Article: Employee misclassification in the gig economy

Employee Relations

Employee misclassification in the gig economy

whether the misclassification of employees has been done intentionally or not, it could lead to the exploitation of these workers by depriving them of basic protection and benefits such as social security, minimum wages, payment of bonus, overtime, leave, etc.
Employee misclassification in the gig economy

With the rapid advances in technology in the past decade leading to the widespread deployment of ridesharing applications and delivery platforms, terms such as ‘gig workers’, ‘Flexible work’ and ‘sharing economy’ have been brought into the mainstream. Mobility as a service, food and grocery delivery services, on demand home-services etc. are now on our mobile devices and fingertips, leading to the rapid growth of gig platforms. 

The COVID-19 pandemic has altered the traditional conception of work and workplace, and led to the emergence of new forms of working. The loss of employment due to the uncertainties triggered by the pandemic along with rise in demand for home delivery of goods and services has led to some sections of India’s labour force shifting their focus towards gig economy jobs. 

Companies engaging gig workers usually classify them as self-employed workers/ independent contractors. Such classification of gig workers in the category of independent contractors enables companies to avoid providing the benefits which they would otherwise be liable to pay under various Indian labour laws.

Notwithstanding whether the misclassification of employees has been done intentionally or not, it could lead to the exploitation of these workers by depriving them of basic protection and benefits such as social security, minimum wages, payment of bonus, overtime, leave, etc. Such misclassification carries serious penalties, risks, and consequences for employers including, but not limited to, non-compliance with the applicable laws, litigation by the affected workers, back payment to the said misclassified workers, loss of revenue/tax for the government, loss of reputation, etc.

International position of gig workers 

India has witnessed strikes by Ola and Uber drivers in the past on account of being subjected to long working hours but earning less than what they claimed had been promised to them. In a country like India with almost three (3) million gig workers and also taking into account the fact that fifty-six per cent (56%) of the new employment is generated by the gig economy, statutory affirmation of the rights of gig workers becomes necessary. 

In a landmark ruling by the Supreme Court of the United Kingdom (‘UKSC’) in the case of Uber BV and Ors. v. Aslam and Ors., the Court held Uber drivers to be workers under the Employment Rights Act 1996, thus entitling them to various benefits such as paid holidays and minimum wages. This judgement is a detailed and targeted ruling in favour of gig workers, where the UKSC laid down several factors to justify its conclusion, such as the payment of remuneration, rigid nature of employment contract, decision-making power, maintenance of ratings, and control over the relationship of the driver with the customer by virtue of being an intermediary. 

Similarly, in the United States of America, the Supreme Court of California, in the case of Dynamex Operations West, Inc. v. Superior Court of Los Angeles, ruled in favour of the erstwhile employees working as courier delivery personnel who had to enter into a contractual arrangement with their employer. The Court laid down a new test and imposed the responsibility on the employer of proving that the persons employed by it by virtue of being independent contractors are not entitled to social security benefits. In Vizcaino v. Microsoft, the US Internal Revenue Service audit concluded that freelance workers were common law employees within the Internal Revenue Code of 1986 as the work done by them was identical to the work done by regular employees, the conditions of work were similar, and the tasks were performed under the same supervision. Thus, this case made the employers aware that an extensive freelance program could impose significant liability for providing benefits to those employees that the employer misclassified as independent contractors. 

In the European Union, the Directive of the European Parliament and of the Council on Transparent and Predictable Working Conditions in the European Union, provides protection to gig workers by delving into how the employment relationship should depend on the work done by the employee and not the description made in employment contracts. It reduces the vulnerability of gig workers, ensuring transparent working conditions and availability of minimum statutory rights to such workers. 

Evolution of Indian jurisprudence with respect to gig workers 

The Centre has formulated the Code on Social Security, 2020 (the ‘SS Code’) that aims to replace nine (9) labour laws already in force. The SS Code is aimed at providing social security benefits to a wider net of employees and encompasses workers in the unorganised sector, gig workers, fixed term employees, platform workers, etc.  

On September 20, 2021, a public interest litigation has been filed on behalf of gig workers before the Supreme Court of India. The petitioners have alleged that not providing social security benefits to them is in violation of their fundamental rights as provided under the Indian Constitution. The petitioners have demanded that gig workers or platform workers be declared as unorganised workers so that they can come under the purview of the Unorganised Workers’ Social Security Act, 2008 (the ‘UWSS Act’), and, hence, can be provided with statutory protections in the form of social security benefits.

The petitioners also aim to secure specific schemes in pursuance of obtaining increased protection of gig workers, including maternity benefits, pension, health insurance, vaccination against COVID-19 at the company’s expense, old age assistance, disability allowance, and the protections conventionally available under existing statutes such as the Employees’ Compensation Act, 1923, the Employees’ State Insurance Act, 1948, the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. 

The petitioners have relied upon the SS Code that seeks to provide social security for unorganised workers, gig workers and platform workers, to argue that the legislators recognise the true nature of the work arrangement produced by the gig economy is that of unorganised workers.

Way Forward

The anticipated growth of India’s gig sector to USD 455 billion at a compounded annual growth rate of 17 per cent by the year 2024 and the capacity to grow at twice the rate of the pre-pandemic estimates should provide food for thought to the Indian government to take prudent measures to deal with gig workers even though it may not be comparable with the protection granted to the permanent or contractual employees. 

Given the continuous growth of the gig economy and issues faced by the workers, it is expected that the Supreme Court of India may grant temporary relief to gig workers till the SS Code is implemented and the concerned schemes are formulated by the appropriate government. 

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Topics: Employee Relations, #RemoteWork, #GuestArticle, #GigEconomy

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