[Esha Rathi is a final year B.B.A. LL.B. (Hons.) student at Jindal Global Law School.]
Rajasthan has taken the lead as the first Indian state to regulate and support the burgeoning gig economy workforce through a comprehensive legal framework titled “Rajasthan Platform Based Gig Workers (Registration and Welfare) Act, 2023” (Act), the Bill for which was brought before the Rajasthan Legislative Assembly on 21 July 2023 and passed on July 24 2023. Through its provisions, the Act aims to provide the concerned class of workers with crucial social security and essential benefits. Although the Code on Social Security 2022 recognizes gig and platform workers and seeks to extend benefits to them at a central level, its implementation is still in progress. In the interim, Rajasthan has taken a proactive step to address these issues on a state level, thereby setting a significant precedent for other Indian states.
Functioning as a safety net for countless unemployed youth and even the elderly, the gig economy offers a low-cost, low-investment labour market. It tantalizingly promises subsistence and flexible work opportunities via platforms like Ola, Uber, Swiggy, Zomato, Amazon, Urban Company and more. These platforms often identify as tech aggregators, mediators, or facilitators, steadfastly avoiding the label of employers and treating their workers as partners or independent contractors, thereby evading accountability and responsibility. Even though many facets of employment, including mode of arrangements, payments, costs, fares, incentives, penalties, and market entry or exit, are frequently subject to rules resembling those found in formal job markets, the benefits associated with formal employment, such as stable working hours, decent work conditions, and substantial wages and social security, elude these workers. In this context, Rajasthan’s Act serves as a momentous legislation to gig workers, a growing segment of the workforce that operates outside traditional employer-employee relationships.
Championing the Gig Workers’ Cause
The Act encompasses two key players in the gig economy: aggregators that are digital intermediaries linking buyers and sellers, and primary employers that are individuals or organisations directly engaging platform-based gig workers for a particular task against payment. The Act defines gig workers as individuals who perform work and earn income outside traditional employer-employee structures or those who work under contractual arrangements with terms and conditions leading to fixed payment rates, including all piece-rate work.
The Act introduces the Platform Based Gig Workers Welfare Cess, a monthly contribution from aggregators and primary employers. This welfare cess, ranging from 1% to 2% of the value of each transaction, as may be notified by the State Government, must be deposited by the fifth day of each calendar month which, alongside worker contributions, government grants, and donations, will pool into the Rajasthan Platform Based Gig Workers Social Security and Welfare Fund, a dedicated resource aimed at supporting the welfare and social security of registered gig workers. In addition to the obvious benefits provided by such welfare cess, an ancillary advantage is that the calculation of this cess will compel companies to relinquish control over transaction-level data, which will now reside in a government-controlled database, accessible also to workers. Companies have long resisted such transparency, whereby customers would receive an upfront price, while the worker remained unaware of the actual amount and, consequently, had no insight into the effective commission rate imposed on that transaction.
The Act also ensures comprehensive social security benefits, including accident and health insurance, maternity benefits, gratuity, pension, scholarships, and more, in line with existing schemes. The Act also empowers registered gig workers to raise concerns regarding their entitlements, payments, and other benefits through a dedicated grievance redressal mechanism, and establishes rigorous penalties for contravening the provisions of the Act. Violations by aggregators could lead to fines of up to Rs. 50 lakh, while principal employers might face fines up to Rs. 2 lakh for contraventions.
To facilitate the aforesaid provisions, the Act mandates the establishment of the Rajasthan Platform Based Gig Workers Welfare Board, comprising government officials, worker representatives, aggregators, and civil society members. The aggregators and primary employees are mandated to register with this Board and submit comprehensive data about all platform-based gig workers engaged by them within 60 days of the Act’s implementation. Furthermore, every gig worker already onboarded or registered with a platform must also be registered with the Board. This registration, bestowed with a Unique ID, remains valid indefinitely, irrespective of engagement duration. In turn of such registration, this Board is entrusted with the discharge of several critical responsibilities, including registering gig workers, aggregators, and primary employers within the state, integrating welfare cess deductions into platforms’ mechanisms, devising social security schemes for registered workers, ensuring accessibility to benefits, and engaging with unions to facilitate transparent consultations.
To further ensure accountability and transparency, all platform transactions will be tracked through the Central Transaction Information and Management System. This system, overseen by the Board, will monitor aspects like commission, GST deductions, and welfare cess collection, enhancing regulatory control and data accuracy.
