Published on: 14th July 2026
Authored by: Reshmi M.S
CSI College for Legal Studies, Kottayam
Abstract
India’s digital economy has radically transformed consumer transactions and labor distribution, pulling a massive new workforce into gig and platform work.[3][14] NITI Aayog estimates this workforce will expand from 7.7 million in 2020–21 to 23.5 million by 2029–30, signaling a permanent economic shift.[3] Although the Code on Social Security, 2020, was the first central legislation to formally recognize this sector, statutory recognition has proved insufficient to secure worker welfare, a vulnerability highlighted by state-level legislative interventions in late 2025.[1][14] This paper examines the structural limits of central aggregator-funded cess models and the recent regulatory frameworks enacted by Rajasthan and Karnataka.[1][7][8] It evaluates how opaque algorithmic management, arbitrary contract deactivations, and piece-rate pay scales impact rights guaranteed under Articles 14, 21, and 23 of the Constitution of India.[14] Finally, the study advocates for a shift toward a co-regulatory approach, including a statutory minimum-wage floor for active screen time, algorithmic transparency, and the introduction of a distinct “dependent contractor” status.[14]
I. Introduction
Where industrial factories once drove urban employment, digital applications now serve as primary employment engines across major Indian metropolises, such as Bengaluru, Mumbai, and Delhi.[14] What began as a matter of consumer convenience has evolved into critical economic infrastructure.[14] NITI Aayog projects that the gig and platform workforce will triple to reach 23.5 million individuals by 2030, demonstrating that this sector is a permanent structural fixture of the modern economy.[3][14] Despite this massive scale, gig workers occupy a highly precarious position within the socio-legal framework.[14] Historically, Indian labor jurisprudence operated on a strict binary distinction: an individual was either classified as an employee, enjoying full statutory protections, or as an independent contractor who assumed all operational risks.[14] Digital platform work does not fit into either traditional category.[14]
Prominent digital aggregators, including Uber, Zomato, and Swiggy, exercise a degree of control over their workforce that strongly resembles traditional employment, managing operations through automated algorithms that dictate task allocation, routing, and pricing.[6][14] Despite this systemic control, these platforms deny workers fundamental protections, such as statutory minimum wages, comprehensive health insurance, and retirement benefits.[14] This mismatch raises critical constitutional questions regarding the right to equality, procedural fairness, and a life of dignity for millions of workers within the unorganized digital economy.[14]
II. The Statutory Matrix: Analysing the Code on Social Security, 2020
The Code on Social Security, 2020, marked a significant shift in Indian labor legislation.[1] By providing explicit statutory definitions for a “gig worker” under Section 2(35) and a “platform worker” under Section 2(61), Parliament formally recognized that individuals working outside traditional employment arrangements require state-backed social protections.[1] A key element of this statutory framework is the funding model established under Section 114, which requires digital aggregators operating across ride-hailing, food delivery, and e-commerce sectors to pay a social security cess between 1% and 2% of their annual turnover into a national social security fund.[2] This capital is earmarked for state-administered welfare schemes covering life insurance, disability benefits, maternal health, and old-age support.[2][3]
However, the Code treats the platform economy as a matter of corporate benevolence and public welfare rather than a framework of enforceable labor rights.[14] By explicitly excluding gig workers from the definition of an “employee” under Section 2(26), the statute leaves them entirely outside the protections of the other three pillars of India’s labor law reforms, namely the Code on Wages, the Industrial Relations Code, and the Occupational Safety, Health, and Working Conditions Code.[4] Furthermore, the system relies heavily on the e-Shram portal for worker registration, a mechanism that has faced severe bureaucratic and procedural delays.[5] To resolve these registration delays, the Ministry of Labour and Employment introduced the Social Security Rules, 2026.[14] Rule 48(2) shifts the compliance burden onto platforms, requiring aggregators to connect their active databases directly to the e-Shram portal via Application Programming Interfaces (APIs).[14]
