ANALYZING SELF-RELIANCE IN GIG ECONOMY: LABOUR LAW REFORMS AND THE WAY FORWARD
- Shruti Chaturvedi*
There has been a perceptible shift in the manner the businesses operate in India. The COVID-19 pandemic has substantially altered the way the markets function and has underlined the role of remote working. The emergence of work from home practices, freelance work, and remote contract based work has changed the labour market landscape from job oriented to contract based system in India. In a study conducted by IBEF, a Trust established by the Department of Commerce, Ministry of Commerce and Industry, Government of India, it was revealed that nearly 15 million freelance workers are staffed in projects across IT, HR and designing. The ‘online labour platforms’ which are known as global remote gig economy are expected to provide 350 million gig jobs by 2025 in India. Further, ASSOCHAM reported that India’s gig sector has the possibility of expanding to US$455 billion by 2024.
Gig-economy is seen as a unique opportunity to drive unconventional work, formulate start-ups, enhance business models and upgrade skill based jobs in India. The expansion of gig sector directly aligns with the object of ‘Self- Reliant India’ of the Indian Government. The digital nature of work transcends geographical boundaries and makes work and business possible from anywhere to everywhere. The sectors such education, information technology, marketing and sales, customer support services and the like continue to demonstrate their expansion and dependability in India. The ‘Gig Revolution’ brings with it flexibility, freedom, choices, multi-tasking and multi-skilling.
However, this emerging model of employment is far from transparent as it seldom provides social security or desired minimum wages to the ‘independent contractors’. The firms circumvent the laws protecting the rights of the workers arguing that they are not workers in traditional sense. Emphasis is supplied on the words ‘independent contractors’ or ‘freelancers’ to keep the gig economy informal, unregulated and unorganized. The formalization requires legislation, regulations and corporate governance to protect these micro-entrepreneurs and push for fairer contracts, working hours, minimum wages and codified social security.
Therefore, the researcher in this paper would analyze the significance of gig economy for a self-reliant India and intends to highlight the loopholes in the legislative framework protecting the labour rights of these workers. The author would begin by defining gig economy, the pros and cons of gig economy and would highlight the need for social security benefits for the gig workers. The paper intends to analyze the role of new Social Security Code, 2020 in bringing about a fairer set of relationships between the employing class, the governing class and the working class. Lastly, the research papers delves into comparing the labour laws protecting gig workers in India with those protecting Industry 4.0 workers in UK and the USA, finally discussing the way forward.
Gig Economy and Self Reliant India: A Perspective
Gig Economy refers to a kind of economic set up where the short period of work is available to an individual rather than a fixed or permanent job. The workers are paid on hourly basis depending upon the nature of the work, which usually has to be completed within a specified time period. The workers are provided with the work on temporary or freelance basis or part-time basis. The wages are paid in piece-rate after the completion of the work.
The prime examples of such nature of work are cab services such as Uber and Ola, food delivery services such as Swiggy and Zomato, part-time work on Urban Pro, teaching platforms, translator jobs, content writers and much more. The digital boom and technology driven work has provided many platforms to develop and offer digital services. The pandemic has especially contributed towards work from home jobs on online platforms, home-delivery services, online teaching platforms, food delivery services and many similar digital services. The expansion of digital platforms and services has connected customers with service providers, constituting India’s booming gig economy. As per the Oxford Internet Institute’s Online Labour Index, India is home to the highest number of gig workers, with 24% of global online labour,
Gig work has particularly attracted millennial population as an alternative to contemporary work opportunities. The flexible working hours, relative independence, option of choosing work, and easily accessible digital platforms are the key elements attracting the youth towards freelance or part-time work.
For instance, a student can study as well as work as a freelancer to support his daily expenses. A teacher can be a part-time content writer to explore his passion towards writing or earn few extra bucks. A youngster of limited means can work as a food delivery worker due to emergence of new digital platforms. The technological advancement has played a key role in mushrooming of big, medium and small enterprises with variety of works such as Human Resources, Designing, Sales, Marketing, Content writing, Promotional Services, Customer Support Services and Door-step services. All kinds of services can be accessed by the customers on single tap on their digital devices. Nowadays, even medical advice, delivery of medicines, therapist guidance and even research work can be carried out with the help of online platforms. This has resulted in multiple work opportunities across sectors, both skilled work and non-skilled work.
