STATUS OF GIG ECONOMY WORKERS: AN ANALYSIS OF US, UK AND INDIAN LAWS

by Syed Alwaz Asif, Second year law student at Dr. Ram Manohar Lohiya National Law University, Lucknow.

Introduction

Digital labour platforms are emerging as important sources of employment in the 21st century. These platforms have provided income generating opportunities to multiple sections of society. Along with the opportunities these platforms have provided, they have also given rise to several challenges. These challenges are related to flexibility of work and income, working conditions, social protections and access to their fundamental rights of freedom of association and collective bargaining, etc.

This article aims to explore the nature of the relationship between a gig economy worker and various digital platforms. It also explores the status of these workers in the current legal framework in US, UK and India, respectively.

Nature of Relationship Between Gig Economy Workers and Digital Platform

Internationally, there is a dearth of legal codes which can define a gig economy worker or independent contractor within domestic legislation. Because of this, digital platforms escape their social security obligations by claiming that the workers working with their platforms are independent contractors. Platforms frequently claim that workers have freedom to decide the time, place and modus operandi to work.

The ground reality is that monitoring of work and determining conditions in which a worker has to work is common in gig-economy based digital platforms. These circumstances have led some courts to reclassify the status of gig economy workers. The following section would explore the legal framework in a few foreign countries regarding the legal status they accord to their gig economy workers.

United States of America

There is no definition of ‘employee’ under federal or state law. The test to decide whether a worker falls under the category of ‘employee’ or ‘independent contractor’ depends on the common law test. The Supreme Court of California propounded this test, commonly called the ‘Borello test’, in S.G. Borello & Sons, Inc. v. Department of Industrial Relations.[i]It addresses the central question of whether a worker falls under the category of ‘employee’ or ‘independent contractor’. The Supreme Court held ‘right to control’ the manner of work will determine the employment status of a worker. However, the Supreme Court of California ultimately rejected the ‘Borello test’ to determine employment status for wage orders adopted by California’s Industrial Welfare Commission. This was done in the case of Dynamex Operations West, Inc. v. Superior Court of Los Angeles.[ii]The Supreme court in this case laid down the ‘ABC’ test, which proceeds on the assumption that a worker is an employee, unless the employer proves otherwise.

The Dynamex judgment forms a part of California labour code. This remained the law until Californian voters supported ‘Proposition-22’, formulated by Uber and other digital platforms. This inserted Chapter 10.5, on app-based drivers and services, into the Business and Professional Code. Proposition-22’s principle effect was to exempt digital taxi-based platforms from AB5 (Assembly Bill-5), California’s law, that made it difficult for companies like Uber to maintain control over drivers. The Chapter specifies app-based drivers as independent contractors but provides them with benefits pertaining to minimum earnings, health benefits, accident insurance, anti-discrimination, public-safety and rest periods. Proposition-22 also has certain drawbacks such as, it puts a bar on workers’ right to unionize and bargain collectively and minimum wages given to drivers would be calculated on the basis of time engaged with the platform’s app rather than total time spent on the app. The drivers would be beyond the scope of many social security laws. Prop. 22 prevents California’s legislature to amend any provisions with less than seven-eighths majority, making it impractical for legislators to grant drivers’ right to unionize.

In August 2021, Alameda County Superior Court[iii] declared Proposition-22 unconstitutional. The court reasoned that this ballot law infringes on the state’s Constitution, which granted California’s legislature the right to regulate compensation for workers’ injury. California’s Constitution requires that a law has to be limited to a single object. The court stated that Prop. -22 violated even this provision by aiming to prevent drivers from unionizing. Thus, “obliquely and indirectly” creates a bar on collective bargaining. This ruling has led Prop. -22 unenforceable and will get challenged in appellate court. Court’s decision in this regard could have a lasting effect on the gig-economy law in California.

United Kingdom

There are three categories of workers in the UK: ‘employees’, ‘self-employed’ and ‘workers’. The status of employment is determined by what is generally followed in the common law system. The definition of ‘worker’ is provided under section 230(3) of the Employment Rights Act, 1996[iv] which entitles them to certain social protections. The case that has a major impact on the gig economy in UK is Uber BV vs Aslam.[v]The Supreme Court of UK unanimously ruled that Uber drivers are ‘workers’, not independent contractors. The preliminary issue was whether the Uber drivers will come under the definition of ‘worker’ or ‘independent contractors’.

The Supreme Court found some key facets of gig economy, especially about workers who are working with digital platforms. This would have a far-reaching impact on the development of law around the world in relation to the future of work. The Court held that the contract alone couldn’t decide the status of employment. The company unilaterally drafts a contract signed between Uber and its drivers and they only have the option to accept or reject it. The court said that an employment contract is not a normal contract, but is categorized by subordination and dependency. The court examined the economic reality of the relationship between platform and worker. After this, drivers are left with no option but to work for longer hours with Uber to improve their economic position.

