The suit, filed by Service Employees International Union and a group of ride-hailing drivers, asks the state Supreme Court to invalidate Prop 22, which cemented gig driver’s status as independent contractors after more than 58 percent of voters supported it in November. They argue the measure limits state legislators’ ability to implement a system of workers’ compensation in defiance of their constitutional authority to do so. It also argues that the proposition unconstitutionally defines what comprises an amendment to the measure, as well as violating a rule limiting ballot measures to a single subject to prevent voter confusion.
The Protect App-Based Drivers and Services coalition, which represents gig companies such as Uber, Lyft and Doordash, criticized the lawsuit in a statement attributed to Uber driver Jim Pyatt, an activist who has worked in favor of Prop 22.
“Nearly 10 million California voters — including the vast majority of app-based drivers — passed Prop 22 to protect driver independence, while providing historic new protections,” said Pyatt, of Modesto, who is retired and drives for Uber. “Voters across the political spectrum spoke loud and clear, passing Prop 22 in a landslide. Meritless lawsuits that seek to undermine the clear democratic will of the people do not stand up to scrutiny in the courts.”
It’s the latest turn in a heated saga that kicked off in 2019 when state legislators approved a law, known as Assembly Bill 5, that classified certain categories of gig workers as employees. Gig companies Uber and Lyft argued the law did not apply to them, but the courts sided with state and local officials, requiring the companies to classify drivers as employees. Meanwhile, the ride-hailing firms and food delivery giants such as DoorDash mounted a more than $200 million campaign, Prop 22, to fight the law. It aimed to provide limited benefits such as a wage promise and health insurance stipend in exchange for classifying drivers as independent, barring them from employee protections such as sick pay and workers’ compensation.
The groups that filed the suit, which also include SEIU California State Council, took particular issue with the measure’s inclusion of a provision requiring a seven-eighths legislative supermajority to amend and even define what constitutes an amendment. That authority, they say, is vested with the courts.
The lawsuit blasts the measure’s drafters as having “impermissibly usurped this Court’s authority to ‘say what the law is’ by determining what constitutes an ‘amendment.’” Further, they argued, they violated the single-subject rule by “burying these cryptic amendment provisions on subjects not substantively addressed in the measure, and in language that most voters would not understand.”
They said they were suing in the state Supreme Court rather than a lower court because the issues were of broad public importance and required a speedy resolution to minimize harm to gig workers.
Hoopy’s Work Culture Paving Path For Sustainable $455 Bn Gig Economy
India, currently home to 8 Mn gig jobs, is witnessing the growing popularity of the gig economy due to its business agility and flexibility
A key challenge in this space is to find the right balance between cost-effectiveness and better sustenance for gig workers
Abhinav Shrivastava, cofounder and CEO of Hoopy, believes that creating a respectful work environment and taking care of the gig workers’ basic needs will go a long way in helping businesses grow
The year 2020 shaped up as a pivotal year in many ways. On the one hand, it disrupted people’s lives, health and the way they used to interact in a pre-Covid-19 world; on the other, it impacted the livelihoods of millions as businesses and individuals struggled to evolve and survive the pandemic. High-growth sectors like tourism and hospitality came to a grinding halt overnight; traditional jobs disappeared and consumers clamoured for all things digital that ensured speed and safety. New forms of work, driven by new technologies, are emerging fast, and the existing workforce must adapt and contribute in sync with the new normal.
However, job transformations mostly happened in sectors already disrupted by new-age tech companies, especially the startups, which have been a mainstay in the Indian economy for some time now. Incidentally, ridesharing app Uber and foodtech giant Zomato were the first to opt for a flexible workforce comprising freelancers and contract workers, bringing the companies several benefits in terms of productivity, cost control and profit margins. This breakaway from a team of permanent employees to short-term and expertise-driven contract work is popularly known as the gig economy. On-demand service companies may have adopted it first, but traditional corporate houses are also looking for this new breed of workers in the pandemic-induced remote work regime.
India’s gig economy has been growing steadily in the past couple of years. It is expected to see a massive jump in the post-Covid-19 era, given the current need for business agility and the young demographic’s focus on strategic roles, meaningful work and the freedom to pursue their passion without being shackled to a 9-to-5 job. Gig work allows people to choose their working hours, the projects they like and a pay-per-job model that enables them to work with companies that offer higher-than-average payment. As for businesses, the gig economy costs less and allows them to tap into a diverse pool of workers. The combination of saving resources and acquiring more experienced workers enable companies to scale faster as well.
According to Boston Consulting Group, a management consulting firm, India is home to 8 Mn non-farm gig jobs and it is likely to grow to 24 Mn in the next three-four years. India’s gig sector is expected to grow to $455 Bn by 2024 at a CAGR of 17% according to the Associated Chambers of Commerce of India (ASSOCHAM).
