Saga Legal - Priya Mamgain, Sakina Kapadia
Saga Legal - Priya Mamgain, Sakina Kapadia

Gig Basket of Social Security and Welfare

This article explains the changing landscape of labour relations in light of rising unemployment vis-à-vis the unprecedented growth of the informal economy and the perpetual predicament of misclassification of labour.

Primitively, human resources in the labour market have broadly been classified as either employees (contract of service) or independent contractors (contract for service). With the ever-changing socio-economic structure of India, employment and industrial relations have also undergone a tectonic shift. Owing to the advent of technology and apps on your tap, consumerism has further motivated business units as well as consumers to shift to on-demand services which have fueled the growth of on-demand jobs. 

The attention of the readers is requested to appreciate some of the key factors that have propelled the growth of the gig economy. 

Kick to Gig

Kick to Gig
Kick to Gig

Need for Rejig for Gig - from the Labour Laws standpoint

Notably, the Government of India modelled the Workmen’s Compensation Act of 1923 by taking inspiration from the British law, that is, the Workmen’s Compensation Act, 1897, which established the principle of compensation to workers not as a sanction for a wrongful act but as a liability arising out of a master-servant relationship. Subsequently, other legislations pertaining to Maternity Benefit, ESI, EPF, and Gratuity were rolled out. As per the existing labour law framework, an employee working under an employment relationship gets rights to fair working conditions, minimum wages, income security, ESI, PF, gratuity, paid leaves, right to contest unfair dismissal, etc., on the other hand, gig workers and platform workers do not get similar entitlements. Recently, all social security legislations have been consolidated into the Code on Social Security, 2020 which is hailed as a pioneer legislation in ensuring social security to gig and platform workers. However, a microscopic review of the same reveals a series of inconsistencies, ambiguities, and a connotation of disentitlements. In summary, it does not create any binding obligations on the government to frame schemes to extend all the benefits of an employee such as insurance, health, maternity benefits, etc. to gig and platform workers. Instead, the framing of social security and welfare schemes has been left to the mercy of the State governments as and when framed and notified.  States like Tamil Nadu, Karnataka, and Maharashtra have shown promise to frame the laws to protect the social and labour rights of workers. However, Rajasthan has apparently taken the lead.

The Rajasthan Platform Based Gig Workers (Registration and Welfare) Act, 2023 (“ACT”): Beneficial legislation or another sham?

With the implementation of the said Act, the State has invited more criticism than applause due to the fact that the Act does not extend social security and social welfare to gig and platform workers in real terms. It merely advocates the responsibilities of the welfare boards with no substantive obligations for engaging entities except for the creation of welfare funds and payment of welfare cess.

Further, the ruling passed in Koluthara Exports Ltd. vs. the State of Kerala, AIR 2002 SC 973, wherein the Kerala Fishermen's Welfare Fund Act, 1985, which obligated dealers in fish to contribute to a fund that was to serve as a resource for meeting the requirements to provide for distress relief to fishermen in times of natural calamities was declared unconstitutional by reasoning, “The burden of the impost may be placed only when there exists the relationship of employer and employee between the contributor and the beneficiary of the provisions of the Act and the scheme made there under.” 

The Act is likely to meet a similar fate with the given definitions and legal provisions present in the Act, which defines the relationship of gig and platform workers as a work arrangement outside of a traditional employer-employee relationship, but which invites contribution from the engaging entities/aggregators. 

In light of the above judgement, there is an urgent need to review the validity of the Rajasthan Platform Based Gig Workers (Registration and Welfare) Act, 2023 before any other State follows suit.

In the same vein, it is significant to note the principle which has been acknowledged and emphasized as one of the G20 Labour and Employment Ministerial Declarations, which states that the correct classification will help support the creation of regulations and policies to reduce social protection gaps, help minimise worker exploitation and ensure fair support from employers.

Definition of disenfranchisement

Sections 2(35), 2(60), and 2(61) of the Code, define gig and platform workers. Interestingly, the definition of “gig worker” and “platform worker” has been drafted or rather over explained in a manner to disguise the classification right from the word go. It is still being deliberated at the national and international level that the classification of workers in terms of their employment status is correlated to their rights and access to adequate social welfare. Let us scrutinise these definitions in light of classification tests propounded by various courts in India and abroad.

