Code On Social Security: Impact on online Aggregators

November 2020

1. Introduction

On September 28, 2020, the Code on Social Security, 2020 (“Code”) received the Presidential assent and was notified in the Official Gazette. It is yet to be made effective and supplemented by rules. Following the recommendations of the Second National Commission on Labour, the Code attempts to repeal and consolidate provisions under 9 central social security laws in India.[1] It is arranged into 14 chapters with 164 sections. Further, it seeks to move away from traditional concepts of employment, with the aim to provide social security coverage to new categories of workers. The Code introduces the concept of platform and gig workers, and contemplates establishing a separate social security fund to provide benefits to them. Platform workers are generally understood as those who obtain work through an online platform that connects them with consumers who avail their services. So far, these workers have remained outside the purview of direct or indirect employment, as well as from the ambit of social security laws as they are treated as independent principals. As the COVID-19 pandemic propelled a new normal, workers in the unorganised sector rose up to the crisis and worked on the frontline in sectors such as food and medicine delivery, and essential supplies. It is estimated that 24% of world’s platform workers are employed in India.[2] Owing to the surge in use of digital platforms for goods and services which is likely to further rise in India, the government is keen on providing benefits to millions of platform workers. With these new changes, aggregators may no longer remain unaccountable for onboarded platform workers and their social security rights. 

This newsletter seeks to analyse the new concepts regarding platform work, platform workers, provide an overview of the related requirements, and assess its potential impact, specifically on online aggregators.

2. Overview of the new concepts

The Code under Section 2 provides definitions of terms including social security which is defined as measures afforded through schemes to ensure access to health and provide income security to workers, particularly during old age, unemployment, sickness, invalidity, work injury, maternity or loss of a breadwinner. As noted, the Code recognises the need to provide social security to unorganised, gig, and platform workers. Towards this, it introduces some new concepts, an overview of which is provided below:

  • Aggregator is an intermediary or a market place for a consumer to connect with a seller or a service provider. The Seventh Schedule provides for 9 categories of aggregators namely, ride sharing, food and grocery delivery, logistic, professional services, marketplace and inventory-based e-commerce for wholesale and retail sale of goods as well as services in B2B or B2C set up, healthcare, travel and hospitality, content and media, and any other goods and service provider platform. Through this definition, online platforms such as Uber and Amazon are aggregators.
  • Gig worker is a person who earns from work performed outside traditional employer-employee relationships. This is a generic definition and a large variety of workers can be covered under this category. A repair-man hired through Just Dial or a driver hailed through Uber are gig workers under this definition.
  • Platform worker is a person who performs platform work. Platform work refers to work arrangements which do not fall under a traditional employer-employee relationship, and where organisations or individuals use an online platform to access other organisations or individuals, and provide specific services or goods for consideration. Platform workers are those who undertake platform work. Under this definition, an Uber driver and Amazon delivery rider are platform workers. It is interesting to note here that platform workers can also be gig workers.

3. New Requirements

Chapter IX of the Code proposes framing of several welfare schemes for benefit of unorganised, platform and gig workers. Section 114 empowers the central government to frame and notify appropriate social security schemes for gig and platform workers relating life and disability cover, accident insurance, health and maternity benefits, old age protection, creche, and any other matters as it may determine from time to time. The schemes shall provide for its administration, implementation agencies, role of aggregators in the scheme, funding sources and other aspects. An overview of the key related provisions is below:

  • Funding: The schemes could be funded wholly or partly by government (central and/or state), aggregators, corporate social responsibility funds or from any other source as may be notified. Furthermore, contributions by aggregators shall be 1 to 2% of the annual turnover of the concerned aggregator, provided that under no circumstance the contribution shall exceed 5% of what it pays cumulatively to the platform and gig workers. Where an aggregator has more than one business housed in the same entity, each business will be treated as a separate entity for the purpose of contribution.
  • NSSB: The Code proposes the constitution of a National Social Security Board (“NSSB”), and lists the various roles that it shall perform vis-à-vis social security of workers. One of its key roles will be to act as the government agency responsible for administration of welfare schemes made for platform and gig workers. In this role, NSSB shall comprise of 31 members including 5 representatives from aggregators as well as gig and platform workers as the central government may nominate. Alongside, it will also have representation from state government, Central Provident Fund Commissioner, Ministry of Labour & Employment as well as state governments on rotation basis.
  • Eligibility: The Code mandates that every gig and platform worker must be 16 years of age in the least, and registered to receive benefits under the proposed welfare scheme. Further, such workers must submit a self-declaration and prescribed information as per notified format. The application for registration must be accompanied with prescribed documents, including AADHAAR number. Each application shall be assigned a unique number.

Thus, once the Code is effective and schemes are framed, it is likely that employers and aggregators are obligated to comply with new requirements connected with social security schemes for platform and gig workers.

