U.S., Europe Lessons for Gig Economy Law

IN OCTOBER, the U.S. Department of Labour circulated a draft rule, making it easier for delivery drivers, truckers, construction workers and janitors to be considered as employees, rather than independent contractors or partners. The objective was to stop “misclassification” of gig workers and provide them benefits granted under the Fair Labour Standards Act, including minimum wage, overtime, social security, and unemployment insurance, among others. The rule proposed to “rescind” the Trump rule (Independent Contractor Status Under the Fair Labour Standards Act or 2021 IC Rule), which made classification of gig workers as independent contractors easier, through “multifactor, totality-of-the-circumstances analysis”. The analysis would check “economic reality factors” such as “investment, control and opportunity for profit or loss factors” and an “integral factor” which considers whether the work is integral to the employer’s business, to see if a gig worker is an employee or truly independent of it.

The proposed rule would be finalised and notified once it goes through the mandatory 45-day public consultation process. With over 57 million gig workers (36% of workforce) in the U.S. in 2021, it would mean a significant change, particularly in the ride-hailing and delivery sectors.

California Law, 2019

California became the first U.S. state to bring such a change in 2019. Its “ABC-test” considers the worker an “employee” unless (i) he/she is “free from the control and direction of the hiring entity” with respect to the performance of the work (ii) performs work classified “outside the usual work” of the hiring entity’s business and (iii) is customarily engaged in an “independently established trade, occupation, or business of the same nature”.

The move, which has benefitted one million gig workers earlier classified as independent contractors, evoked strong protests from firms, including Uber, Lyft, Instacart and others, who have made fortunes on gig work-based (cheap labour) business models. They fought a pitched battle for a year, bankrolling (spending $200 million on campaign alone) a referendum (voting by rideshare drivers) in 2020 to exempt them from classifying gig workers as employees by mobilising rideshare drivers, and succeeded in getting a “yes”. But a year later in 2021, a California court struck down the referendum as “unconstitutional” and “unenforceable” as it had sought to limit the state’s legislative power by proposing a seven-eighth legislative majority (87.5%) for amendments to pass.

European Initiatives

In 2021, the European Parliament took a similar initiative to grant rights and benefits to gig workers engaged in the platform economy. The same year, the European Commission proposed five criteria to determine whether the platform is an “employer”. These include whether (i) the platform determines the pay, (ii) requires workers to follow rules regarding appearance, conduct toward clients or performance of the work, (iii) uses electronic means to supervise, assess job performance, (iv) restricts work times or the freedom to turn the app off and (e) requires exclusivity or non-competition.

A platform that satisfies any of the two criteria is legally presumed to be an “employer” and those working through it are entitled to the status of “worker”, giving them access to labour and social protections.

The U.K., which exited the European Union in 2016, already has a law recognising “worker” as a separate category from “employee” and “self-employed” who are entitled to minimum wage and paid holiday etc., but not full employment rights. In 2021, an apex court ruled Uber drivers as “workers”, following which the ride-hailing company classified 70,000 driver-partners as “workers” entitled to minimum wage, paid holiday, pension (contributory) and older benefits like accident and health insurance to worker and family (since 2018).

Courts in the Netherlands (2021), France (2020) and Spain (2020) have also recognised Uber drivers and delivery riders of Deliveroo and UberEats as “employees” and salaried staff. Spain became the first E.U. country to enact such a law in 2021. Indonesia, where close to 90% of workers are informal, treats driver-partners as temporary contractors.

How India Treats Gig Workers

In contrast to the developed economies, India treats “gig” or “platform” workers as informal workers. The Code on Social Security 2020 defines them as those who work “outside of traditional employer-employee relationship”. They are entitled to “social security schemes” — in future since the code is yet to be notified. However, they don’t find a mention in any of the other three codes relating to minimum wages, industrial disputes and health and safety work environment passed in 2019 and 2020 – which, too, are yet to be operationalised.

Additionally, in 2020, the transport ministry issued a guideline mandating that platform drivers get 80% of the fare from rides, work for not more than 12 hours and are provided insurance. In 2021, the budget promised minimum wages and insurance cover for “all categories of workers”. According to gig workers of Uber, Ola, Swiggy, Zomato and Zepto, who spoke on condition of anonymity, apart from insurance the rest are yet to be rolled out.

The labour ministry, meanwhile, continues to consult industry associations and companies engaging gig workers to figure out suitable social security schemes. But there is no forward movement, even after two years.

Industry’s Silence

Lack of progress in the labour ministry’s efforts is because none of the industry associations and companies engaging gig workers have shared their plans or schemes yet, sources told Fortune India. Their reluctance is evident in their lack of response to the Supreme Court directive on a petition filed by the Indian Federation of App-based Transport Workers and Others in November 2021, seeking social security cover for gig drivers. Ironically, the petition before the apex court doesn’t even stress on minimum wage for gig workers or redefine the “employer-employee relationship” in line with advanced economies.

According to the Periodic Labour Force Survey (PLFS) of 2020-21, 64.3% of best category workers — regular wage/salaried — had no written contract (legal status) and 53.8% had no social security cover. Also, 89% of India’s total workforce was “informal” in 2019-20 (Economic Survey 2021-22) — without legal status, rights and social security protections. Therefore, the idea of a good social security cover for gig workers, who constituted 1.5% of the workforce (7.7 million) in 2021 according to NITI Aayog, appears a little far-fetched.

Debate Over “Moonlighting”

In sharp contrast to the silence over rights of gig workers, the industry is quite vocal when it comes to “moonlighting” — a fallout of the pandemic-induced work-from-home practice.

IT and technology majors, including Wipro and IBM, have declared their strong opposition to moonlighting. Wipro even fired 300 employees for the same. But others such as Infosys, Swiggy and Emeritus have “allowed” moonlighting with prior consent and/or disclosures.

There is, however, a difference between moonlighting and gig work. According to the Oxford dictionary, moonlighting means having a second job that is done secretly, without telling the main employer”. It means one indulging in moonlighting is an “employee” of a firm making extra money from a side job with another company.

Gig workers are, however, nobody’s employee in India. A survey by the People’s Union for Democratic Rights in the Delhi-NCR region in 2021 found that “for most” of the lower-end workers (engaged with deliveries, ridesharing, and wellness), gig work is not something they are doing on the side for extra cash, rather it is their “primary job”.

Well-paid workforce is a potent consumer and driver of economic growth. With the number of gig workers set to jump to 23.5 million, or 4.1% of the total workforce, by 2029-30 (NITI Aayog) and not enough quality jobs being produced, Indian lawmakers need to take note of all that is happening in the U.S. and Europe, and follow suit.