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Business News/ Opinion / The conundrums of a gig economy

The conundrums of a gig economy

Employing gig workers could be beneficial for businesses, but it would also erode the social welfare objectives of various labour laws

The practice of hiring freelancers or gig workers has been prevalent in the US and European countries for a while. Photo: iStockPremium
The practice of hiring freelancers or gig workers has been prevalent in the US and European countries for a while. Photo: iStock

“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." This quote by Airbnb co-founder Brian Chesky lucidly explains the “gig economy", a trend that is gathering momentum in India as big software companies like Wipro and Infosys hire gig workers on a project-to-project basis. The sharing economy has revolutionized the way services are delivered and received around the world.

The practice of hiring freelancers or gig workers has been prevalent in the US and European countries for a while. However, in the past decade, the proportion of gig workers in the US has gone up from 7% of the total workforce to around 30% as per reports from last year.

Businesses fail sometimes and entrepreneurs should not become risk averse for fear of being saddled with a redundant workforce. At the same time, should we let the gig economy recklessly erode the social welfare objectives of various labour legislations? If no, is there a case here for the state to interfere, given the peculiar social and economic conditions that the Indian workforce operates under?

Gig workers are typically governed by the contract between them and the employers. Since labour laws are not brought into play, the employer is not required to make contributions with respect to provident fund, gratuity, super-annuity and employees’ state insurance. While it saves hassle and costs for the employer, the gig workers miss out on statutory safeguards with respect to unfair termination, minimum wages, paid leave, etc.

Social welfare legislation is premised on the fundamental principle that workers at the bottom of the pyramid in India, especially in the unorganized sector, do not have the bargaining power to negotiate a fair deal with their employers. It will probably not be long before courts are called upon to test if the new “pay as per use" arrangements will meet the avowed legislative objectives of preventing exploitation and ensuring social welfare. While the jury is still out on this, a UK employment tribunal last year ruled that Uber drivers are employees and are therefore entitled to minimum wages, sick pay and paid holidays.

Is it all so bad for the employee? There is no denying that the gig employee is more in control of his time and fate than an employee bound by the rigours of traditional employment. The relationship of a gig worker with his employer is driven entirely by the contract. Unless the contract states otherwise, gig workers have the freedom to work as per their convenience, with no fixed working hours or employment policies to bog them down. Add to that the flexibility to pick and choose the kind of work they wish to participate in. In the traditional employer-employee set-up, the employee is required to work on whatever the employer asks of him.

Going beyond employer-employee issues, it will also be interesting to consider some of the legal issues that this may spawn. Unlike a traditional employer-employee relationship where the law would presume (and/or the employment contract require) that all work product created by the employee shall remain the intellectual property (IP) of the employer, for gig workers such terms have to be negotiated on a case-to-case basis. This makes the task onerous for the employers.

Another issue that may crop up for the employer is confidentiality. In industries such as information technology and pharmaceuticals where confidentiality becomes crucial, having less control over the actions of a gig worker will make it challenging for the employer to enforce confidentiality obligations on him. Given the speed (or the lack of it) of contract enforcement through Indian courts, a good-looking contract may just be that.

Also, in a gig economy set-up, a non-compete clause becomes critical to protect business interests, whereas, under Indian law, non-compete clauses are generally enforceable only for the term of the employment. When you have a situation where your gig worker is potentially working for others as well, including competitors, the employer is wary of what he shares with the gig worker and perennially

Beyond social justice, one has to also reckon with business and efficiency issues. On what basis do banks and other financial service providers extend lines of credit when steady income is not assured? Also, in situations where teamwork is essential, gig worker teams formed and disbanded on a case-to-case basis will likely produce tardy, inconsistent and poor output. Concepts like organizational culture and team synergy become casualties in such ad hoc employment conditions.

All this should tell us that it is an idea whose time has come but a free run may not be in anyone’s interests. Labour welfare schemes were introduced to secure fair employment terms and we cannot let technology run roughshod over it. Taking a page from the UK employment tribunal’s judgement, basic labour protection like minimum wages, paid leave provisions and maternity benefits should be available to gig workers as well.

There is arguably a case for the state to deftly balance the interests of business exigencies and social welfare.

Ramesh Vaidyanathan and Probal Bose are, respectively, managing partner and associate at Advaya Legal.

Comments are welcome at

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Published: 01 Aug 2017, 02:03 AM IST
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