The independent, or on-demand, or crowd-sourced collaborations make it easier for the companies to hire individuals for specific purposes and reimburse them according to work. The traditional employer-employee mechanism often acts as roadblock when the work sought to be done is not for a longer duration or does not require a permanent position. Hence the flexibility in form of gig work enables companies to grow and expand at lesser costs. The new avenues of work with the help of fresh talent and new ideas helps in creation of new work opportunities with directly aligns with the goal of self-reliant India. The traditional role of companies from being primary suppliers of goods and services is changing to them being only second component. Their main function now is to directly connect worker and consumer for accessing goods or services.
However, the flexibility in mechanism of working and temporary nature of work, has subjected the gig workers to unfair and less than transparent working terms and conditions. They have limited access to minimum wages, they are subject to arbitrary terms and conditions and lack collective bargaining power for their welfare measures. The new Social Security Code, 2020 (‘the Code’) however has made an attempt to extend certain social security benefits to gig workers and platform workers. This paper shall discuss the provisions and its shortcomings to suggest fair, transparent and better protected labour welfare regime in India.
Gig Workers and the Indian Legislative Framework
Social Security Code, 2020: An Overview
In an attempt to assimilate and bring about an overhaul in the labour law regime, the central government in 2019 introduced four set of legislations addressing different aspects of the labour law. The four codes were the Wage Code, the Social Security Code, the Occupational Safety, Health & Working Conditions Code and the Code on Industrial Relations.
The Code that concerns the gig-workers, or freelancers or platform workers is the Code on Social Security, 2020. The gig workers have been defined and given certain legal protections vis-à-vis social security net under this code. The Code on Social Security will merge and replace previously existing legislations providing social security to employees in the form of maternity benefit, provident fund, pension scheme, and compensation among others.The particular laws that would be subsumed under the new Code include Employees’ Compensation Act 1923, Employees’ State Insurance Act 1948, Employees’ Provident Funds Act 1952, Maternity Benefit Act 1961, Payment of Gratuity Act 1972, and Unorganized Workers’ Social Security Act 2008. The Social Security Code, 2020 was to be implemented on April 1, 2021, however, its enforcement has been deferred sinedie.
The earlier Acts had different applicability and coverage and they had segregated the employees on basis of nature of work resulting into multiplicity and complexity of the laws. However, the new Code is aimed at bringing about a uniformity in laws that seek to provide social security benefits to the employees. The Code not only intends to simplify the laws but also intends to expand the coverage of the employees to a wider group so that the social security benefits could be extended to workers in unorganized sector and those emerging in the new forms of employment. The change in nature of work, demand of work and change in nature of traditional employer-employee relationship has generated new concepts such as gig workers, platform workers, fixed term employee etc.
The government has also made efforts to recognize these forms of work and extend social security benefits to gig-workers, who otherwise were not covered in any of the previous labor law legislations. Through this research paper, an attempt would be made to analyze the provisions relating to gig-workers vis-à-vis social security and highlight the gaps in the legislation so as to formulate better policies for protection of the Industry 4.0 workers.
Defining Gig-Workers and Platform Workers
Section 2(35) of the Social Security Code, 2020 introduces the term gig worker and defines it as “a person who performs work or participates in a work arrangement and earns from such activities outside of traditional employer-employee relationships.”
The term gig-worker can colloquially be understood to mean person involved in hourly or part-time work which is temporary in nature and is performed under non-standard work arrangement. Generally, the work has to be completed within a specified time frame and payment is made accordingly. The nature of such jobs ranges from catering events to translators to software developers to online tutors. Some other common names that denote gig workers include contingent workers, freelancers and independent contractors etc.