But this is one side of the story as the gig economy faces various challenges. For one, as most gig workers fall under the low-income category, they end up working extra hours to make ends meet. Further, pay-per-job often results in irregular incomes. Finally, as the workforce is not part of the permanent employee base, they miss out on all benefits and perks. Clearly, the role of businesses employing gig workers becomes more crucial as the regulatory infrastructure of the nation does not protect this particular market.
In essence, a balance must be struck here and followed meticulously so that the sector may evolve into a talent-first, goal-driven and less-hierarchical work structure instead of adhering to its much-maligned short-term, low-pay, zero-benefits model.
Keeping in mind the multiple benefits associated with gig work, players such as Bengaluru-based hyperlocal delivery startup Dunzo, Delhi-NCR-based home services marketplace Urban Company and Bengaluru-based doorstep two-wheelers repair startup Hoopy are tapping into this rising workforce. But the likes of Hoopy are well aware of the dark side of this ‘human marketplace model’ as discussed above.
“Using Gig economy successfully is a little tricky, especially where the gig workers are the front face of the company. The onus is on the companies to formulate policies , pay structure and benefits plans in a way that motivates the gig workers to abide by the set SOPs,” says Shashank Dubey, cofounder and COO, Hoopy.
The Balancing Act Of The Gig Economy
In December 2020, Bangalore-based Fairwork India, an organisation that researches workplace fairness, came out with the second edition of fair working conditions rankings by digital platforms. Among the bottom, three were Swiggy, Uber and Zomato — three companies leveraging the gig economy in a big way. In brief, the challenges of the gig sector have surfaced across workplaces and gig workers are bearing the brunt.
But things are even more complicated than they appear. The biggest business advantage of the gig economy is its agility. In simple terms, companies need not bear extra costs for acquisition and retention. As these businesses run on a tight budget and primarily focus their resources on core operations to scale and grow, offering full-fledged employee benefits to gig workers is not easy. On the other hand, many businesses have failed to ascertain minimum standards for their workers as they tend to have stringent measures in place.
The outcome does not augur well for businesses, though. According to a study by Oxford University’s Saïd Business School, workers are up to 13% more productive when they are happy with their work conditions. Moreover, absenteeism and lack of efforts by gig workers directly impact the brand image of a business.
Understandably, some businesses are taking steps in the right direction to bring about some much-needed change. For instance, in the same ranking by Fairwork India, Urban Company topped the list even though its business model is based on the gig economy. Other players who are innovating in the gig economy space include Hoopy and Flipkart’s logistics and supply chain division Ekart.
Hoopy, a two-wheeler repair and servicing startup set up in 2016, works with more than 200 mechanic partners and has come out with ingenious solutions to help its gig workers. Recently, the company has announced a Covid-19 vaccination drive for all its mechanic partners and their families and extended the offer to former workers who are no longer associated with the startup. Cofounder and COO Shashank Dubey has told Inc42 that its workers are getting vaccinated at the Narayana Institute of Cardiac Sciences in Bengaluru, and the initiative has been facilitated by the company’s angel investor Kumar Gaurav, VP, Kotak Securities.
Hoopy’s Take On The Gig Economy
Hoopy mainly works with independent mechanics from the unorganised sector and brings them under its brand as gig workers. The people hired by the startup are split into three groups based on their experience and skills. These include minor mechanics, general service mechanics and major work mechanics, and they are paid accordingly. The workers, designated as mechanic partners by the startup, also have scope for career growth as the auto repair company allows them to move up to a higher category when they have enough skills and experience. Senior mechanics are also entitled to profiles like quality-in-charge, service manager and trainers.
Hoopy’s mechanic partners initially undergo a seven-day training, followed by a period of mentoring by senior coworkers. In addition, the company has in place various soft-skill development initiatives to ascertain that its workers are able to provide a good customer experience every time. All mechanic partners get certificates for all training programmes they have undergone that help develop their portfolios.
Besides training and career development, Hoopy has developed a pay structure that ensures that the person earns a minimum amount every day. The startup also provides medical insurance and extra incentives for adhering to the standard operating protocols regarding the quality of repair and servicing. Dubey tells Inc42 that about 10% of all mechanics frequently cross the INR 30K mark per month, and the majority makes up to INR 20K. In the unorganised market, the national average pay for auto mechanics is INR 11-12K a month.
Hoopy had to shut shop temporarily during the nationwide lockdowns in 2020. But it tied up with Freshworld (doorstep fruits and vegetable delivery startup) to turn its mechanic partners into delivery executives so that they could keep earning. It also started a donation drive to raise money for its workers.
