Regulation of gig workers: A step forward?

Traditional employment roles have undergone a marked transformation in recent times. Advancements in technology, changing consumer needs, and shifts in the preferences of workers have led to the growth of flexible gig economies. Defined as economic activities that involve the use of temporary or freelance workers to perform jobs typically in the service sector, gig economies are gradually becoming the preferred mode of operation for both employers and workers. Statistics reveal that about 50% of the international workforce will be engaged in gig economies by the end of the decade, signalling permanence in the shift towards gig economies at the global level. However, despite the increasing adoption of this economic model, international legal and regulatory frameworks have failed until now to address the social security rights of gig workers, that is workers engaged in gig economies.

Domestically, such gig workers have been treated as independent contractors. This classification has unfortunately left them bereft of the social security benefits available to permanent employees and contract workers, due to the absence of established employer-employee relationships. Ironically, a judiciary known for being pro-labour has usually held the existence of an employer-employee relationship to be a prerequisite for access to social security benefits under labour laws (see for example, Sarva Shramik Sangh v M/s Indian Smelting & Refining Co Ltd and Others).

The Ministry of Labour and Employment, thus introduced in December 2019 the bill on the Code on Social Security, 2019 (draft code). While the draft code is at its nascent stage, if enacted in its current form, it is set to become the first statute formally to recognize the concept of gig workers and to address the need to bring them within the regulatory framework. Under the draft code, a gig worker is defined as a person “who performs or participates in any work or arrangement and earns from such activities outside of the traditional employer-employee construct”. It is noticeable that while defining gig workers, the draft code has made a categorical effort to address the rapidly changing nature of prevalent work arrangements and models. It brings within its scope temporary workers and freelancers, who would otherwise not satisfy the conventional employer-employee test formulated under labour laws, and consequently be deprived of benefits available to the traditional workforce. With respect to the benefits proposed to be extended to gig workers, the draft code empowers the central government to formulate terms and conditions for the provision of mandatory state insurance benefits to such workers. The draft code also proposes that such gig workers receive benefits through welfare schemes formulated by the central government in matters relating to life and disability cover, health and maternity benefits and old-age protection.

A connected change proposed under the draft code, is the introduction of the concept of the aggregator. An aggregator is defined as a digital intermediary or a marketplace that enables a buyer or user of a service to connect directly with the seller or the service provider. For the first time, concepts such as online platforms and marketplaces are proposed to be recognized under labour laws, with the intention being to protect gig workers such as freelancers and independent consultants providing services over the internet or through online platforms. The draft code states that the rules to be formulated thereunder will likely specify the role that an aggregator will play in providing social security benefits to gig workers. In light of the conscious attempt by the legislation to bring “online aggregators” and “platforms” within the purview of employers under the draft code, this is undoubtedly a significant step towards protecting gig workers. As a consequence, it may well be that social security obligations which have until now been restricted to traditional employers, will soon be extended to employers operating as online aggregators and platforms and will regulate the relationship they have with the independent contractors and service partners they engage.

One consequence to watch out closely for is the impact that this shift will have on the way in which the law perceives temporary and freelance employment, and the manner in which, and the extent to which online aggregators will be required to restructure their existing employment models in the future.

It is important to note that, in addition to the provisions proposed under the draft code the government may further regulate the employment of gig workers by notifying amendments under other labour legislation such as the Code on Wages, 2019, which allows the government to declare additional persons as employees such that they may make use of the benefit under that legislation.

Junaira Rahman is a partner and Nikita Tanwar is an associate at Samvad Partners.

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