Another emerging nature of worker that has been recognized and defined in the Code is the term ‘platform worker’. Section 2(61) defines platform worker as “a person engaged in or undertaking platform work”. To understand the definition in better terms, the definition of ‘platform work’ as defined in Section 2(60) needs to be understood. Platform Work refers to work-arrangement which is not a traditional employer-employee relationship. In such kind of work, online platform is used by individuals or organizations to seek specific services or solutions to specific problems in lieu of payment. These activities may also include other activities as and when notified by the Central Government. The example of cab services, or food delivery services can be taken into account to comprehend the nature of work covered under the definition of platform work, and consequently, platform worker.
Scheme of the Code on Social Security
Under the Code, the Central Government has been empowered to formulate social security schemes for gig workers and platform workers. Section 114(1) provides the power to the Central Government to frame and notify such schemes. The subject-matters given under Section 114(1) include life and disability cover, accident insurance, health and maternity benefits, old age protection and crèche. An additional clause has been put in the section giving free hand to the government to formulate schemes on ‘any other benefit’ as deemed appropriate by the Central Government.
The earlier Labour Law legislations did not extend such security benefits to the gig workers and the platform workers. However, the Central Government, under the new Code, may wholly or partly fund the welfare schemes for such workers. Apart from the Central Government, the State Government may also set up a separate social security fund for the workers. The State Government may partly fund the schemes and the beneficiaries or aggregators may also partly fund it. The aggregators that have been specified by the government under the Code include are ride-sharing services, food and grocery delivery services, content and media services, and online marketplaces. The schemes may also be funded by the obligations under the corporate social responsibility mentioned under the Companies Act, 2013.
The providing of social security benefits has been made mandatory for the employers. The companies employing gig workers have been mandated to allocate 1-2% of their annual turnover or 5% of the wages paid to gig workers, whichever is lower, towards the social security funds meant for gig workers.
The availing of the social security benefits has made subject to the registration by the gig worker or platform worker on the portal specified by the Central Government. The Section 113(1) of the Code makes it mandatory for the workers to get registered and Rule 50(2) made in furtherance of the Code specifies the details for the registration. The Rule specifies that every eligible gig worker or platform worker shall make a self-declaration to this effect and proceed to register himself with Aadhar Card details, on the specified portal.
Social Security Code: Issues and Challenges
The first and foremost issue that arises under the Code is the unclear and overlapping definitions provided for Gig Workers and Platform Workers. In both the concepts, the traditional employer-employee relationship is absent and the substantive distinction between them has been left unstated. Similarly, the concept of gig workers overlaps with the concept of self-employed worker. Taking an instance of a cab driver, it can be pointed out that there is no traditional employer-employee relationship, the work is unregulated one, payment differs on the basis of actual work carried out, no appointment letter is issued and no social security benefits are provided.
The cab driver may also choose to work for other employer simultaneously and the function is carried out using an online platform such as Ola or Uber. This particular instance can be put under the category of gig worker, platform worker as well as under the category of self-employed person. Due to the overlap in the definitions and the lack of categorization and distinction between the nature of workers, it is difficult to comprehend how the specific schemes would be made applicable to gig workers and platform workers. Further there is no clarity on availing or transfer of these benefits if the worker chooses to work for multiple platforms or decides to switch between platforms or organizations.
Secondly, the registration of gig workers and platform workers has been made mandatory on the portal specified by the Central Government. However, it needs to be noted that there is provision for registration of unorganized workers on portals specified by State Governments in various states. Consequently, a question arises about the multiplicity of the registration by worker who would fall under the category of both unorganized worker and gig worker. Further, the issue with respect to transfer of data on State Government’s portal to portal proposed by the Central Government takes center-stage. The scholars have been asking whether data of the registered workers’ on the State portal will be transferred to the proposed Central portal or existing beneficiaries would be required to register afresh.