Redefining the Employer-Employee Relationship: A Missed Opportunity?
The primary shortcoming of the Act arises from the definitions assigned to gig workers and aggregators within the Act, which do not categorize gig workers as employees or aggregators as employers. There is a growing global consensus that many gig workers indeed fit within the broad definitions of employees and should be entitled to all the protections provided to traditional employees. However, Rajasthan’s Act sidesteps this issue by continuing to categorise the gig companies as aggregators. When gig workers are not officially recognized as employees, it raises the question of the extent to which aggregators can be held accountable. While some Indian platforms may include provisions for situations such as workplace accidents and resulting medical expenses, this approach risks transforming essential entitlements like occupational safety into acts of goodwill rather than legally mandated obligations.
Consequently, the Act suffers from a narrow scope, failing to incorporate existing labour laws into its purposive framework of protecting gig workers. This oversight allows for the persistence of long-standing practices of non-compliance with labour regulations and a circumvention of responsibilities regarding workplace entitlements and protections. This is despite the high degree of control exerted over these workers, a point underscored in various jurisdictions that have classified gig workers as employees to afford employee-level benefits and protections, including Australia, the Netherlands, Switzerland, and Spain.
Furthermore, Australia and New Zealand have shifted their terminological focus from ‘employer’ and ‘employee’ to ‘person conducting a business or undertaking’ and ‘worker in their workplace’, thereby emphasizing the duty of businesses to ensure worker health and safety, amongst other benefits, regardless of the employment status, traditional or otherwise. While this represents an aspirational model for the labour landscape, India would face significant challenges in striving towards such a paradigm shift through a single leap. In order to approach this vision, Rajasthan’s Act has the potential to take an incremental step towards bridging the gap between traditional and non-traditional workers, by categorizing gig workers as employees, which the Act does not provide for at present.
However, it is essential to acknowledge that in countries where workers have been equated to employees or have been offered high benefits, gig platforms have faced increased costs, leading to reduced job availability or cessation of operations. Therefore, developing countries with substantial presence of informal employment, such as India, Indonesia, and Thailand, have remained silent on gig worker employment status, as the risk of misclassifying gig workers is high and could prove extremely costly for workers and consumers. In this context, India appears to adopt a cautious approach, providing ad hoc targeted measures for more visible groups of informal workers. Nevertheless, maintaining gig workers as independent contractors with piecemeal benefits fails to plug gaps in current labour laws and social protection schemes, particularly in countries like India, which do not have an effective universal social safety net. This regulatory approach also risks introducing a multitude of fragmented measures, adding administrative burdens for both workers and companies.
Considering these challenges, India may benefit from introducing a third worker category, providing a more promising policy option that maintains worker autonomy while offering enhanced protections commensurate with the degree of control and dependence that the worker is under. Canada, the United Kingdom, Ireland, Italy, and certain other countries have implemented similar categories to encompass non-formal employment relationships and ensure entitlements to an appropriate level of rights and protections. Until such changes are introduced, the existing form of this legislation, designed to safeguard non-traditional workers, can act as a catalyst for discussions about expanding the category of workers entitled to the gamut of labour law protections.
Concluding Thoughts
The platform-based gig worker engagement model has traditionally offered aggregators a business structure with low liability from a legal compliance perspective. In a refreshing departure from this norm, Rajasthan’s legislation for gig sector workers marks the beginning of a new era in India’s labour landscape. By addressing the distinct needs of gig workers, who often operate under non-traditional employment terms, and extending them social security benefits, the state not only acknowledges the evolving nature of work but also works toward fostering a more robust and inclusive economy. The gig economy holds significant potential for economic empowerment, but its realization depends on ensuring that workers are granted adequate rights and legal protections, and that aggregators fulfil their roles and responsibilities.
While it is important to create an environment that supports gig workers, solely focusing on their needs may inadvertently burden aggregators and hinder their business operations. Hence, it is imperative to not only extend benefits to gig workers but also facilitate the growth of aggregator businesses. This balanced approach is essential to ensure the sustainability of the gig economy, which many depend on. To fully harness the potential of this legislation and shape the trajectory of the gig economy in India and beyond, it is imperative that Rajasthan effectively implements the provisions of the Act while simultaneously refining them through the Rules under the Act.
– Esha Rathi
