Article: The gig economy and the Indian employment law

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The gig economy and the Indian employment law

The gig model questions the conventional attributes of an employer-employee relationship but the Indian employment law, unfortunately, has not kept pace with the times and does not lend itself to the rapidly evolving business models and workforce structures
The gig economy and the Indian employment law

The evolution of technology has brought about radical and sudden shifts in human capital requirements. With the rapid pace of automation and integration of artificial intelligence in the workplace, employers across the globe have found it both expensive and unnecessary to limit workforce engagement to the traditional employer-employee model. New-age on-demand business models are rapidly evolving, from taxi services to salon and spa services, from chefs to grocery delivery, all creating fluid and dynamic workforce structures, including the ‘gig workers’.  

The concept of ‘gig’ or on-demand working has been gaining popularity across the world for a couple of years now; however, the Indian Government began to take notice of this only when the taxi drivers affiliated with certain app-based taxi service providers went on strike in Karnataka earlier this year to protest the harsh conditions of work, inconsistent wages, and lack of stability. Further, as per news reports, a taxi driver’s union in Delhi had also made similar allegations against app-based taxi service providers. This union has filed a case in the High Court of Delhi against these app-based taxi service providers, claiming that their manner of engagement, nature of work, and the extent of supervision and control exercised by the cab aggregator demonstrate an employer-employee relationship.  

Traditionally, the workforce in India has been structured to mean permanent employees, fixed-term employees, contract labor, i.e., persons engaged through third-party service providers, and independent contractors on a principal-to-principal basis, and the protections and benefits envisaged under Indian employment law vary depending on the nature of engagement.  The gig model questions the conventional attributes of an employer-employee relationship leaving employers, legislators and workers puzzled. Indian employment law, unfortunately, has not kept pace with the times and does not completely lend itself to the rapidly evolving business models and workforce structures. Given that there is currently no clarity provided under the law specifically governing gig workers and the terms of their engagement, we have analyzed and set out the key considerations for gig platforms, from an Indian employment law perspective:

The Employer-Employee Relationship: The types of benefits guaranteed under the Indian employment laws vary based on the nature of engagement of the worker – regular employees are eligible for most employment benefits such as gratuity, provident fund, and medical insurance, that consultants and independent contractors are not eligible for. In addition to statutory benefits, employees are also eligible for protection from termination of employment-at-will employment is not recognized for most categories of employees and employment can only be terminated for reasonable cause or misconduct.  

It is important to note that gig workers have been successful in certain jurisdictions in their claims that they are in fact regular employees of the platform, but have been misclassified as gig workers by their employers. Courts, when dealing with similar cases, have determined the existence of an employer-employee relationship based on the following criteria:

  • Control: The amount of ‘control’ that an employer engages on a worker is considered to be one of the touchstones for determining if an individual is an employee or if the worker is an independent contractor/gig worker i.e., whether the engagement is based on a contract of service or a contract for service. In making the determination, Courts look into whether the employer exercises a significant amount of control on the manner, mode, or method in which a worker carries out work. 

  • Supervision: In a contract for service (i.e., an independent contractor relationship), employers typically do not supervise or review the performance of the independent contractors from time-to-time.

  • Initiate Disciplinary Action: Courts have held that one of the primary differences between a worker being treated as an employee and being treated as a gig worker is the ability of the employer to initiate disciplinary action. As regards employees, an employer has the ability to initiate disciplinary action in accordance with its policies (subject to applicable law).

One of the primary differences between a worker being treated as an employee and being treated as a gig worker is the ability of the employer to initiate disciplinary action

Since such new forms of workforce engagement are untested in the Indian courts and in the absence of specific legislation setting out the rights of the gig workers, claims from such workers alleging misclassification and demanding employment and consequential benefits cannot be ruled out. If considered as ‘employees’, the employer would also have to ensure that they adhere to conditions with respect to minimum wages, hours of work, overtime, and leave.

In order to ensure that employers are ring-fenced from misclassification claims, employers typically try to ensure that they limit the amount of control and supervision that they exercise on gig workers. In most cases, this is done by allowing consumers to rate the performance of gig workers through the app (electronic platform) that they use to engage the gig worker. Automation also helps mitigate risks by minimizing employer discretion. Further, it is advisable that the documentation that is used to engage gig workers (such as the terms and conditions of the platform) emphasizes the fact that there is no employment relationship and clearly state that the engagement is on a principal-to-principal basis, either with the platform or the end-user. 

Benefits: While one of the defining factors of the gig economy is that the duty of the platform/end user is limited to paying the worker for the specific job (gig) that the gig worker carries out, given the changing economic landscape there is potential for employee benefits to also be extended to gig workers. In this regard, the Labour Code on Social Security, 2017, that is proposed to be passed by the Government provides for social security benefits for persons who are self-employed, which is an indication of the change in the approach of the Government to the provision of social security. 

Health and Safety Laws: One of the major employment law concerns in relation to the gig economy is the fact that there are no specific health and safety laws that govern gig workers. In most cases, gig workers do not perform their function from a fixed office space or are required to travel from place-to-place to meet the needs of consumers. This model provides a number of issues that employers would have to consider, specifically:

  1. Protection from Sexual Harassment: The Sexual Harassment at Workplace (Prevention, Prohibition, and Redressal) Act, 2013 (“SH Act”) is the law that prohibits sexual harassment of women at the workplace and requires that employers sensitize their employees to issues of sexual harassment and redress grievances in a confidential and time-bound manner.

  2. Working in the Nightshift: The laws applicable to shops, commercial establishments, and factories mandate certain conditions be followed in relation to women working at night, to ensure their safety and security. However, given that gig workers are not ‘employed’ to work out of shops, commercial establishments or factories, the obligations of the platform in this respect are largely unregulated. 

One of the major employment law concerns in relation to the gig economy is the fact that there are no specific health and safety laws that govern gig workers

Contract Labor Laws: Engaging contract labor i.e., engaging workers through a third-party contractor to do specific tasks in connection with the work of an establishment, is regulated by the Contract Labour (Regulation and Abolition) Act, 1970 ("CLRA Act").  There exists potential scope for gig platforms to be construed as contractors under the CLRA and this could accordingly trigger obligations to obtain a license and comply with requirements under the Act.

Compensation in case of accidents: The law on compensation for injuries caused during the course of employment is primarily governed by the Employees Compensation Act, 1923 (“ECA”). The ECA mandates that an employer pays compensation for injuries caused due to accidents arising out of and in the course of employment, including cases where employees are required to travel on behalf of the employer. The applicability of this statute in relation to gig workers is yet to be tested in courts; however, given the intent of this statute, there is a possibility that courts may hold that gig workers be entitled to compensation for injuries incurred while providing services to consumers through the gig platform. 

Given the changing economic and social backdrop, it has become necessary that employers begin to focus on their employee engagement structures. Further, if they, in fact, choose to utilize gig workers, they would have to ensure that a clear distinction can be drawn between gig workers and their regular employees. 

Topics: #CeoChroPartnership, Diversity, Employee Relations

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