Thirdly, there has been a debate around the clarification of the word ‘turnover’ used in the provisions relating to social security funds. As stated earlier, the employers or companies are required to contribute 1-2% of their annual turnover or 5% of the wages paid to gig workers, whichever is lower, towards the social security funds meant for gig workers. The companies have been contesting the usage of the word turnover of the company to mean that the unit that hires gig workers. In order to avoid undue burden on their revenues, the giants such as Amazon, Flipkart, Ola and Uber etc. wrote to the Ministry of Labour to make clear what base has to be used to calculate the contribution of the company towards the social security fund. They heavily insisted that ‘turnover’ should mean revenue for just the unit that hires gig workers and not the company’s overall turnover. The companies that are obligated to contribute towards social security schemes have expressed concerns regarding the cost impact that the contribution is going to have on their businesses. The bringing of gig workers and platform workers under the social security net, undoubtedly, will make a cost impact on businesses, especially medium and small businesses.
The concern has also been expressed over the evident overlap between the guidelines formulated for motor vehicles aggregators and the obligations to contribute towards welfare schemes under the Social Security Code. Both the guidelines make it mandatory for the aggregators or the companies to extend insurance and health benefits to the cab drivers. The industry professionals have demanded that these issues be redressed and resolved.
Fourthly, various scholars have argued about the pocket-cut or reduction in take-home salary of the gig workers or platform workers. In order to contribute towards social security fund, the companies would resort to wage theft thereby leading to reduction in wages of such workers. This in-turn, would defeat the very object of the social security benefits which is to incentivize work, increase productivity and instill an element of security. The reduction in wage-pay might be counterproductive.
Lastly, the extension of social security benefits to gig workers and platform workers is a positive step in terms of bringing parity between workforces. However, extending social security net is not same as recognizing all other labour rights of such workers. The absence of such workers from other labour law legislations such as Wage Code, Occupational Safety Code and the like implies that they have not been fully recognized as the part of the formal workforce. The provision of minimum wages is not applicable to them. The attempt of the government to recognize them, incentivize them by providing security cover and enhance their importance in building a self-reliant India, is no doubt welcoming step, however it is half-hearted. The absence of their rights under other Codes might further push them towards informalization and less than transparent working terms.
Gig Workers and Social Security Benefits: Transcending Jurisdictions
- United Kingdom
The change in the labour law landscape vis-à-vis gig workers emerged in the United Kingdom recently and has the potential to impact labour law regimes across jurisdictions. The paradigm shifted in the case of Uber BV and others v Aslam and others. In this case, two drivers of the Uber Company, Yaseen Aslam and James Farar, contested before Employment Tribunal that the Uber drivers must be treated as Employees and not as gig-workers. The Employment Tribunal ruled in favour of the petitioners and the Appeal was preferred by the company before Appeals Tribunal in 2016.
To Uber’s dissatisfaction, the Appeals Tribunal also ruled in favour of the respondents, the cab drivers. Consequently, the company sought respite before the Court of Appeal, where they lost again. Finally, the matter went before the Supreme Court of United Kingdom, wherein the SC of UK passed a landmark judgment on February 19, 2021. The Court held that Uber Drivers must be categorized as ‘employees’ under the Employment Laws of the United Kingdom and they would be entitled to minimum wages and other work benefits. The court based its decisions on the reasoning provided by the Employment Tribunal.
The Employment Tribunal had analyzed the nature of work and degree of control to assess the Employer-Employee Relationship. It opined that Uber Drivers have no control or bargaining power on their payment, the acceptance of riders, the drop-locations and mode of communication with the customers. The routes, payment and standard form of contract are controlled by the Company. The driver is also at risk of losing the work, if the customer complaints. The redressal system is also controlled by the company. This nature of work gives the impression of ‘subordination and dependency’ of the Uber Drivers. Therefore, such workers would fall within the ambit of ‘worker’ under the Employment Laws and would not be merely self-employed worker.
This judgment has changed the landscape of the labour law regime vis-à-vis gig workers in the United Kingdom. On similar lines various gig-workers belonging to other sectors such as delivery personnel might press for ‘worker’ status. However, the SC in this judgment has not clarified who is actually a worker and how flexible the definition could be made. Further, Uber v. Aslam judgment is only limited to providing minimum wages to the drivers, the battle for other work benefits still needs to be fought.
