Gig sector workers in India – Legal Considerations

Introduction

“There were laws created for businesses and there were laws created for people. What the sharing economy did was create a third category: people as businesses.” –Airbnb co-founder Brian Chesky[1]

The world is standing at the cusp of the 4^th Industrial Revolution, which is generating new, disruptive technologies by fusing and blurring the boundaries of existing technologies.[2] Among the many aspects of the current economy which are expected to undergo profound changes in the process, the nature of work and workplace is an important one.

The 4^th Industrial Revolution has the potential to completely change workplaces.[3] It is also giving rise to what is known as the ‘gig economy’, which is characterized by temporary or flexible jobs where companies tend towards hiring freelancers.[4] The gig economy is on the rise, including in India, where it is likely to be worth $20 billion-$30 billion by 2025.[5]

This article discusses the legal issues that an organization must consider while entering into a work relationship with gig sector workers. For brevity, such workers will be referred to as ‘gig workers’, and the organizations will be referred to as ‘employers’ in this article.

Classification Issues

The first important legal consideration concerning gig workers is their classification. Under the framework of the current employment laws, the classification of a worker as an employee has important implications. For example, several social security measures such as the provident fund, ESI, etc. are available to employees only. The gig workers on the other hand do not inherently fit into the conventional employee-employer paradigm.

As noted earlier, the gig sector is defined in terms of temporary and flexible jobs, in place of full-time employment. This understanding was cemented in the case of Ali Razak v. Uber Technologies, Inc.,[6] where the Eastern District of Pennsylvania held that UberBLACK drivers were independent contractors.

However, soon after, the legal approach changed with the Supreme Court of California’s ruling in Dynamex Operations West, Inc. v. Superior Court of Los Angeles.[7] In this case, rejecting the earlier precedent, the court laid down a fresh test for the determination of employee status, called the ABC test. Under this test, the burden of proof to establish the status of an independent contractor was put upon the employer, if he could prove all of the following:

1. that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;
2. that the worker performs work that is outside the usual course of the hiring entity’s business; and
3. that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.[8]

This legal test is important for several reasons. First, if even one of these limbs is not established, the worker would be classified as an employee. Second, under part B of the test, gig workers in many prime areas of the gig economy, for example, Uber and similar services, would clearly be classified as employees. Third, the nature of the relationship is to be assessed factually, and not just with reference to the contract.

In India, the governing factors for the employer-employee relationship can be deciphered from the decision in Balwant Rai Saluja v. Air India Ltd.[9] In this case, the Supreme Court held that several factors have a bearing on the question of employee status, such as (a) who is the appointing authority; (b) who is the paymaster; (c) who can dismiss; (d) how long alternative service lasts; (e) the extent of control and supervision; (f) the nature of the job e.g. whether it is professional or skilled work; (g) nature of establishment; (h) the right to reject. The court also held that the extent of control required for an employee was ‘effective and absolute control’.

Although the exact applicability of these factors upon gig workers would need judicial scrutiny, the shift to the ‘effective control’ standard could mean that gig workers would not be classified as employees in India. Further, a Code on Social Security, 2020 released recently, deals with the concept of a gig worker and defines it as “a person who performs work or participates in a work arrangement and earns from such activities outside of a traditional employer-employee relationship”.[10]

Prima facie, this would also suggest that the Indian law does not equate gig workers to employees. While at present, the legal position appears to be leaning in favour of classifying gig workers as not employees, rulings from the West may have persuasive value for Indian courts, especially given the orthodox Indian jurisprudence of employee definition.[11]

Contractual Issues

Many important issues also arise with respect to the contractual provisions between the parties. The first issue is the viability of the non-disclosure clause in the agreement with gig workers. India protects sensitive and valuable information either under common law or as part of the enforcement of the non-disclosure clause under a contract.[12]

The practice of including a non-disclosure clause is fairly common in employment contracts in India. These clauses have been held to be enforceable even beyond the term of the employment. [13] The courts have further held that in the case of confidential information, relief may not just be limited by the contract but may be given under general rules of equity and breach of confidence.[14]

Thus, it is possible in law to enforce non-disclosure clauses in conjunction with the common law obligation of confidence, when the requirements under the law are fulfilled.[15] It also appears that this clause will be applicable to all, irrespective of whether such a person is an employee or not, and thus to gig workers as well.

