22 November, 2019
The economy driven by technology is making its presence felt in nearly all economic activities of the country! Whether it is the purchase of groceries or clothes or medicines or finding a doctor or booking an airline ticket or hotel reservations or using taxis or buying cooked food or booking tickets for a movie or concert or investing in financial instruments or availing loans, everything is available on online platforms. Not only is it available online but it is being used by consumers in a prodigious manner. Behind the scenes of this technology enabled economy, millions are working to make it happen! These include people with very hi-end skills to people who are doing the last mile work, i.e., delivering / driving, working in call centres, etc. This is the new age economy, which is not entirely based on the model of an employer-employee relationship but based on the freelance workforce where services are provided by workers on a part time or on call basis involving use of digital and non-digital platforms for sourcing work. This is the Gig Economy!
The main component of a Gig Economy is that the workers in the Gig Economy (Gig Workers) are classified as self-employed and independent contractors. Therefore, the Gig Economy provides businesses the opportunity to easily access an on-demand workforce to scale up their operations within a short span of time without undertaking obligations associated with standard form of employment. While lack of a traditional employer-employee relationships provides Gig Workers the latitude to regulate their working conditions by choosing work and assignments from different businesses, this flexibility also keeps such workers out of the protection of traditional employment laws including social security benefits.
Further, even though, the Gig Economy offers many advantages in terms of flexibility to work and in execution of tasks assigned, Gig Workers face a myriad of challenges due to the unregulated nature of the industry such as income instability, lack of proper working conditions, minimum wages and other social security benefits.
Currently, Gig Workers are not covered under the definition of “workers” or “employees” under Indian employment law. However, the Government of India has recently proposed to include Gig Workers within the ambit of the unorganised workforce through the Draft Code on Social Security, 2019 (Social Security Code). The Social Security Code has defined ‘Gig Worker’ as a person who performs work or participates in a work arrangement and earns from such activities outside the traditional employer-employee relationship. In addition, the Social Security Code defines ‘Platform Worker’ as a person engaged in an employment form in which the organisation or individual uses an online platform to access other organisation or individuals to solve specific problems or to provide specific services in exchange of payment. For instance, Platform Workers will include workers engaged through digital platforms like Uber, Ola, Zomato, Swiggy Urban Clap and many others.
Workers under the organised workforce are eligible for certain social security benefits such as insurance, maternity benefit, pension, gratuity etc. which are partly funded by the employer. The Social Security Code has specified that Gig Workers and Platform Workers shall be eligible for life and disability cover, health and maternity benefits, old age protection and any other benefit as may be determined by the Government.
However, under the Social Security Code, the Government while classifying Gig Workers and Platform Workers as part of the unorganized workforce, has not clarified if employers will have an obligation to fund the social security benefits. Further, Wage Code, 2019 has not been made applicable to Gig Workers and offers no guarantee as to minimum wage to Gig Workers. Therefore, while the Social Security Code recognises the need to provide social security benefits, the mechanism has been left open ended up to the decision of the Government.
To analyse the proposed Indian legal system for Gig Workers, it will be necessary to look at some of the key global developments. On 10 September 2019, the State of California has passed Assembly Bill 5 (Bill) which will classify certain Gig Workers working as independent contractor as employees and entitle them to basic labour rights. The Bill if signed by the Governor of California will provide social security benefits such as minimum wage, health insurance and paid sick leave to about a million workers in the State of California. The Bill incorporates the ‘ABC’ test laid down in the California Supreme Court decision in Dynamex Operation West, Inc. v. Superior Court of Los Angeles which states that Gig Workers will be considered as independent contractors if (i) the tasks performed by them fall outside the usual course of a company’s business, (ii) company does not exert control over the manner in which Gig Workers perform their tasks, and (iii) they are customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.
In the European Union, the Directive on Transparent and Predicable Working Conditions (Directive) provides for minimum rights to on demand workers, workers in casual or short time employment, intermittent workers, platform workers, paid trainees and apprentices working 3 hours per week or 12 hours a month on average. The Directive covers Gig Workers within its scope of applicability and gives them minimum protection as to predictable working hours and compensation for cancelled work. Further, Gig Workers can refuse, without any consequences, tasks which are outside the predetermined hours. However, the Directive does not make any provisions for social security benefits or any other protection. Intent of the Directive is to provide minimum protection to all the workers who fall in the above-mentioned category without affording any specific protection mechanism to Gig Workers.
Having said that, the Directive has been able to provide solution to some of the problems pertaining Gig Economy such as refusal of work by Gig Workers, compensation for cancelled work and predictable working hour.
The Indian regime on regulation of Gig Economy envisages extending some social security benefits to Gig Workers, however, the Social Security Code is still in a nascent stage of development and only the test of time will tell if it could be implemented for the welfare of the Gig Workers.
Considering that new age business has a telling role to play in the Gig Economy, over regulating the employee-employer relationships at this stage of the evolution of the Gig Economy may not be beneficial for new age tech companies as it may increase compliance costs and create entry barriers for such tech companies! At the most providing certain benefits such as medical / healthcare insurance, if not covered by other Government programs, compensation for cancelled work, and termination of contracts without cause may assist in further development and growth of the tech companies and the Gig Economy.
For further information, please contact:
Souvik Ganguly, Partner, Acuity Law
al@acuitylaw.co.in
