Gig Workers Should be Treated as Workmen or Employee in the Insolvency Waterfall

Abstract

The origins of gig economy can be traced to 19th century. The advent of internet, mobile, and platforms coupled with the deregulation in the developed world during the 1970s and 80s, along with globalisation accelerated the gig-economy. America’s truck drivers and railroad workers were hugely affected by this phenomenon. India’s urban economy relies heavily on gig workers. Delivery riders, couriers, drivers, beauticians and domestic help are ubiquitous, all working on behalf of digital platforms that ostensibly call them “partners” but in reality, treat them as anything but. Yet if a platform collapses, gig workers may discover that their place in the insolvency queue is at the bottom of the pyramid alongside operational creditors and far from that of formal workers. By 2030, India may have 90m gig workers, according to one estimate. Their legal status remains ambiguous, and in insolvency proceedings they risk losing unpaid dues, incentives, or social-security contributions. In India the ranks of gig workers swell partly because of high youth unemployment. The lived reality is grim; harassment, musculoskeletal injuries and extreme conditions are common. Platforms can deactivate accounts based on opaque ratings, with little recourse. Half-hearted steps have been taken to address the matter. The Code on Social Security 2020 (COSS), though not yet notified, defines gig and platform workers. Yet crucially, the COSS places gig workers outside the traditional employer–employee framework. A few states i.e., Rajasthan, Karnataka, and Telangana have gone further. Further, COSS grants priority to claims relating to provident fund, insurance, gratuity, etc. during insolvency, but it specifically excludes Chapter IX, which covers social security for unorganised, gig, and platform workers. Indian courts have long interpreted “workman” broadly, piercing the corporate veil when companies hid behind contractors. Supreme Court rulings suggest that gig workers could well be considered employees under a functional test of control and integration. In some parts of the world, momentum is clear. The European Union, Mexico, British Columbia and Ontario in Canada have taken steps that treat gig workers favourably in an insolvency. Some legal precedents from insolvencies abroad too are instructive. The anomaly of gig-workers in insolvency needs to be addressed and reforms need to be undertaken. The key being to amend the IBC to recognise gig workers as “workmen,” revise the COSS to ensure their claims are prioritised and institute appropriate regulations so that information memorandum exhibits gig workers as a separate class.