Hoopy describes its gig economy as respectful work culture. The startup regularly organises high tea events where all its people, right from the senior leadership to full-time employees to mechanic partners, gather and share their experiences.
The startup’s retention data reflects these efforts. A LinkedIn survey suggests that, on average, the retention rate of gig workers in an organisation is around 62%. But Hoopy boasts 90% retention of its mechanic partners.
“Traditionally, mechanics in India do not get their due respect as they are part of a highly unorganised industry. So, we try to build a work environment where their needs are taken care of. Perks like loans, insurance and intangibles like respect and pride go a long way,” says Shrivastava.
In spite of the pandemic-induced lockdowns and a significant investment in its gig partners since its inception, Hoopy managed to cross an annual recurring revenue of $1 Mn in March 2021 and aims to cross revenue run rate of $3.5 Mn by March 2022. But this revenue data does not merely underline the company’s financial health. It also proves beyond any doubt that striking a balance between business growth and good working conditions for the gig workers is possible. And it speaks well of the company culture without which no business can thrive.
After Zomato IPO, Can We Have a More Honest Discussion on Gig Labour?
A little over a week ago, food logistics company Zomato made a dream debut on Indian stock exchanges. Its initial public offering worth Rs 9,375 crore was oversubscribed 38.25 times, and its shares had listing gains of over 70%, giving it a market capitalisation of over 1 lakh crore.
Just weeks earlier, its primary competitor Swiggy raised Rs 9,300 crore from a clutch of private investors. Investors remain untroubled by the fact these food logistics companies (FLCs) have racked up astronomical losses since inception, secure in the belief that restaurant delivery services will grow to a $110 billion industry by 2025 (Zomato’s RHP, p. 26).
Also integral to their optimism is the assumption that these FLCs will continue to enjoy access to the underpaid labour of a highly vulnerable segment of Indian workers.
Consider a bit of historical context. Engorged with vast foreign funding, FLCs entered our labour market less than a decade ago with the much-marketed lure of massive earnings for anyone with a motorbike. FLCs ran advertising campaigns promising monthly incomes of over Rs.40,000, and aggressive driver onboarding teams were set up to sell this proposition across the country. Lakhs of workers signed on, many of whom took on loans to purchase vehicles, as the expected remuneration dwarfed the EMIs. And for a while, the system worked, albeit unfairly; FLC workers could potentially earn the advertised amounts, provided they put in back-breaking shifts that often extended beyond 12 hours.
The scenario today is vastly different. Payouts for FLC workers have been unilaterally revised, resulting in remuneration as low as Rs.15 per order. The additional incentives were reduced/eliminated and complex penalties introduced, often resulting in earnings lower than fuel expenses. They have none of the standard employee benefits, including overtime compensation, or leave; on the contrary, Zomato’s RHP and website discloses that the FLC workers are actually charged a platform fee for being onboarded.
For FLC workers, quitting is not an option, given the loans and other obligations that would have arisen since they first started. This state of affairs has led to several protests and strikes by FLC worker groups across the country since 2020 – though this yielded little respite; after all, as one FLC worker put it: ‘how do you protest against an app?’ So, they’re invariably forced to continue.
These workers are an integral part of the business of the FLCs, without whom the FLC cannot exist. Yet, by labelling them ‘gig workers’, ‘independent contractors’, ‘delivery partners’, even ‘driver entrepreneurs’, and substituting the typical workplace with a mobile app, FLCs evade the responsibilities of an ordinary employer under the law. The FLCs claim that its workers are self-employed, and they can choose when and how long they wish to work; thereby skirting legal restrictions on excessive work hours and the obligation to ensure other benefits.
Globally, there is no consensus over whether FLC workers qualify as employees, though foreign judicial decisions are increasingly finding in favour of labour rights. In 2021, the UK Supreme Court ruled that Uber’s drivers were entitled to employee benefits; in 2018, the California Supreme Court specified a test for determining an employer-employee relationship, which effectively designated gig workers are employees (although the impact of this judgement on the transportation sector was subsequently undone). There are, however, no judicial tailwinds in India in support of the rights of FLC workers, and the Central government has even statutorily segregated FLC workers from “employees”.
Yet, the fundamental nature of an employer-employee relationship cannot be denied in the FLC-worker equation. The FLCs exert pervasive control over FLC workers, determining which delivery jobs are allocated to them, how much they get paid, how fast they need to complete the job, how they interact with customers, what they wear, what equipment they use, etc. While the FLC workers can choose to decline a specific job or go offline for extended periods, these choices result in penalties or de-prioritization, which make a huge difference in earnings. Thus, the choice of the FLC workers is illusory, and the control exercised by FLCs undeniable.