India

India has seen a rapid growth in the gig economy in recent years. This has provided greater opportunities outside of traditional employment to a vast population. Recognizing this, the Government took various measures to cover the wide ambit of informal workforce present in the country. The legislature introduced The Code on Social Security, 2020 (hereafter to be referred as ‘The Code’) which seeks to amalgamate and rationalise nine central laws related to social security.[vi]

The code makes provisions for registration of gig workers and specified social security fund. It aims at formalizing social security schemes related to life and disability cover, health and maternity benefits, old age protection, education, housing, provident fund, etc. It aims to cover gig workers and their families under the Employee State Insurance framework. By enacting these measures, code aims to provide a social security safety net to the dynamic and growing gig economy.

The code also requires aggregators falling within classified categories to contribute 1-2% of annual turnover towards a social security fund for gig workers. The aggregators who were not providing a gig worker any social security by classifying them as “independent contractor” would now have to provide such benefits under law.

The code, which on face value looks visionary, has certain drawbacks and conflict points that make its implementation tough. Under the code, both the Central and state governments will formulate schemes for the unorganized sector. This would result in multiple authorities operating, which complicates the process of availing social security from the perspective of a worker. It is also not specified who will carry out the implementation at the state-level. Observation of decades has shown that different funds have led to fragmentation of social security for informal workers.

Further, as per section 113 of the code, every unorganized, gig or platform worker has to register himself on a specified online portal to be developed by the Central Government. The registration process comprises submission of various documents, including their Aadhaar number. Informal workers find it difficult to furnish all documents, as is visible from various schemes operating in the country. Compulsory submission of Aadhaar number for registration also goes against the judgment of the Supreme Court in J. K.S. Puttaswamy vs Union of India[vii] which has aadhaar voluntary under many instances. Thus, denial of social security to workers who don’t have aadhaar number would leave a vast majority of workers in this classification without a safety net. This seems an unreasonable and harsh measure, if not completely illegal. The legal framework as designed in the code puts the onus on workers to register as beneficiaries. This runs contrary to the experience of state governments running social security schemes under the Unorganized Workers’ Social Security Act, 2008.[viii] A large workforce is outside its ambit even after a decade of implementation.

The absence of unambiguous definitionsin the present code also hinders universal registration.[ix]  The Code defines gig workers as workers who are outside ‘traditional employer-employee relationship’. It also defines platform workers as those outside ‘traditional employer-employee relationship’ and who have accessed online platforms to provide services and receive payments. The Code has also included ‘self-employed’ within the definition of ‘unorganized workers’ and has provided different schemes for these categories of workers. This overlapping would create various legal complexities which would obfuscate the implementation of this code.

A driver working with a taxi-based digital platform comes outside of traditional employment. Hence, would come under “gig-worker”. He is working with a digital platform to provide transportation service, making him a “platform worker”. He will also be recognized as an unorganized worker since he is self-employed. This creates numerous legal hurdles in implementation and would also render it difficult for workers to avail social security benefits under this code. The aim of the code to cover the unorganized workforce under a social security safety net is lost in the quagmire between jurisdictional overlap between centre and state. Thus, there is an urgent need to simplify procedures and avoid multiple authorities to prevent conflict.

Conclusion

In conclusion, the above examples show the development of law for the gig economy around the world. The future of work will be determined by these digital platforms. The vulnerabilities of gig economy workers should be properly addressed by bringing in domestic laws aimed at overcoming the current concerns and issues being faced by them. A social dialogue would act as a key to resolve disputes. With the tremendous growth potential of gig economy in countries around the world, if the gaps are left unaddressed, this could have a negative impact not just on workers but on the whole economy.


[i] SG Borello & Sons, Inc v Department of Industrial Relations, 48 Cal 3d 345 (1989).

[ii] Dynamex Operations West, Inc v Superior Court of Los Angeles, 4 Cal5th 903 (2018).

[iii] Hector Castellanos and ors v State of California and ors, Cal LEXIS 833 (2021).

[iv] Legislation.gov.uk. 2015. Employment Rights Act 1996. [online] Available at: <http://www.legislation.gov.uk/ukpga/1996/18/part/I/crossheading/right-to-statements-of-employment-particulars> [Accessed 27th November, 2021].

[v] Uber BV and others v Aslam and others [2021] 5 UKSC 43.

[vi] The Code on Social Security 2020, s 116.

[vii] Justice KS Puttaswamy vs Union of India (2019) 1 SCC 1.

[viii] ‘Unorganized Workers’ Social Security Act, 2008’ <https://legislative.gov.in/sites/default/files/A2008-33.pdf> accessed 29 November 2021.

[ix] ‘Social Security Code, 2020 and Rules’ (2015) 56 Economic and Political Weekly 7 <https://www.epw.in/journal/2021/12/commentary/social-security-code-2020-and-rules.html> accessed 27 September 2021.


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