Labour Law and the Gig Economy: Towards a Hybrid Model of Employment

[Sahaj Mathur is a IV year BA. LLB Student at the National University of Juridical Sciences, Kolkata]

The status of gig workers has become a cause of growing concern in recent months. Niti Aayog’s report ‘India’s Booming Gig and Platform Economy’ estimates that nearly 23.5 million workers will be engaged in the gig economy by 2029. However, the report also notes how the gig economy has become increasingly characterised by poor safety conditions, unfair contracts, the lack of minimum wages, and the absence of employment benefits, such as worker’s compensation, overtime pay and medical leave.

The advancement in technology and the rise of the gig economy have transformed the traditional understanding of the work organisation, thereby raising significant issues for the labour law regime. The gig economy challenges the very notion of the employment contract, blurring the distinction between an independent contractor and an employee. This distinction is of immense importance, as it determines which labour laws are applicable to gig workers, and it outlines the employer’s obligations towards gig workers with regard to wages, social security, working conditions, and the resolution of employer-employee disputes

The poor state of gig workers during the pandemic has led to immense pressure on lawmakers to categorise independent contractors as employees. In India, the Supreme Court is confronted with a public interest litigation seeking employee status for gig workers.  These developments raise the question of whether gig workers should be categorised as employees. This debate has typically focused on the distinction between independent contractors and employees, and which of the two categories a gig worker falls into. Instead of reiterating this debate, this post argues in favour of creating a novel conceptualisation of gig workers in India, proposing the establishment of a hybrid category between an employee and an independent contractor.

Assessing the Status of Gig Workers: Independent Contractors or Employees?

Courts across the world have been confronted with the question of whether gig workers should be categorised as employees or as independent contractors. Across different jurisdictions, including India, the test to determine whether an individual is an employee or an independent contractor tend typically revolve around factors such as the degree of control that the employer exercises and the intention of the parties. Such tests continue to evolve across the world, and can include an assessment of factors such as the manner of work, the power to dismiss, appoint, ownership of equipment, title of contract, and the prescription of rules and standards. These factors become relevant in the factual matrix of gig work, as examined below. However, it is widely accepted by scholars that such tests often lead to inconsistent results due to intrinsically subjective interpretations of employer control. It is thus unsurprising to note that different courts have reached significantly different conclusions on the same issue. In certain jurisdictions, such as Switzerland and France,courts have categorised gig workers as employees.  On the other hand, legal authorities have characterised gig workers as independent contractors in jurisdictions like Brazil and Australia.

Given the unique nature of gig work, even when these tests are applied to the same factual scenario, they lead to inconsistent interpretations of whether a gig worker is an employee or an independent contractor. This is particularly the case because gig workers display characteristics of both employees and independent contractors. For instance, in the case of Uber, the company controls the collection of fares, the management of complaints, standards of conduct, and fixing of prices, showing strong characteristics of an employer-employee relationship. At the same time, Uber drivers select their work assignments, are able to refuse a client or location, can decide their work schedule, provide their own equipment, and often do not have an arrangement of exclusivity with one employer, all of which are characteristic of independent contractors.

The very nature and purpose of gig work leads to gig workers displaying characteristics of both independent contractors and employees. Thus, it is proposed that gig workers cannot squarely and conclusively be characterised as either independent contractors or employees. Even if such a categorisation can be made, there exist normative reasons against such strict categorisation. If gig workers are strictly categorised as employees, it could overburden aggregators with overwhelming costs such as taxes, back-wages and penalties, making their economic model unsustainable. In turn, this could deteriorate the consumer experience, reduce the number of jobs overall and stifle their economic growth. At the same time, categorising gig workers as independent contractors would lead to their continued exploitation and denial of basic employment rights such as overtime pay and medical leave.

Resolving the Gig Economy Dilemma: The Need for Establishing the Hybrid Worker?

The discussion above showcases how strictly categorising gig workers as either employees or as independent contractors can lead to significant problems. To resolve this issue, this post proposes the establishment of a third, ‘hybrid’, category for gig workers. It outlines the basic principles on which this framework can be formulated. The practical issues would require further academic and legislative scrutiny, which outside the scope of this post.

Conceptually, the proposed category would serve as an intermediate position between independent contractors and employees. This would entitle gig workers to limited employment rights and benefits, entail the sharing of liability between the hiring company and the gig worker, while requiring compliance with the guidelines and procedures of the hiring company. This hybrid categorisation will improve the welfare of gig workers by bringing them directly within the ambit of labour law and providing them with concrete rights and benefits. At the same time, as opposed to the classification of gig workers as employees, the hybrid model would sustain the flexibility of gig work that allows the economic model of such aggregators to continue to operate.

The hybrid framework offers significant advantages, especially when compared to the status of gig workers under the 2020 Labour Codes. Out of the four codes, gig work finds reference only in the Code on Social Security in section 2(35). This leads to the exclusion of gig workers from the benefits and protections offered by the other codes, such as minimum wages, occupational safety and health benefits, and overtime pay. At the same time, while the Code on Social Security defines a ‘gig worker’, it does not offer any concrete benefits or protections, and merely provides that Central Government will notify schemes for gig workers in the future.

The new labour codes also missed out on the opportunity to re-assess the employment contract and the employee-independent contractor distinction, particularly in light of gig work. Thus, the labour codes merely mask the problems plaguing the gig economy without offering any conceptual or legal resolution to the classification problem. This fails to bring gig workers directly within the ambit of the labour and employment regime in India.

This presents a problem for two reasons. Firstly, gig workers are excluded from accessing the specialised redressal mechanism under the Industrial Disputes Act. Under the proposed framework, which would bring gig workers within the ambit of the Industrial Disputes Act, gig workers would have a meaningful remedy for grievances against their employers. Secondly, given the contract-based relationship, gig workers do not currently possess the specific right to collective bargaining. Collective bargaining, a fundamental principle of modern labour law, is instrumental in ensuring workers’ rights despite the inequality in bargaining power between employers and employees. Although trade union activities in India are increasingly focusing on the rights of gig workers, the unclear status of gig workers serves as a hindrance to registration as a trade union for organisations such as the All-India Gig Workers Union. In the absence of such registration, the trade unions will not be granted immunity from civil, criminal and contractual liabilities that allow them to effectively voice their demands to their employers. While the new labour codes represent a significant development for India’s labour law regime, they fail to adequately address the state of gig workers in India.

Concluding Remarks

Gig workers are amongst the most vulnerable sections of the workforce. The atypical nature of gig work coupled with regulatory uncertainty has allowed companies to continually exploit their workforce without bearing commensurate responsibilities under labour law. However, the mere non-traditional nature of gig work cannot serve as a justification to avoid imposing the most primary obligations arising from labour law on such corporations with regard to their employees. The very purpose of labour law is to protect vulnerable individuals that have limited say over their work conditions due to a lack of bargaining power vis-à-vis their employers.

This post proposes a solution to this issue through the establishment of a hybrid category for gig workers. As it argues, a gig worker cannot and should not be squarely put into the category of an employee or an independent contractor due to the unique nature of gig work. Without attempting to offer a concrete framework, the post proposes that the inherent advantages of benefits and protections under labour law, collective bargaining, access to dispute settlement and shared liability showcase the need for legislative scrutiny into the establishment of a third categorisation for gig workers.

Sahaj Mathur

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