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Technological advancements and changes in the nature of work have given rise to the gig economy. Digital platforms that connect workers with consumers for short-term tasks or services allow the worker to circumvent traditional employment models. Companies benefit from lower operational costs by not having to pay for full-time employee benefits, such as health care and pensions or other protections under employment law. For workers, the gig economy typically provides the opportunity for more flexible hours and self-employment. However, the appearance of flexibility does not mean gig workers have any of the basic rights universally available to full-time employees. As reported by the International Labour Organization (ILO), gig workers often face a more precarious situation, lacking social security and benefits, such as paid leave, health insurance, or unemployment benefits. This circumstance raises the question of whether gig workers are considered employees or independent contractors with respect to taking advantage of legal protections.
A fundamental legal issue specifically concerning the gig economy is whether gig workers are classified as "employees" or "independent contractors." This classification dictates the extent of legal protections workers may receive under labor law. In Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018), the California Supreme Court embraced the "ABC Test" to determine the classification of the worker.
Under the ABC Test, a worker is presumed to be an employee unless the hiring entity demonstrates that the worker:
(1) is free from the control and direction of the hiring entity in connection with the performance of the work;
(2) performs work that is outside the usual course of the hiring entity's business; and
(3) is customarily engaged in an independently established trade, occupation, or business.
Dynamex was significant in that it tipped the scale toward classifying many gig workers as employees and entitled them to, at a minimum, minimum wage and overtime protections, in addition to other protections under the California Labor Code. The decision was met with vehement opposition from gig economy companies, which argued that the independent contractor model was vital to its business operations. Subsequently, California enacted legislation called Assembly Bill 5 (AB5), codifying the ABC test in California labor law, and it later created Proposition 22, which allowed certain gig economy companies to continue classifying workers as independent contractors, albeit with limited benefits. This back-and-forth by the judiciary and the legislature, with the ultimate goal of classifying gig workers properly, is indicative of the immense confusion and controversy around gig workers classification.
India and Gig Economy
The gig economy in India is experiencing rapid growth, primarily due to digital innovations and the growing penetration of smartphones as well as internet connectivity. To put this growth into perspective, a 2021 report published by the Boston Consulting Group and the Michael & Susan Dell Foundation predicts that the gig economy will reach an estimated $455 billion by 2024 supporting more than 24 million workers. The growth of India's gig economy is an outcome of many factors such as the demand for flexibility, the rise of e-commerce, and the growth of on-demand services such as ride-hailing, food delivery, and home service app services, which are revolutionizing the way people within India work both in urban cities and towns across the country. A gig, for many workers in India particularly for many living in urban areas, affords the convenience and ability to earn money on their own terms – without the structure of a 9-to-5 job.
However, while the gig economy has created many new opportunities, it has also created many precarious working conditions. For gig workers in India, engaging in gig work frequently involves uncertainty and instability of income, social security, and of legal status. In a country where labour protections are limited and the regulatory environment that supports workers' rights is vague and undefined, companies can classify gig workers as independent contractors and absolve themselves from providing workers benefits, health insurance, paid leave, or pensions. The ascendance of the gig economy, in conjunction with the changing landscape of work, has raised questions about the need for changes to labour law that would adapt to the new realities for the growing gig economy worker cohort.
A legal Characterization
The legal categorization of gig workers presents one of the primary challenges to the regulation of the gig economy in India. Under traditional labor law in India, workers are categorized as either "employees" or "contractors." Employees with this status possess a broad array of rights that are enforceable against their employer while contractors possess much less. The vast majority of gig workers identified in studies fit the criteria for being contractors, denying access to the array of legal protections and benefits available to employees under the labor law framework. Ultimately, whether or not gig workers fall into the "employee" or "contractor" category depends on the level of control exercised by gig employers over their workers. Gig employers usually argue that they are simply a conduit or intermediary between workers and customers and that workers are independents. Regardless of this classification, gig workers are more likely to suffer because they are not entitled to basic benefits that employees in the Indian labor context would receive, including minimum wage, provident fund contributions, health insurance, and maternity leave.
In response to the increasing significance of the gig economy and the challenges faced by its labor to traditional labor laws, India’s government introduced four new labor codes in 2020 that consolidated numerous labor laws into four new ones:
· The Code on Wages, 2019
· The Industrial Relations Code, 2020
· The Code on Social Security, 2020
· The Occupational Safety, Health and Working Conditions Code, 2020
The most important of these for gig workers is the Code on Social Security, 2020, which for the first time, recognized gig workers, platform workers, and independent workers. This is a positive step, as it recognizes the unique nature of gig work and introduces the possibility of policy intervention focused on improving social security of gig workers. The Code on Social Security creates a path for welfare schemes for gig and platform workers, covering welfare scheme areas such as accident insurance, health and maternity, and old age benefits are all covered in the code as well. Additionally, the Code empowers the government to create a social security fund for gig and platform workers which could be funded both by the government and within contributions from aggregators such as Uber, Swiggy, and Zomato.