Yet the employers should be cognizant that while in law such terms may be enforceable, gig workers may pose unique problems of enforcement. The employee must therefore limit the confidential information being shared with gig workers to the extent feasible.

The second contractual issue could be non-compete clauses. The chief motivator for gig workers is the freedom to be able to work for multiple clients simultaneously. Thus, the presence of a non-compete clause in a contract with gig workers could be problematic and defeat the very raison d’etre of the gig economy.

The non-compete agreement with gig workers may also lead the court to presume the existence of an ‘employer-employee’ relationship.[16]  Additionally, non-compete clauses are not enforceable post-termination [17]  Thus, it is best to avoid their usage. Indeed, companies like UBER and Lyft allow their drivers to work with their prime competitors to signal their non-employment status.[18] Instead, as discussed above, the best alternative can be a non-disclosure or confidentiality clause, which Indian courts enforce even post-termination of the contract.[19]

Sexual Harassment and Employers Responsibility with respect to Gig Workers

Understanding the implications of the extant sexual harassment laws for gig workers is very important for employers. In 2018 research, 54% of self-employed and freelance women reported that they have been harassed at least once.[20] In India, Vishakha guidelines provided for employer’s responsibilities with respect to alleged sexual harassment by a third party.^[21]

Also, since the Sexual Harassment Act[22] defines ‘aggrieved women’ as “a woman.. whether employed or not…”, it appears that gig workers can also be effectively brought under the purview of the Act, whether as a complainant or as respondent. The Act further states that the employer shall provide a safe working environment at the workplace which shall include safety from the persons coming in contact at the workplace.^[23]

The employer should also initiate action under the Indian Penal Code, against the perpetrator, or if the aggrieved woman so desires, where the perpetrator is not an employee, in the workplace at which the incident of sexual harassment took place.^[24]

It is clear from the above position that the Employer’s responsibility extends to taking appropriate steps under the Act even in the case of gig workers. Additionally, as a preventive measure, employers may add a sexual harassment policy clause in the agreements entered with such gig workers.^[25]

Conclusion

Under the code on Social Security, some welfare measures for gig workers have been incorporated such as minimum wages, maternity benefits, etc. However, the three other codes are silent on the policies toward gig workers.[26] Gig workers don’t have protection related to occupational health & safety under the current labour law regime, which needs to be addressed.

The law with respect to gig workers is currently in a nascent stage. At this stage, employers need to guard their interests first by remaining vigilant of the evolution of law and adapting when necessary. Second, great attention should be paid to drafting the contract for the gig workers, and terms indicating employer-employee relationship, such as ‘control’, ‘supervision’ ‘and ‘non-compete’ should be avoided. Third, a robust sexual harassment policy should be implemented with respect to gig workers to ensure compliance with the Sexual Harassment Act.

References:

[1] Ramesh K. Vaidyanathan and Probal Bose, ‘India: The Conundrums Of A Gig Economy’, https://www.livemint.com/Opinion/AtBCpBokW7aLYLy4G0Kq3H/The-conundrums-of-a-gig-economy.html, last accessed on 13 October 2022

[2] Bernard Marr, ‘The 4th Industrial Revolution Is Here – Are You Ready?’ https://www.forbes.com/sites/bernardmarr/2018/08/13/the-4th-industrial-revolution-is-here-are-you-ready/#86320bd628b2, last accessed on 13 October 2022

[3] Alex De Ruyter, Martyn Brown And John Burgess, ‘Gig Work And The Fourth Industrial Revolution’, Journal Of International Affairs, 37

[4] Jim Chappelow, ‘Gig Economy’, https://Www.Investopedia.Com/Terms/G/Gig-Economy.Asp, last accessed on 13 October 2022.

