as held in Silver Jubilee Tailoring House and Ors. V. Chief Inspector of Shops and Establishments12. In the same vein, intermediaries like Ola, Zomato, Amazon can be held liable for the actions of their “independent contractors” if they play an active role in provision of goods and services as held in Amazon Sellers v. Gopal Krishnan and Vadiraja Rao v Flipkart13.
8 All India Gig Workers Union v. Uber India Systems Pt. Ltd. (2023).
9 Kavita sharma v uber
10 Review C and CL, “KAVITA v. UBER INDIA: DIVERGENCE OF LIABILITY AND EMPLOYMENT IN THE
GIG-ECONOMY?” (Tcclr, November 9, 2022) <https://www.tcclr.com/post/kavita-v-uber-india-divergence-ofliability-and-employment-in-the-gigeconomy#:~:text=The%20rationale%20is%2C%20that%20under,more%20than%20a%20mere%20intermediary.>
11 Birdhichand Sharma v. The First Civil Judge, Nagpur (1961) II LLJ 86 SC
12 Silver Jubilee Tailoring House and Ors. V. Chief Inspector of Shops and Establishments, AIR 1974 SC 37 13 “Defrauded and Disorganised: Gig Workers in India” <https://aicctu.org/workers-resistance/v1/workersresistance-jan-2023-special-issue/defrauded-and-disorganised-gig-workers-india#_ftn4>
4. International Comparisons
In the market, independent contractors are cheaper to hire as compared to workers and employees, they are not entitled to the same benefits as the latter such as (i) social security (ii) access to healthcare, paid leaves (iii) guarantee of minimum wage etc.In case of misconduct, employees also attract legal action against their employers, in contrast to independent contractors who are pretty much responsible for their own conduct. Additionally, most employment anti-discrimination and worker protection laws only protect employees, not independent contractors. Big companies like Lyft and Uber adopt the cheaper working model of hiring independent contractors to avoid accountability and mint more money. On February 19, 2021, the U.K. The Supreme Court ruled that Uber drivers in the U.K. were “workers” and not independent contractors. This meant the drivers were eligible for a variety of employment protections, such as minimum wage, paid annual leave and whistleblower protections from retaliation. In the U.K., the term “worker” can have a comparable legal meaning as the term “employee” does in the U.S14. The Court based its conclusion partly on Uber's amount of supervision over its drivers, it unilaterally defines the terms of their ‘employment, penalsing them for non-compliance with standards like maintaining a particular rider acceptance rate, and limiting what drivers’ interaction with the clients. This ruling, however, does not bind American courts Misclassification of workers can lead to hefty fines and legal repercussions. The Employment Status and Worker Regulations of 2023 have introduced more rigorous tests, emphasizing factors like control, supervision, and integration into the business15. While gig workers do not enjoy traditional benefits like minimum leave and overtime allowances, recent rulings have obliged upon organizations to make specific arrangements for the same. European countries like Spain and France also recognise delivery riders and uber riders as “employees” and salaried staff.
14 Spiggle T, “Gig Workers as Employees: Why America Won’t Follow the U.K. Anytime Soon” Forbes
(February 26, 2021) <https://www.forbes.com/sites/tomspiggle/2021/02/26/gig-workers-as-employees-whyamerica-wont-follow-the-uk-anytime-soon/> 15 Davenport Solicitors, “Relation of the UK’s Gig Economy and Employment Law” (Davenport Solicitors, September 17, 2024) <https://davenportsolicitors.com/blogs/understanding-the-relation-of-the-uks-gigeconomy-and-employment-law-a-practical-overview/>
Position in U.S. The United States may encounter some challenges in repositioning gig workers as employees like in the U.K. AB5 faces challenges owing to partisanship in congress, antagonism from states, and the US Supreme Court that leans right. The California experience of Proposition 22, several benefits to workers, including: (i) guaranteed minimum earning (ii) stipend to help pay for health insurance (iii) Medical coverage for on-the-job injuries (iv) Protections against discrimination and sexual harassment (v) Reimbursement for vehicle expenses provided on a per-mile basis, however these benefits are not at par benefits guaranteed to employees; this illustrated how gig companies bypassed and circumvented strict classification legislation while offering meager benefits. The Biden administration makes it difficult to classify employees as contractors. The county labor enforcement office in Denver, Colorado, recently issued citations to two gig companies that were hiring workers as dishwashers and bus boys as independent contractors rather than employees, this by its very nature disenfranchises them from availing minimum wage, accepting tips from customers and right to safe working conditions16. In the Indian context, the status of gig workers as employees or workers remains a question of debate. They do not fall under the ambit of any labor laws, the social security code 2020, defines them as “those who lie outside the traditional employer-employee relationship are entitled to social security benefits that are yet to be notified”17. With little to no legal protection, they are left to fend for themselves. Government measures There have been a few government policies and programs for the empowerment of the informal sector workers Pradhan Mantri Shram Yogi Maan-Dhan scheme, It is a voluntary and contributory pension scheme which protects unorganized workers mostly engaged as home based workers, street vendors, mid-day meal workers, head loaders, brick kiln workers, 16 “Gig Economy: US ‘under-Resourced’ to Enforce Employment Laws” <https://inance.yahoo.com/video/gigeconomy-us-under-resourced- 183902806.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig= AQAAAHeIQzykFizB4A- IPBx__rOzTWtg5gcAImFKgRr44SEyUMp9vBZpLegFBFJMbG7U_O9gGBdPCf3L6nH2fLtYN- XyieEnGQnquEJb_vf- LnimWeYbypod0csAqJ6XayLIriOC1Q2sCcrpd0lEehNqOsEKHmn1ff151swhNwYBHrws>
