REGULATING THE GIG ECONOMY

Anuraag Pillai

The gig economy can be described as a collection of markets that match providers to consumers on a gig (job) basis in support of on-demand commerce. It offers the workers an established company/brand to associate with without having to bear the costs of marketing and setting up a company. The gig economy has grown rapidly as its independent and flexible approach has appealed to many workers. This growth, however, has been facilitated by a lacuna in the traditional labour legislations that fail to regulate the new type of employer-employee relationship that has emerged with the digitization of the economy and the arrival of tech-based on-demand platforms. The lockdown has helped highlight this severe lack of protection accorded to gig workers. The lack of social security had put the gig workers in a tight spot when their primary source of revenue was completely halted. The platforms were quick to absolve themselves of any responsibility towards the welfare of their workers claiming that their workers weren’t their employees but their ‘partners’ or ‘independent contractors.’

The rise of platform driven gig economy has resulted in a new type of relationship between employers and employees which differs from the traditional notion of employee-employer relationship covered under most labour legislations. Gig workers lack any specific legislation or labour law jurisprudence that accords them any protection. This lacuna has been heavily exploited by platforms across the world. Uber, Zomato, Swiggy, etc. claim that there are no fixed hours of work or a physical place of work and on this basis they claim to not be covered under the existing labour laws.

The flaw in this logic is apparent as it fails to acknowledge the digitization of the modern economy. A physical place of work can be equated with the apps on which these platforms function. It is through these apps that the platforms define their relationship with their workers. The app defines various aspects of the relationship by setting prices, determining ‘ratings’ and sometimes prescribing time limits. Overall, through the app the platform has a significant degree of control over the workers. This has raised legitimate concerns over the exploitative labour practices against the systematically disempowered workers. It is therefore necessary to update the traditional notion of employee-employer relationship envisaged under labour legislation to deal with the digitization of the economy and the new types of relationships formed therein. California, USA has been at the front-end of addressing the issues around exploitation of workers but the reforms have failed to gather support.

Legislative Developments in USA

California, USA has been at the front end of implementing changes to secure the rights of gig workers. The legislature in California has codified the landmark decision of the State Supreme Court in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) (“Dynamex Case”) by passing the Assembly Bill 5 (“AB5”). This legislation addresses the ‘independent contractor’ classification given to gig workers. It stems out of the Dynamex case decision where it was held that in order for the workers to be considered as independent contractors the hiring entity has to demonstrate that:

1. The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;

2. The worker performs work that is outside the usual course of the hiring entity’s business; and

3. The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

If the hiring entity fails to satisfy any part of this three tier test then the workers cannot be classified as an independent contractor and have to be treated as employees. The legislation isn’t applicable to all occupations and largely exempts professional services such as legal professionals, insurance agents, etc. For these occupations the multifactor test laid down in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) shall be applicable.

With AB5, California has successfully extended the traditionally available protections for labour workers to the gig workers as well. However, the act will have a considerable impact on the gig economy for which it has faced severe criticism even from the gig workers themselves. Since classifying them as employees threatens the flexibility and freedom they currently enjoy. This classification would also impose extra financial burden on the platforms as they will now have to contribute to the benefits for their employees. This could result in reduced hiring of gig workers or even laying off of some workers. Perhaps, it was because of these reasons that when a ballot proposal in the form of “Proposition 22” was raised to essentially override AB5. The majority of Californians voted in favour of it. It was passed with 58% of the vote on November 5, 2020. This was a massive win for the platforms who had spent a record amount of money to persuade the Californians to vote in favour of the proposal.

Legislative Developments in India

India contributes to almost a quarter of the gig workers in the world and the number is expected to grow even further. This has prompted the legislature to take some action by including them in the draft labour code bill i.e. the Code on Social Security, 2019 (the “Code”)

In a few isolated provisions the code has provided some protection for the gig workers. It introduces the concept of gig work and envisages social security schemes for such workers. It defines a gig worker as: “person who performs work or participates in a work arrangement and earns from such activities outside of traditional employer-employee relationship”

It also defines a platform worker as: “a person engaged in a form of employment in which organisations or individuals use an online platform to access other organisations or individuals to solve specific problems or to provide specific services in exchange for payment.”

By separately defining the two terms rather than broadening the definition of employee under the code, it has differentiated these types of workers. Thereby, approving of the separate classification accorded to them by the platforms.

The only protection the Code provides is the Central Government contemplating on formulating social security schemes for gig and platform workers, because of this the code is often criticised for not conclusively regulating the gig economy and bringing it to terms with traditional labour laws but this just might be the appropriate step to take at this juncture given the fragility of the gig industry to regulations.

Comparison

In the USA the law laid down in the Dynamex case and later codified through AB5 expands the traditionally recognized definitions of employees to incorporate gig workers and other such workers. It does this by employing a three tier test that has significantly narrowed the scope of classifying workers as independent contractors.

The Code, however, embraces the new form of employer-employee relationship and separately defines it to address it exclusively in the future by introducing social security schemes for health, safety, etc. This is a different approach from the one taken under AB5 where the concept of gig work is regularized and equated with traditional employer-employee relationships. The Code creates a separate category of workers to which specific incentives can be provided in the future through notifications. It does not commit to bringing an entire reform in the gig work space but proposes to bring certain protections under certain provisions.

This cautionary approach is prudent and might allow the Indian regulation of the gig economy to be successful in future while the Californian legislation has already been robbed of its teeth. The cautious approach by the Indian government appreciates the need to tread carefully between protecting labour and allowing the gig economy to survive. While it is apparent that the platforms are engaged in some form of exploitative labour practice against a disempowered workforce, providing wage guarantees by regulations might do more harm than good to all the stakeholders of the gig economy. However, it is still important to address concerns around worker safety and the power differential that persists between the platforms and its workers. Transparency and better corporate governance norms should be introduced in this sector to level the playing field for all stakeholders. It is also suggested that mechanisms for workers to collectively bargain should be introduced to balance the skewed power differential between them and the platforms.

If the government makes provisions for formalization and collective bargaining then the platforms will be pressured to make changes in consideration of the welfare of their workers. When the power dynamics of the gig economy is balanced, the workers and platforms can themselves negotiate suitable working conditions and protections. Any additional protections provided by the state would also help ease the burden on the platforms and allow the gig economy to flourish. In conclusion, the gig economy has grown rapidly and shall continue to do so if allowed to.

Anuraag Pillai, a 4th year student at GNLU, Gandhinagar.

Picture Credits: New Strait Times

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