[5] KR Srivats, ‘With freelancing on the rise, India’s gig economy is going strong: report’, https://www.thehindubusinessline.com/economy/with-freelancing-on-the-rise-indias-gig-economy-is-going-strong-report/article10022680.ece, last accessed on 13 October 2022

[6] Civil Action No. 16-573

^[7] (2018) 4 Cal.5th 903

^[8] Tony Marks, ‘The California Supreme Court Deals A Blow To Independent Contractors’ https://www.forbes.com/sites/tonymarks/2018/05/29/the-california-supreme-court-deals-a-blow-to-independent-contractors/#bc6095070a18, last accessed on 13 October 2022

[9] (2014) 9 SCC 407

[10] Singhania & Partners, ‘Gig Workers And Platform Workers: The Code On Social Security 2020’ https://www.mondaq.com/india/employee-benefits-compensation/1035552/gig-workers-and-platform-workers-the-code-on-social-security-2020, last accessed on 15 October 2022

[11] “Raw societal realities, not  fine-spun legal niceties, not competitive market economics but complex protective  principles,  shape  the  law  when  the  weaker working  class sector needs succour for  livelihood  through labour.”, Hussainbhai v. AFTU, Kozhikode, 1978 SCC (4) 257

[12] Prashant Reddy T, ‘The ‘Other IP Right’: Is It Time to Codify the Indian Law on Protection of Confidential Information?’ Journal of National Law University Delhi, 5(1) 1–21

[13] V.V. Sivaram And Ors. vs Foseco India Limited, 2006 (1) KarLJ 386

[14] John Richard Brady v. Chemical Process Equipments AIR 1987 Delhi 372, citing Saltman Engineering Co. v. Cambell Engineering Co., [1948] 65 RPC 203

[15] The three requirements are: (i) that the information disclosed was of a confidential nature; (ii) that it was communicated in circumstances importing an obligation of confidence and (iii) that there was an unauthorised use of the information, Coco v AN Clark (Engineers) Ltd, [1968] F.S.R. 415

[16] Geoffery Washington, Non-Compete Agreements for Independent Contractors May Cause Employment Woes, https://www.bizmonthly.com/non-compete-agreements-for-independent-contractors-may-cause-employment-woes/, last accessed on 13 October 2022

[17] Superintendence Company of India v. Krishna Murgai, 1980 AIR SC 1717

[18] Orly Lobel, The Gig Economy & the Future of Employment and Labor Law, 51 U.S.F. L. Rev. 51 (2017)

[19] Supra Note 14

[20] Sexual Harassment is Pervasive Among Self-Employed Creatives, https://www.honeybook.com/risingtide/sexual-harassment-report, last accessed on 13 October 2022

[21] Guidelines and norms laid down by the Hon’ble Supreme Court in Vishaka and Others v. State of Rajasthan and Others (JT 1997 (7) SC 384), https://www.iitg.ac.in/iitgicc/docs/Vishaka_Guidelines.pdf, last accessed on 13 October 2022

[22] The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

[23] Section 19 (1), Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

[24] Section 19 (h), Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

[25] Smita Paliwal, ‘Notional Extension Of Workplace vis-à-vis POSH Act, 2013’, http://www.mondaq.com/india/x/816388/Employee+Benefits+Compensation/TOPIC+Extended+Workplace+under+the+Prevention+of+Harassment+of+Women+at+Workplace+Act+2013+POSH+Act, last accessed on 13 October 2022

[26] https://www.epw.in/journal/2022/30/perspectives/labour-laws-gig-workers-context-labour-law-reforms.html

This article has been submitted by Anupriya, a law graduate and an independent researcher.