Although major digital intermediaries like Zomato, Swiggy, and Uber have completed the initial onboarding required to integrate their workers’ Universal Account Numbers (UAN), this technological integration exposes a basic systemic flaw.[6] The state is attempting to track fluid, irregular human labor using rigid, automated software interfaces.[14] For example, if a delivery partner logs off mid-shift due to a medical emergency or an equipment failure, their connection to the automated welfare safety net can become unstable.[14] Consequently, while the Central Code recognizes the existence of this workforce, it leaves algorithmic management and piece-rate compensation entirely unregulated, creating a regulatory gap that has driven individual state legislatures to act.[14]
III. State-Level Interventions: A Comparative Study of Rajasthan and Karnataka
Faced with implementation delays in the Central Code, states with high concentrations of digital platform workers enacted independent, standalone laws.[14] The Rajasthan State Legislature moved first by enacting the Rajasthan Platform-Based Gig Workers (Registration and Welfare) Act, 2023.[7] The Karnataka State Legislature followed by introducing the Karnataka Platform-Based Gig Workers (Social Security and Welfare) Act, 2025.[8] While federal initiatives focus primarily on back-end welfare accumulation, these state laws directly regulate the everyday operations of digital platforms, challenging the unilateral control exercised by aggregators.[14] Both states establish tri-partite Welfare Boards, with seats divided equally among state officials, aggregator representatives, and gig worker delegates, though their underlying funding mechanisms differ significantly:[9]
A. The Rajasthan Transaction-Based Model
The Rajasthan model funds its welfare board through a real-time, transaction-level welfare fee integrated directly into the aggregator’s digital application.[7] Every time a consumer books a ride or purchases an item, a dedicated percentage of that specific bill is automatically transferred into the state’s Gig Workers Welfare Fund.[10]
B. The Karnataka Gross-Payout Model
Conversely, Karnataka calculates its welfare fee based on the platform’s total gross payouts to workers, establishing a fee structure between 1% and 5%.[11] Crucially, Section 23 of the Karnataka Act includes a structural offset mechanism, stating that contributions paid to the State Welfare Fund satisfy the aggregator’s welfare obligations under the Central Code on Social Security, 2020, preventing double taxation.[12]
These state-level laws also target the core technology of the platform economy.[14] Aggregators have long maintained an asymmetric advantage by keeping their matching algorithms opaque, allowing them to alter piece-rates and task allocations without external oversight.[14] Rule 12 of the Karnataka Rules (Notified in November 2025) addresses this asymmetry by granting registered gig workers an explicit right to algorithmic transparency.[13] Under this rule, workers can demand explanations regarding how tasks are allocated, how automated customer ratings are calculated, and what electronic metrics determine their final pay.[13] Furthermore, Section 14(e) of the Karnataka Act prohibits sudden, automated deactivations based on single, unverified user complaints, mandating a 14-day written notice that details the grounds for termination or suspension and gives the worker a meaningful opportunity to respond.[14]
Finally, both states have established formal, state-backed grievance redressal mechanisms to replace automated internal app chatbots:[14]
* Under Section 14 of the Rajasthan Act, an aggrieved worker can file a formal complaint before a designated state labor officer, who must resolve the dispute or escalate it to an Appellate Authority within 90 days.[15]
* Section 21 of the Karnataka Act requires any aggregator employing more than 50 workers to maintain an internal dispute resolution committee, while preserving the worker’s right to pursue grievances through the statutory machinery of the Industrial Disputes Act, 1947.[16][17]
IV. The Constitutional Dimensions: Evaluating Algorithmic Management
Unregulated algorithmic control presents significant constitutional concerns under Part III of the Constitution of India.[14] When private aggregators govern human labor through automated code without statutory guardrails, their daily operations can conflict with fundamental rights:[14]
