Context

• The growth of the gig economy has transformed labour dynamics across the globe, offering flexibility but raising questions about worker rights and protections.
• In India, the Union Ministry of Labour and Employment is drafting a national law to bring gig workers under the umbrella of social security schemes, addressing their needs for health insurance, retirement savings, and other benefits.
• So, it is crucial to critically examine the existing legal framework for gig workers in India, the limitations of the Social Security Code 2020, and the path forward for ensuring fair treatment and protection of gig workers.

Proposed New Legislation for Gig Workers and Existing Mechanism

• Proposed New Legislation: Expanding Social Security for Gig Workers
  • The new legislation proposed by the Union Ministry aims to incorporate gig workers into social security schemes through a welfare board model.
  • It mandates the creation of a social security fund, requiring aggregators to contribute 1%-2% of their revenue.
  • This fund would offer health insurance and other benefits, potentially alleviating the precarious nature of gig work.
  • Additionally, the legislation proposes the registration of gig workers and demands transparency in their treatment by aggregators, such as providing a 14-day notice before termination and introducing dispute resolution mechanisms.
• Existing Mechanism: Gig Workers Under the Social Security Code 2020
  • The Social Security Code 2020 is a key element of India’s approach to integrating gig workers into the formal economy.
  • This code is one of four labour codes introduced in 2019 and 2020, aiming to simplify and rationalise existing labour laws by merging 29 central labour laws into four broad categories: wage, social security, industrial relations, and occupational safety and working conditions.
  • Gig workers, however, are only explicitly mentioned in the Social Security Code 2020, which treats them as a subset of informal workers.
  • As a result, gig workers are encouraged to register on the e-Shram portal, much like informal workers, but this categorization falls short of recognizing their unique employment situation.

Limitations of the Existing Legal Framework for Gig Workers (Social Security Code 2020)

• Ambiguous Definition of Gig Workers
  • The Social Security Code 2020 is the only one of India’s four labour codes that explicitly mentions gig and platform workers.
  • However, it classifies them as a subset of the informal workforce rather than as part of the formal economy.
  • This categorisation fails to reflect the realities of gig work, which often straddles the line between traditional employment and independent contracting.
  • Because they are categorised as informal, gig workers do not enjoy the same legal entitlements as those in traditional, formal employment, such as access to comprehensive social benefits and job security.
  • This ambiguity prevents a nuanced understanding of the employment dynamics in the gig economy and results in a framework that is ill-suited to the unique nature of gig work.
• Exclusion from Traditional Employer-Employee Relationship
  • One of the critical challenges in the Social Security Code 2020 is its failure to establish gig workers within the traditional employer-employee paradigm.
  • In many cases, companies that utilise gig workers, such as ride-sharing and delivery services, operate as formal businesses within the formal economy.
  • However, these companies often classify their workers as independent contractors rather than employees.
  • This allows them to avoid obligations under labour laws, such as providing minimum wages, paid leave, or job security.
• Avoidance of Employer Responsibilities by Aggregators
  • The classification of gig workers as independent contractors rather than employees is not a mere oversight but a strategic move by aggregators to minimise their responsibilities.
  • Many aggregators intentionally blur the lines of employment relationships, labelling their workforce as independent contractors to sidestep legal obligations.
  • This classification allows companies to avoid providing benefits like health insurance, paid leave, or contributions to retirement funds.
  • By doing so, they leverage the flexibility of the gig economy while avoiding the costs associated with formal employment.
  • This ambiguity not only disadvantages gig workers but also challenges the enforcement of labour laws, as the existing framework does not account for this strategic obfuscation.
• Limited Coverage Under Social Security Schemes
  • Although the Social Security Code 2020 recognises the need for social security schemes for gig workers, it only offers a limited scope of benefits, which fall short of the protections available to formal employees.
  • For example, while the code allows for the provision of social security schemes like health insurance, it does not extend to other essential benefits such as unemployment insurance or robust pension schemes.
  • These limitations mean that gig workers are often unable to secure their long-term well-being or protect themselves against income disruptions.
• Lack of Dispute Resolution Mechanisms
  • Another significant challenge is the absence of effective dispute resolution mechanisms for gig workers.
  • While the Industrial Relations Code 2020 includes provisions for addressing workplace disputes, these are not extended to gig workers, who remain outside the scope of the code.
  • This means that when gig workers face issues like unfair dismissal, wage disputes, or discrimination, they lack a formal avenue for seeking redress.

Impact of the Informal Classification on Worker Rights

• The classification of gig workers as part of the informal sector not only limits their access to benefits but also reinforces the precarious nature of their work.
• Informal workers in India, including gig workers, are typically subject to greater economic instability due to the lack of job security and weaker legal protections.
• The informal classification means that gig workers are often unable to access minimum wage protections or occupational safety regulations that would be standard in formal employment.
• For example, gig workers may face unsafe working conditions or unreasonable workloads without recourse to regulations that ensure their safety and well-being.
• The informal classification thus perpetuates a cycle where gig workers remain vulnerable to exploitation, lacking the rights and protections afforded to their formally employed counterparts.

Ways Ahead to Address the Challenges Associated with Social Security Code 2020

• Addressing the Core Issue: The Need for Redefining Employment Relationships
  • The absence of a clear definition of employment relationships within the gig economy is at the heart of the issue.
  • To genuinely protect gig workers, the government must redefine gig work to acknowledge the role of aggregators as employers.
  • This shift would align with international precedents, such as the 2021 ruling by the U.K. Supreme Court, which recognised Uber as an employer and its drivers as workers entitled to labour protections.
  • Establishing a similar recognition in India would enable the inclusion of gig workers under the existing labour codes, rendering separate legislation unnecessary and promoting greater formalization of gig work.
• Evaluating the Welfare Board Model
  • While the proposed welfare board model represents a step towards providing gig workers with social security, it has its limitations.
  • Past experiences with similar models, such as those created for construction workers, reveal that they have been insufficient in providing adequate protection.
  • Despite working for formal employers, construction workers often remain classified as informal, resulting in subpar coverage.
  • Thus, merely establishing a welfare board for gig workers may not fully address the systemic issues unless the employment relationship is made explicit and aggregators are held accountable as employers.

Conclusion

• The proposed legislation by the Union Ministry of Labour and Employment aims to address the long-standing need for social security among gig workers in India.
• However, its success depends on redefining the employment relationship within the gig economy and ensuring that gig workers are recognised as part of the formal labour force.
• The ambiguity surrounding the status of gig workers must be resolved to bring them under the protections of the existing labour codes.