4. What It Means  

While the goal of providing social security to gig and platform workers is laudable, the Code lacks clarity on certain fundamental aspects, and perhaps, these would be addressed through rules and schemes. Some of the ambivalent aspects are analysed below:

4.1       Overlaps: The Code’s definitions for gig, home-based, platform, self-employed, and unorganised workers intersect one another. This may cause confusion while identifying which work should fall under which category. An unorganised worker is defined as one who is working in the unorganised sector with less than 10 workers, and includes home-based, wage or self-employed worker. Home-based worker is one who works for an employer at home or other premises, apart from the employer’s location or designated workplace. Self-employed workers are not employed by a single employer and work in the unorganised sector. Theoretically, a worker could fit all these definitions and also be a gig and platform worker. For example, a home-based tailor who accesses an aggregator platform to accept orders and provides goods to the consumer will be a platform worker. Incidentally, such a person would also fit the definition for a self-employed and gig worker. Further, such a worker can also be an unorganised worker if the employer does not employ more than 10 workers. The central and state governments need to work together to ensure that rules framed under the Code bring forth clarity on what work would fall under which definition.

4.2       Classification of Employer of Platform Workers: Traditionally, providing social welfare to the workers is the employer’s obligation. While the Code acknowledges that platform and gig workers are not covered under traditional employment models, it does not provide clarity on whether aggregator or the end consumer will qualify as employers under the Code, and consequently, be obligated to fulfill employer obligations.

Online aggregators claim that their workers are self-employed and the platform simply acts as an intermediary. Though Indian courts have not discussed the role of aggregators, online platforms are generally treated as intermediaries rather than as employers.[3] However, aggregators often place several work-related conditions on workers who use their platform. They also enable payments from end consumers through their platforms and provide incentives and bonuses. Furthermore, they engage in reviews and ratings as a means to ensure and gauge quality of services provided. These facts may indicate that some degree of control and supervision rests with aggregators. On the other hand, many of them do not provide tools and resources, training or real-time supervision for works performed.

Existing jurisprudence dealing with traditional employment models rely on tests of control and supervision (who controls the work, who has the ability to hire and fire, who is the paymaster, etc.) and integration (to what extent the person is integrated into an organisation for performing the work) to determine whether the contract is that “of service” (i.e., employment) or “for service” (i.e., service contract). Additionally, the determination is fact specific. Applying these tests to platform or gig workers is likely to be problematic. Thus, it is difficult to foresee how courts will apply existing employment tests to a scenario where platform and gig workers claim employment status. The Code is silent on this aspect, as a result of which the confusion lingers as to whether platform and gig workers are employees of the aggregator. Hence, rules framed under the Code should delve into this aspect and provide necessary guidance.

4.3       B2B and B2C platform work: In the absence of adequate clarity on who employs platform workers, it is possible that the end-user could be considered as the employer, especially in cases of recurring work for one consumer or in cases where a company uses crowd-sourcing[4] to outsource work to freelancers via a platform. For example, a service contract between Uber and a company hiring drivers on a yearly basis is a scenario wherein issues could arise in distinguishing the employer.

The object of the Code is to expand social security schemes to include unorganised, gig and platform workers. In the case of B2C platform services, it is unlikely that the Code intended for a consumer to comply with these schemes. However, the same cannot be said for B2B platform work. The Code is silent on classification of platforms on the basis of whether they are B2C or B2B. This may raise issues on who shall be considered as the employer in such cases.

5. Conclusion

The full impact of the Code on aggregators cannot be anticipated until the government notifies rules and schemes. Nevertheless, it is clear that operation costs for aggregators are likely to increase. Online aggregators contend with increasingly low margins as they seek to provide services at competitive costs and it is likely that instead of increasing costs for consumers, the increased cost would be apportioned to the workers themselves. In the absence of a comprehensive scheme which outlines the welfare that platform workers are entitled to and how the same shall be funded, the Code creates a situation wherein both employers and employees must wait for the other shoe to drop.

Author

Aastha Mathur

[1] These include Employee’s Compensation, Employees’ State Insurance, Employees’ Provident Funds and Miscellaneous Provisions, Employment Exchanges (Compulsory Notification of Vacancies), Maternity Benefit, Payment of Gratuity, Cine-Workers Welfare Fund, Building and Other Construction Workers’ Welfare Cess and Unorganised Workers’ Social Security acts.

[2] See Shobha Mishra Ghosh, “Future of jobs in India: A 2022 Perspective”, Ernst and Young (2020), available at http://ficci.in/spdocument/22951/FICCI-NASSCOM-EY-Report_Future-of-Jobs.pdf (last accessed on Nov 23, 2020)

[3] For instance, OECD defines an online platform as a digital service that facilitates interactions between 2 or more distinct, but interdependent set of users (firms or individuals) who interact through the internet. See An Introduction to Online Platforms and Their Role in the Digital Transformation, OECD (2019) available at https://www.oecd-ilibrary.org/science-and-technology/an-introduction-to-online-platforms-and-their-role-in-the-digital-transformation_ac38db8f-en (last accessed on Nov 23, 2020) 

[4] Crowd-sourcing is work which is outsourced to a geographically dispersed crowd/freelancers through platforms.. For example, content writers are often crowd-sourced platform workers. See Maria Maxi, “Social Dialogue and the Governance of the Digital Platform Economy: Understanding Challenges, Shaping Opportunities”, ILO-AICESIS-CES Romania Conference (2019), available at https://www.ilo.org/wcmsp5/groups/public/—ed_dialogue/—dialogue/documents/meetingdocument/wcms_723431.pdf (last accessed on Nov 23, 2020)

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