- The United States of America
The status of the gig workers to be treated as employees is still being debated in the across states of the country. Some states such as California have already recognized cab drivers as ‘workers’ for the purposes of employee benefits, while other states such as New York and Albany are yet to formulate the legislation in this aspect.
The tussle between the cab drivers and the cab companies such as Uber, DoorDash and Lyft still continues as there is no federal law on this matter. The companies are lobbying with the workers of the organized sector and labour unions to let the cab drivers remain ‘independent contractors’ rather than being classified as ‘worker’ for the purposes of Employment Law. In lieu of their support the companies are providing various incentives in several states. The gig economy companies are lobbying to ensure that food delivery workers and cab drivers are not classified as ‘workers’ and they are giving assurances of letting them form unions to negotiate their minimum wages and other benefits without being classified as workers. In other states, some companies are promising wage negotiation rights, unemployment insurance and putting a cap on company’s commission fee. The organized labour is divided in its stand as companies are lobbying hard in the states of Massachusetts, New York, New Jersey, Illinois, Colorado and Washington to declare ride-hail and food delivery workers as merely independent contractors.
The most noted development in area of labour rights with respect to gig workers in the United States is that of California State. The trajectory started with the California Supreme Court, in the case of Dynamex Operations West, Inc. v. Superior Court of Los Angeles, where it was held that a worker would be presumed to an employee. The judgment laid down test to determine whether the worker would be treated as employee or independent contractor.
This implied that gig workers such as cab drivers and food delivery workers would be treated as employees.
This judgment was codified into law by the California Legislature by passing Assembly Bill 5 (AB5), which was countered by ballot Proposition 22, exempting companies from application of AB5. The proposition was voted upon the citizens of California State and it was approved with more than 57% votes. The Proposition 22 although promises health benefits, health insurance, guaranteed minimum wages and various other protections, yet, it fails to classify gig workers as employees.
Therefore, in the United States of America, there is no federal law yet and the laws in the states are not uniform either. The gig workers have been ensured certain protections and social security benefits, but they have not been termed as employees.
Conclusion And The Way Forward
The Social Security Code is no doubt a welcoming step in labour law regulation in India especially in context of gig workers and platform workers. The setting up of welfare schemes for providing social security net to the gig workers recognizes the emergence of new forms of employment and work opportunities in India. The new kind of industry workers have been given the legal recognition and an attempt has been made to incentivize them. However, the Code has concerning gaps and is marred with shortcomings. The workers in gig economy need not only incentives such as maternity benefits, health insurance and the like. The important questions pertaining to minimum wages, rights of the unions, collective bargaining power, working hours and issues related thereto need to be addressed urgently. It cannot be emphasized enough that leaving ‘gig workers’ out of primary legislations such as wages and industrial relations, denying the protections under to occupational health and safety legislations, pushes them more towards informalization. The attempt to bring them to mainstream workforce and recognize their role in contribution towards self-reliant India falls short due to the regressive state of employment law in India. We are yet to guarantee essential minimum legal protection to gig economy workers. An attempt is also required to be made in rectifying the issues highlighted above. The overlapping and unclear definitions, ambiguity in powers and functions of the authorities, no plan for effective implementation of the schemes and concerns of the corporations too, need to be addressed. The new Code would definitely be of assistance in generation of several small jobs and new forms of work, however, viewing gig work as a separate unit of the economy, which can be treated casually would reinforce the narrative that gig workers are a low-cost substitute for employment. Such kind of treatment which is non-standard and less than transparent, would have huge implications for labour law rights in general. A healthy debate in context of employment status of gig workers or platform workers vis-à-vis technological advancement would help in accommodating better protections due to change in nature of work. The Social Security Code provides only piecemeal protections, denying them a larger coverage which is need of the hour if we need our workforce to function effectively and contribute towards nation development. India must also remain vigilant towards development in international jurisprudence such as UK and California which vehemently protect the interest of gig workers and accept the new reality of gig economy or Industry 4.0.
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