Employment Laws In A GIG Economy

 

The term “gig economy” often confounds people. Individuals earning their livelihood not through one single employment but through multiple assignments or gigs is what constitutes a “gig economy”. Freelancers and consultants form the backbone of a gig economy.

Gradually, the traditional structures of employment, where a formal employer-employee relationship exists are being replaced by gig employment. More people are flocking towards self-employment.

Reasons for such move are multiple. Some of them being the need for greater self-control, diversity of work and following one’s passion. The young Indian workforce today, requires more from their jobs as opposed to just money and job security. This has led to a spurt in the gig economy.

With the rise of gig economy, another question comes to the fore. Can these freelancers and consultants be covered under the traditional employment laws? If not, then how can they be protected legally?

Through, this article, I shall endeavour to explain the basics of our employment law as it stands today and how freelancers and consultants are treated under it. An alternative model would also be suggested.

Indian employment law: Applicability

Indian employment statutes divide the workforce into two categories: workmen and non-workmen. Workmen are those workers which are engaged in technical, manual and clerical roles. Employees categorised as workmen receive protection under the Industrial Disputes Act, 1947. This protection includes, inter alia, a statutory notice before retrenchment, retrenchment compensation, etc. non-workmen are those employees who are engaged in discharge of more of managerial and supervisory functions. Such employees do not get the protection under the Industrial Disputes Act but are covered under other social welfare legislations. None of the categories outlined under the employment legislations include freelancers or consultants.

Moreover, an employee under the Indian employment law is an individual who has a master-servant relationship with his employer. There are various tests to assess the employer-employee relationship. All these tests primarily stem from the nature of control employer exerts over the employee, who can hire/fire, who pays salary, etc. Once again, none of these tests span the freelancer or consultant within their ambit.

All social welfare legislations pertaining to bonus, minimum wages, provident fund, etc. are applicable only to employees (workmen or non-workmen) and hence, freelancers and consultants are systematically excluded from their benefits.

As is evident from the aforementioned discussion pertaining to the Indian employment statutes, a freelancer does not strictly fit into the definition of an employee.
(S)he is not controlled by any single entity, (s)he does not have traditional hire and fire rules nor is his/her salary or remuneration under some other nomenclature paid by any one single employer. In such a situation, it becomes impossible to categorise them as employees and to allocate social security measures to such freelancer/consultant. This exclusion from the definition of the term “employee” makes freelancers/consultants devoid of the protection afforded by employment laws.

With the steady growth of gig economy and the number of individuals opting for the roles of freelancers and consultants on the rise, isn’t it time to end this exclusion and expand the definition of the term “employee”?

If discussed from a moral standpoint, yes. The definition of the term “employee” may be expanded as excluding an entire class of workers from legal protection is not only erroneous but also discriminatory. It also encourages companies to hire freelancers or consultants in place of employees as then they would not have to be legally responsible to them.

However, if discussed from a strict legal angle, it may not be viable to expand the definition of employee. An employee, loosely said, works only for a single employer under his/her control, is hired and fired by her, is told how to do the assigned work by the employer and is paid wages by them. This manifests that the underlying intent behind an employer-employee relationship is that all aspects of an employee’s professional life is to be under the aegis of the employer. However, it is impossible to do so in the case of a freelancer or a consultant. Hence, the option of including them within the definition of the term “employee” may not be seemingly appropriate.

Alternatively, a separate class of workers called the consultants/freelancers may be created and the benefits of certain social welfare legislations may be extended to them. For instance, applying the minimum wages legislation to them, their inclusion in the standing orders and having certain basic terms and conditions applicable to them, etc. would be a good start.

Somewhere or the other, a move to provide a form of legal protection needs to be initiated for such class of workers. They cannot be left at the mercy of contractual protections, especially in the view of disparity in their bargaining power. In today’s market, there is a significant oversupply of talent and lack of opportunities. Freelancers are prone to excessive bargaining and exploitation by the industry.

Conclusion

Examining employment law from the standpoint of gig economy is essential. This is so because a large section of our workforce today is a part of this gig economy. If we still continue to follow the antiquated laws, then there would be no growth of laws with the emerging societal trends.

A revamp in the employment laws is need of the hour to protect and manifest the rights of freelancers and consultants. A new category including these should be covered under the extant employment law statutes. An assessment may be done as to what all statutes they may be covered within. Certain minimum employment periods may be specified. Protection against unfair termination may be extended. Minimum wages may be prescribed. Doing so will boost the confidence of those who wish to fuel the economy in their own way and would be a step forward in legal protection of the workforce.

Bhumesh Verma is Managing Partner at Corp Comm Legal and can be contacted at bhumesh.verma@corpcommlegal.in.

 

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