17 Mohanty P, “US Europe Lessons for Gig Economy Law” Fortune India (December 8, 2022)
<https://www.fortuneindia.com/long-reads/us-europe-lessons-for-gigeconomy-law/110665>
cobblers, rag pickers, domestic workers, washer men, rickshaw pullers, landless laborers, own account workers, agricultural workers, construction workers, beedi workers, handloom workers, leather workers, audio- visual workers and similar other occupations whose monthly income is Rs 15,000/ per month or less and belong to the entry age group of 18-40 years18, additionally they should not be liable to pay tax. PM-SYM provides assured income post 60 years of age with a minimum pension of ₹ 3000/- per month for the beneficiary. Should the subscriber die, the pension is divided where the spouse is given half of it. It means if the subscriber dies before the age of 60, the spouse has an option of continuing to contribute towards the scheme or to opt out. Contributions are made via auto-debit from the subscriber's bank account, with the Central Government matching the beneficiary’s age-specific contribution on a 50:50 basis. The ministry of labor launched and Employment launched the e-Shram portal, this aims to 38 crore unorganized workers such as contract and migrant workforce by granting them access to medical compensation of up to 2 lakh rupees in case of death or permanent disability, workers will be provided an e-Shram card containing a 12- digit number.19 This came into force when the Supreme Court mandated the government to complete registration of unorganized workers, with special focus on distressed categories like midwives, head load carriers, beedi workers and Domestic workers, Fishermen and women, Barbers, Vegetable and fruit vendors, News paper vendors etc. Despite the efforts of government and law enforcement authorities, most of the gig workers remain blithely unaware of such schemes and programmes, additionally, applicants often face various roadblocks while applying for the plan. In 2023, Rajasthan became the first Indian state to enact the Rajasthan Platform-Based Gig Workers (Registration and Welfare) Act, the legislation defines gig workers as those who earn money outside of regular employment by performing contracted services with particular payment terms. It established the Rajasthan Platform-Based Gig Workers benefit Board, which will register workers, aggregators, and main employers, regulate social security systems, and administer a benefit fund. Violations can result in fines, and workers can seek remedies for statutory rights violations through the appropriate authorities. This legislation is consistent with India's growing strategy to recognise and provide benefits for gig and platform workers, and
18 “PM-SYM Ministry of Labour & Employment|Government of India” <https://labour.gov.in/pm-sym>
19 “E-Shram Portal” (Drishti IAS) <https://www.drishtiias.com/daily-news-analysis/e-shram-portal>
also precedes the national Social Security Code of 2022, which has yet to be completely implemented across states20. Conclusion The paper, therefore, suggests that flexibility and social security are ideal approaches to safeguard gig workers in India. The Social Security Code 2020 has also been enacted to extend the ambit of social security to the informal sector workers but the extensive social security coverage is still a distant dream. The future threats lie ahead – India will continue to grow older whereas its people receive little to no social security. The subject of social security provision should largely be sponsored by the employers because they benefit significantly from the productivity of the workers. The government and the employers’ organizations need to work together to enable, structure the gig economy and come up with policies that safeguard gig workers. In addressing the India government to deal with issues in the gig economy, it is recommended that there should be stringent rules formulated to safeguard the gig workers as well as to ensure that companies complied with the laws on their gig economy workers. Social security programs, pension, health insurance and other facilities must be provided to gig workers and labor rights including union formation, etc. Education and training expenses raise the level of mastery of the personnel and their wages. Also, it promotes fair competition and innovation by banning workers misclassification and providing opportunities for business with tax incentives. Another feature of empowering women in the gig workforce is improving the enabling structures for the same. 20 Manupatra, “Articles – Manupatra” <https://articles.manupatra.com/article-details/India-s-Gig-Economy-A- Legal-Minefield>