If we revisit the jurisprudence of labour classification in India and worldwide, conventionally, there have been three tests which determine whether workers are either employees or independent contractors. Let us examine the application and relevance of these tests on the classification of a gig worker (cab driver, personal care provider, delivery person, etc.)

TEST 1: Freedom to choose how the work will be performed (Control)

Upon perusal of this test, it is observed that a gig worker who works under supervision and control (economic or otherwise), who lacks the freedom to select vendors from whom they want to procure, to fix rates of services, to be in the knowledge of location of delivery beforehand and who is verified and evaluated at time of on boarding and throughout his/her engagement based on customer rating and is hired/fired based on such feedbacks will be classified as “employees." 

TEST 2: How well an individual is integrated into or dependent on an engaging entity (Integration)

Testing a gig work on the tenets of this test, a gig worker who is paid, controlled, and supervised by a single appointing authority, has no alternative service, and gets machines, tools, and equipment from the engaging entity will be classified as an “employee.”

TEST 3: The work is performed or mandated to be performed by the workers personally and other factors depending upon the circumstances (Multi-factors)

Going by this test, a gig worker who works in an arrangement via an implied or expressed contract which obligates him/her to deliver services personally upon instructions of its engaging entity or other factors such as the presence of control, integration, mode of remuneration, nature of work, ownership of tools, economic control exercised by the engaging entity would render his/her classification as an “employee."

Classification test through global lens

Classification through Global Lens
Classification through Global Lens

Gig industry reality check

Reportedly, cab drivers running the Telangana Gig and Platform Workers’ campaign in Hyderabad called for #LowFareNoAir to boycott rides to and from the airport if fares are less than ₹ 2,000.  Similar noise was heard when one of the delivery apps rolled out its new payout structure for delivery partners, under which the minimum payout per delivery has been slashed which has resulted in a significant earnings drop for the delivery workers. On the contrary, some Indian corporations have made policies to ensure that all gig workers on their platforms earn at least the local hourly minimum wage after factoring in their work-related costs (that is, transport in between jobs, supplies, vehicle repair, and maintenance, fuel, road tolls and vehicle insurance. However, it does not include transport to and from the job, unless in between tasks, nor taxes, social security contributions, or health insurance).

Globally, in the UK, a cab aggregator had to guarantee its drivers minimum wage after it lost a legal battle over the drivers' status. The regulators in the Republic of China ordered online platforms to ensure food delivery riders earn above the country's minimum wage and have access to insurance coverage. While the legislative mandate appears to be a work in progress and the judiciary is expected to opine in due course of time, business units engaged in the gig economy seem to have finally woken up to the call of social welfare.

Food for thought

  1. Recommendation of the Standing Committee on Labour with respect to (i) expanding the definition of “unorganised workers” to include gig and platform workers, (ii) making the definition of “gig worker” more specific to avoid misinterpretation, should be reconsidered. 

  2. While ILO has acknowledged the emergence of a new category of labour in some of its literature, legally binding guidance on this subject is awaited. 

  3. Non-inclusion of corresponding definitions in the Occupational Safety, Health, and Working Conditions Code, 2020, and the Industrial Relations Code, 2020 shows a lack of will of the government to extend social security and welfare to gig and platform workers.

  4. In the process of drafting social security laws and welfare schemes for gig and platform workers, State governments should also take into consideration the industry-specific guidelines, if any.  In this context, it is pertinent to note that the Ministry of Road Transport and Highways has issued Motor Vehicle Aggregators Guidelines, 2020, wherein, insurance and working conditions related obligations of the aggregators are mentioned irrespective of classification of workers. 

  5. Indian Jurisprudence needs to evolve and is expected to introduce innovative tests for classification of workers.  Especially, when gig workers are being increasingly recognised as employees in other jurisdictions like the UK, USA, Switzerland, and New Zealand. 

While we legal eagles will be all ears to upcoming developments in the PIL filed by the Indian Federation of App-based Transport Workers (IFAT), it is urged that humans should not be seen and treated as services. We, as a welfare state, and users of these fancy apps need to do a lot more to realise the constitutional mandate and deliver our international commitments to give social security as well as social welfare access to all. 

About the authors: Priya Mamgain is a Partner and Sakina Kapadia is an Associate at Saga Legal.

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