While gig workers being acknowledged within the Code on Social Security is surely positive movement, it should be noted that the Code on Social Security does have limitations in that it does not require employer contributions to social security funds for gig workers to support these welfare schemes and instead leaves the implementation and funding of welfare schemes entirely up to the government and the possibility of voluntary funding through government-issued contributions from aggregation businesses. This begs the question of whether or not the Code provides any protection to gig workers with effective enforcement mechanisms to ensure that gig workers have important protections.
Additionally, the law does not reclassify gig workers as employees, which means that gig workers are still not eligible for a number of protections in worker's rights like arbiter protections in regards to being paid minimum wage, overtime pay, or any job security.
Judicial Impact
While legislation on gig work is under development in India, the judiciary has stepped into to respond to some of the challenges confronting gig workers. There have been a number of decisions that have also questioned the classification of gig workers and the liability of the platform with respect to the worker. Ritu Raj v. Ministry of Labour & Employment (2020) is an illustrative case in which the petitioners, representing the delivery workers for companies Swiggy and Zomato, argued that gig workers should be classified as employees because they were subject to the control and supervision of the platform companies. The court declined to classify gig workers as employees in this case but nonetheless prompted a response from the platforms to consider fair working conditions and social security. In Avinash Mehrotra v. Uber India, the Delhi High Court drew attention to the grey area created by the gig economy in terms of labour regulations. Workers in the gig economy are not traditional employees but are not truly independent either. The court also expressed the need for the government to establish more clear guidelines related to the gig economy, including, fair wages and social security.
These judicial interventions reflect, not just the complexity of creating regulations for the gig economy, but also the need for a legal structure that takes into consideration the interests of both sides, the workers and platform companies.
Issue with Social Security
A significant issue for gig workers in the gig economy is that social security benefits for them are virtually nonexistent. Traditional employees enjoy a variety of benefits such as health insurance, pension benefits, and paid time off, all of which are partially paid for through contributions from their employers. Gig workers, in comparison, bear the full financial burden and responsibility of obtaining necessary benefits because the independent contractor classification typically means these workers are not afforded the same benefits as traditional employees.
According to the ILO, "World Employment and Social Outlook 2021," workers in the gig economy, or gig workers, are less likely to have social protection compared to traditional workers, leading to greater risks during adverse economic circumstances. Adverse economic circumstances, like the COVID-19 pandemic, caused newfound insecurity for many gig workers because many were left without security and without healthcare during a global pandemic. Some countries have started to be more innovative and exploring benefits for gig workers. For example, in Denmark, there has been an experiment with a "flexicurity" model, which in essence combines labor market flexibility with social security benefits. The flexicurity model allows all workers, regardless of their workplace classification, to access healthcare, unemployment benefits, and pensions, and social protection are thus provided for all workers, while still maintaining some of the flexibilities distinctions of the gig economy.
International standards: Comparative Analysis
The rapid expansion of the gig economy has presented a significant challenge to legal systems worldwide, particularly with regard to worker classification and labor protections. Governments and courts across various jurisdictions have responded in markedly different ways, with some nations moving towards greater protection for gig workers, while others have struggled to reconcile the flexibility of gig work with traditional labor laws. This section will offer a more detailed comparative analysis of how different countries have approached the issue of gig worker rights, highlighting key judicial decisions and legislative developments.
In Uber BV v. Aslam [2021] UKSC 5, the UK Supreme Court adjudicated that Uber drivers should be classified as "workers" and not as independent contractors. The Court emphasized that Uber exercised a significant degree of control over drivers, including, among other things, setting the fares, controlling the routes they should take, and controlling their interactions with customers. The degree of control which Uber exercised over drivers directed the drivers toward economically dependent status. Uber drivers were thus qualified as workers eligible to receive statutory entitlements, such as the national minimum wage and paid annual leave, but not considered employees entitled to protections against unfair dismissal. This case began a rethinking of the regulation of gig economy work in the United Kingdom, establishing the premise that even work that includes flexibility is still potentially protected, at least in some capacity, by the law. The Court placed emphasis on the realities of Uber's control over the drivers, establishing a helpful framework for the courts in the determination of future gig worker cases.
In the case of the Federation of Dutch Trade Unions (FNV) v. Ola (2021), the Amsterdam District Court ruled that Ola drivers should be classified as employees rather than independent contractors. The court found that Ola exercised significant control over virtually every aspect of its drivers' activities, including specifying which tasks drivers were to undertake, regulating their pay, and monitoring their performance. Because Ola had so much control over these aspects of work, drivers were not operating independently, and therefore, Ola was required to provide employee benefits, including workers' rights, minimum wage and holiday pay. The Dutch decision is consistent with decisions in other European jurisdictions that have focused on platform control over gig workers. Furthermore, the court's ruling reinforced the principle that gig workers deserve labor protections when they do not have genuine independence in their work.
