GIG economy and employment laws: Are freelancers protected?

India’s gig economy, driven by platforms like Ola, Uber, Swiggy, and Zomato, is growing rapidly, with 350 million gig jobs expected by 2024. However, gig workers lack basic employee rights due to being classified as “independent contractors.” The 2020 Code on Social Security offers limited benefits, but its implementation is delayed and unclear. Legal cases push for better protections, including classifying gig workers as “unorganized workers.” Drawing from international models, India could improve protections by requiring platforms to contribute to social security and introducing portable benefits, ensuring security for gig workers.

The gig economy in India, powered by digital platforms like Ola, Uber, Swiggy, and Zomato, has seen rapid growth and become a significant source of employment for the hitherto unemployed youth. It is predicted that India will have 350 million gig jobs by the year 2024. However, despite this growth, gig workers in India face legal uncertainties regarding job security, benefits, and protections. Their classification as “independent contractors” often excludes them from the rights and safeguards often afforded to formal employees under India’s labour and other laws. This has led to critical discussions about whether they have adequate legal protections under Indian laws or not. Although initial steps have been taken to recognize and address gig workers’ unique needs, however, considerable gaps persist in securing their employment rights and access to comprehensive benefits.

Current Classification and Legal Protections

In India, gig workers and freelancers are generally categorized as “independent contractors,” and thus, do not qualify as “employees” under the Industrial Disputes Act, 1947, or the Minimum Wages Act, 1948 et al. This means that their access to essential benefits like paid leave, health insurance, and social security is limited. Since the terms of work for most gig workers are governed by service agreements rather than employment contracts, they lack and are often denied rights relating to work hours, grievance redressal, and termination benefits that traditional employees enjoy.

The Code on Social Security, 2020 marks a significant shift in Indian labour laws by including gig and platform workers as eligible for specific benefits like health insurance, accident insurance, and retirement support, to be facilitated through a proposed Social Security Fund. This initiative reflects India’s first formal recognition of much-awaited gig workers’ need for social security. However, the Code is still pending full implementation, and its provisions primarily depend on contributions from the Central and State Governments, as well as digital platforms, rather than establishing a formal employer-employee relationship between workers and gig companies. This reliance on external funding sources and voluntary contributions highlights challenges in creating sustainable, enforceable social protections for gig workers.

Challenges of Implementation and Funding

One major hurdle in enforcing social security for gig workers is the unclear mechanism for funding and managing the Social Security Fund. The Code suggests contributions from platforms and government bodies, but there is limited clarity on specific contribution requirements and enforcement. Additionally, State Governments play a role in implementing the Code, which may result in inconsistencies across regions. For GIG workers, the code provides for certain welfare schemes. But then, these schemes are not statutory. If the State Governments, don’t want to implement them, they will not do it.

The Government could consider requiring gig platforms (like Uber, Swiggy, etc.) to make mandatory financial contributions toward social security for gig workers. These contributions would be based on specific metrics, such as the number of hours worked or the earnings generated by each gig worker. This concept is similar to how formal employers in traditional employment settings are required to contribute a portion of wages or salaries to social security funds.

In formal employment, these contributions are collected from both employees and employers and are used to fund social security benefits like pensions, etc. By implementing a similar system for gig platforms, policymakers could ensure that gig workers also receive basic social protection even though they are not traditional employees.  Also, a comprehensive nationwide framework to ensure consistent protection for gig labourers in every State remains absent.

Court Interventions and Worker Rights

Indian courts have also played a role in shaping the legal landscape for gig workers. In All India Gig Workers Union v. Uber India Systems Pvt. Ltd, The Indian Federation of App-based Transport Workers (IFAT) has filed a Public Interest Litigation (PIL) in the Supreme Court, asserting the right to social security for all workers, including those in the gig economy. The petition urges to classification of gig workers employed by platforms like Zomato, Swiggy, Ola, and Uber as “unorganized workers” to ensure they are eligible for social security benefits under existing labour laws. It provides that gig workers face exploitation through long working hours, low wages, and the absence of social protections. It calls for specific welfare measures, including health insurance, maternity benefits, pensions, and other essential assistance. Additionally, IFAT challenges the common view that gig workers and platform companies are engaged in a partnership, instead asserting that the nature of the work establishes a de facto employer-employee relationship that should entitle gig workers to labour protections like those enjoyed by formal employees.

International Influences and Comparative Models

Countries like the United Kingdom and the United States have influenced India’s regulatory approach to the gig economy. In a landmark ruling, the UK Supreme Court has ruled that Uber drivers are ‘workers’, and not ‘independent contractors’. The judgment in the case of Uber BV and others v. Aslam and others marks a paradigm shift in the treatment of individuals working in the gig economy. These individuals, under the status of ‘workers’, shall be entitled to basic worker rights such as the minimum wage and holiday pay.  India could consider similar regulatory frameworks for the gig workers in India ensuring them basic rights that a regular employee enjoys.

Future Prospects for Gig Worker Protection

To create a more balanced gig economy, India could benefit from policies that promote “portable benefits”—benefits that workers can carry from job to job. Some countries have implemented portable benefits systems to support gig workers’ health, retirement, and other welfare needs without tying these benefits to a single employer. In India, such a model could allow gig workers to accumulate benefits over time, regardless of their engagement with different platforms.

India could also benefit from models that require mandatory contributions from gig platforms to the Social Security Fund. Additionally, introducing portable benefits would allow gig workers to retain essential protections, like healthcare and retirement savings, across different platforms.

As India continues to navigate the evolving gig economy, achieving a balanced approach that guarantees fair treatment, essential benefits, and security for gig workers, while preserving the adaptability that defines gig work, will be essential. By learning from international frameworks and strengthening domestic legal structures, India has the opportunity to create an inclusive system that protects gig workers’ rights and provides a stable foundation for this rapidly expanding sector.

Disclaimer: The views expressed in this article are those of the author/authors and do not necessarily reflect the views of ET Edge Insights, its management, or its members