It is arguable that the treatment of FLC workers may amount to forced labour, which is prohibited under Article 23 of the Indian constitution. While a plain reading of Article 23 would suggest that it extends only to traditional forms of forced labour (like the begar bonded labour system) and does not cover instances of underpaid labour compelled through economic circumstances, a 1982 Supreme Court judgement makes it clear that such an interpretation would be narrow, incorrect, and unconstitutional.
In PUDR vs Union of India (1982 SC), while hearing a public interest petition against the unconscionable exploitation of construction workers, the Supreme Court held that “there is no reason why the word “forced” should be read in a narrow and restricted manner so as to be confined only to physical or legal “force”… Any factor which deprives a person of a choice of alternatives and compels him to adopt one particular course of action may properly be regarded as “force” and if labour or service is compelled as a result of such “force”, it would be “forced labour”.”
In effect, the court found that where the compulsion of economic circumstances left no alternatives to a person and compelled her to provide labour at remuneration lower than minimum wage, the mandate of Article 23 against exploitation would be violated. In the case of FLC workers, especially those who have taken loans – often with assistance from the FLC itself – the economic circumstances compelling them to continue to work at highly underpaid rates are attributable, at least partially, to the FLC. Thus, it is arguable that FLCs have violated Article 23; a fundamental right that is enforceable against private parties as well as the State. Unfortunately, as the lawyer Gautam Bhatia writes in his book The Transformative Constitution (Harper Collins, 2019), ‘the judgement in PUDR is a signpost to a road not yet taken’, as several subsequent judgements have ignored the principles set out therein while dealing with labour rights.
Newly minted shareholders of Zomato might argue that such practices are a result of market forces and free consent, and not unique to FLCs. However, the scenario fundamentally changes when an FLC is listed, since the State is effectively supporting their exploitative business model by facilitating their access to funds from the public.
Instead of remedying the situation by providing legal protections, the Government introduced four new labour codes that entrench the problem. The Code on Social Security 2020 (CSS) slots FLC workers into 2 amorphous definitions – ‘gig workers’ and ‘platform workers’ – which places them outside the traditional employer-employee relationship. The CSS further stipulates that the Central Government may provide certain (vague and indeterminate) benefits like ‘old age protection’, ‘creche’, ‘life and disability cover’, and ‘health and maternity benefits’ to such workers – without any explanation of what, when, and how the benefits will be provided. The only responsibility placed on the FLC is that of a possible monetary contribution towards these schemes, capped at a paltry 5% of the total amount the FLC pays to its gig & platform workers. Thus, the only result is a tax on FLCs resulting in the creation of another fund that may remain unutilised or diverted, like so many others before it (Nirbhaya Fund, and Building and Construction Workers fund).
The Securities Exchange Board of India (SEBI) even eased the listing requirements for companies using innovative technologies, thereby paving the way for Zomato to list earlier on the “Innovators Growth Platform”. How FLCs qualify as innovative technology companies is a puzzle; in Douglas O’Connor v. Uber Technologies Inc. (2015), the US District Court of Northern California observed that Uber was no more a technology company than a manufacturer of lawnmowers that used computers and robots to produce the lawnmowers; instead, a company should be defined by what it does, rather than the mechanics used to do it.
It is important that public markets push listed entities towards greater accountability; however, few meaningful examples exist. In April 2021, Adani Ports and SEZ Ltd was removed from the Dow Jones Sustainability Indices due to “relationship with Myanmar’s military, who are alleged to have committed serious human rights abuses under international law”, though this was seemingly on account of the commercial risks to the stock price.
SEBI’s business responsibility and sustainability reporting (BRSR) requirements are a step forward. Applicable to the top 1000 listed entities, Principle 5 therein requires disclosures on measures taken to “respect and promote human rights”. A guidance note in the BRSR even defines “forced or involuntary labour” as “all work or service that is extracted under the menace of penalty… includes any labour for which the worker receives less than the government stipulated minimum wage”; an unexpected / unintentional reference to the PUDR principles. It would be interesting to see Zomato’s disclosures in this context next year.
Cheerleaders of Zomato’s IPO have marketed the “gig economy”, predicted to touch 90 million jobs by the end of the decade, as the panacea to India’s unemployment problem, blind to the alienation of labour and the estrangement of justice that this will cause. One of the few sources of hope on the horizon is the ongoing litigation by the EPFO, Gurgaon, which seeks to hold Zomato the company responsible for not treating its delivery personnel as employees.
Chitralekha Das and Varun Thomas Mathew are lawyers practising in New Delhi.
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