A. Article 14 and Arbitrary Action
Article 14 protects against systemic arbitrariness in state and quasi-state actions.[14] As established in E.P. Royappa v. State of Tamil Nadu, equality and arbitrariness are fundamentally opposed legal concepts.[18] When platforms execute sudden account deactivations or adjust wage rates without explaining their automated criteria, they deny workers basic procedural fairness, violating the natural justice principles protected under Article 14.[14]
B. Article 21 and the Right to Livelihood
Article 21 protects the right to life and personal liberty, which encompasses the right to livelihood, as ruled by the Supreme Court in Olga Tellis v. Bombay Municipal Corporation.[19] Because a gig worker’s livelihood depends entirely on continuous access to the application interface, a sudden, automated ban without notice or review deprives them of their primary means of survival, conflicting with the constitutional mandate to protect human dignity.[14]
C. Article 23 and the Prohibition of Compelled Labor
Finally, this operational model impacts Article 23, which prohibits forced labor and begar.[14] In People’s Union for Democratic Rights v. Union of India, the Supreme Court held that forced labor extends beyond physical coercion to encompass situations where economic desperation forces an individual to work for less than the statutory minimum wage.[20] Gig workers possess little bargaining power and must accept rigid, non-negotiable terms.[14] When platforms leverage this economic vulnerability without providing a guaranteed wage floor for active screen time, the arrangement takes on characteristics of compelled labor, which Article 23 was designed to prevent.[14]
V. Conclusion
The implementation of the Central Rules alongside new state-level laws demonstrates that India’s traditional binary model of employment no longer fits the realities of the modern digital economy.[14] Protecting this vulnerable workforce requires moving past basic welfare distributions toward a comprehensive, co-regulatory legal framework anchored by three primary reforms:[14]
* First, the law must recognize an intermediate “dependent contractor” status that sits between an independent freelancer and a standard employee, accurately reflecting the operational realities of platform labor.[14]
* Second, the state must establish a statutory minimum-wage floor for all active screen time, ensuring that workers are compensated for the hours they remain available on the application.[14]
* Third, legislation must mandate clear algorithmic transparency, strictly prohibiting fully automated deactivations that lack human review.[14]
Regulating these automated systems is essential to ensure that technological innovation does not develop at the expense of human dignity and constitutional rights.[14]
Bibliography
Primary Statutory Sources
[1] The Code on Social Security, 2020, No. 36, Acts of Parliament, 2020 (India).
[2] The Code on Social Security (Central) Rules, 2026, Gazette Notification, Ministry of Labour and Employment, Government of India (2026).
[7] The Rajasthan Platform-Based Gig Workers (Registration and Welfare) Act, 2023, No. 30, Acts of Rajasthan State Legislature, 2023 (India).
[8] The Karnataka Platform-Based Gig Workers (Social Security and Welfare) Act, 2025, LA Bill No. 31, Acts of Karnataka State Legislature, 2025 (India).
[13] The Karnataka Platform-Based Gig Workers (Social Security and Welfare) Rules, 2025, Notified Nov. 19, 2025.
[17] The Industrial Disputes Act, 1947, No. 14, Acts of Parliament, 1947 (India).
Judicial Precedents
[18] E.P. Royappa v. State of Tamil Nadu, (1994) 4 SCC 3.
[19] Olga Tellis v. Bombay Municipal Corporation, (1985) 3 SCC 545.
[20] People’s Union for Democratic Rights v. Union of India, (1982) 3 SCC 235.
Government Policy & Administrative Reports
[3] NITI Aayog, India’s Booming Gig and Platform Economy: Perspectives and Recommendations on the Future of Work, Policy Report, Government of India (June 2022).
[5] Press Information Bureau (PIB), Towards Universal and Inclusive Social Protection: Status of National Registration on e-Shram Portal, Ministry of Labour & Employment, Government of India (Factsheet, 2023).
[6] Ministry of Labour & Employment, Government of India, Directive on Mandatory Onboarding of Online Aggregators and API Integration on the e-Shram Portal, Circular File No. W-11015/15/2024-RW.