In the year 2021, Spain set to effectuate some ramifications of the "Riders Law." In its ruling with Riders X v. Glovo (STS 805/2020), the Spanish Supreme Court ruled that delivery workers were employees because the Glovo app controlled riders with respect to tasks, payment and routes. In addition, the delivery riders were economically dependent on the platform. So, the Riders Law granted delivery couriers employee status and required gig companies to provide benefits like social security and unemployment insurance. Spain’s Riders Law represents a deeply penetrating and comprehensive step to regulate the gig economy, along with granting the guarantee of employment to platform workers and transparency in platform algorithms. It models and may influence other nations while seeking to protect gig workers' rights and behaviours of platform management.
The Role of Unions and Collective Bargaining
Unique challenges are presented by the gig economy to the forms of worker organization and collective bargaining. Gig workers have changed how they have been thought about because they're individually working and they're not physically located near each other. This has made consortium efforts and responsiveness difficult. However, there have been increased efforts of gig workers in India to form unions to express and advocate for better work conditions. In 2019, the Indian Federation of App-based Transport Workers (IFAT) was formed to represent gig economy workers in the transportation sector, such as drivers who work for Ola, Uber, and various other apps. The federation is advocating for minimum wage guarantees, and social security benefits, and viewing gig workers as employees in specific sectors. Delivery workers from companies like Zomato and Swiggy held protests demanding a living wage with all required benefits under labor law.
Despite positive albeit low visibility outcomes for unions representing gig workers in India, there are challenges to awareness and pressure. The rationale is that gig workers are not classified as formal employees, which limits their investment in a formal organizing effort, and platform companies are not embracing union recognition made up of gig workers. To start, however, gig worker organization becomes the possible beginning of advocating for more protections and rights (as workers and gig workers).
The way forward
The emergence of gig economy labor markets worldwide has fundamentally changed the character of labor markets, giving millions of workers flexible options, but challenging core tenets of traditional labor protections. In India, and across the globe, gig workers often face precarious employment relationships, working in a space that straddles independence while relying on the platforms that govern the terms and conditions of their work. The fast-growing emergence of gig work has thrown into stark contrast the inadequacy of labor laws designed primarily for more structured and stable employment relationships. These conditions of employment demand a new approach to labor regulation—that is to protect workers but not compromise the flexibility workers come to value in gig work.
For some time now, within India, and the global perspective, there has been a growing recognition that gig workers need more protection. Countries around the world are considering making changes to labor laws to address the lack of social security, fair wages, and job security to gig work. As countries contemplate creating new reforms, they must recognize while this is admirable endeavor, it still may not be fully sufficient. Reforms that may only grant gig workers employee status would leave gig workers vulnerable to exploitation pertaining to the employment relationship. As we move forward, the potential of gig work lies in the prospects creating policies that offer protections until the relationship between the gig worker and consumer can be reconciled with greater clarity.
For India, as well as the global community, a clear and robust slate of reforms addressing gig economy regulation will need to occur in multi-faceted ways to ensure the protections that gig workers deserve while maintaining flexibility that made gig work appealing. For example, we can focus on:
· Clear and Effective Classifications: Re-conceptualizing the currently ambiguous hierarchy of gig workers as an employee- or independent contractor or some hybrid of both will need to be addressed. The legal definitions should closely reflect the reality in the world of platform work, namely, gig worker reliance on platform for both the task to be completed, as well as dependance upon the platform for economic means to make a living, subject to the platform without direct autonomy.
· Obligatory Employer Commitments: Should accommodate obligations to amass commitments to social security and benefit programs. This could include health insurance, pension coverage, and others involving critical protections that indicate gig workers will not be left without some safety in the event of need. This could be established by statute to provide that gig programs allocate or set aside a slice of the revenue to a specific allocation to workers' social security, thereby protecting workers from economic instability.
· Transparency and Accountability. It is vital that gig programs make transparent all algorithms and methods to manage workers' pay, schedules, tasks, and working conditions. Workers should have access to information regarding the management of their work and how operational conclusions regarding their livelihood may be drawn. Imposing practices for gig programs to reveal and disclose the workings of their platforms and organizations will help promote fairness to readers and combat discriminatory actions or arbitrary conclusions.
· Collective Bargaining Rights. Gig employees should not only have the protection of organizing and sharing their voice for a right of work or commitment, governments must support the formation of unions or ways of collective bargaining to advance bargaining for fair pay, work conditions, and protections for gig employees. Collective bargaining would mean that gig employees will have means of shaping the commitment and terms of their work, balancing the scale of power between worker and gig employer.
To wrap up, an equitable gig economy will take a conglomerate of the legal, institutional, and social reform outlined above. The model to provide uniform treatment of gig employees requires additional worker major classifications. Employee classifications of work will be different than gig classifications. The legal and institutional or banking system will need to be different in order to satisfy the creation of an equitable model for gig workers and their employee characteristics. Overall, meeting the criteria outlined will produce treating gig employees fairly. Beyond meeting the meaning of and providing uniform rights and obligations to gig employees in regard to gig employment, will produce a greater secure, equal, and equitable gig economy future.
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