Digital Platforms and Their Influence on Employee-Employer Relationships

Abstract

The traditional relationship between employees and employers has been changed by digital platforms, creating a gig economy where workers have flexible, task-based jobs. This paper investigates the changing dynamics of these connections, with special emphasis on categorizing gig workers and their accountability under current legal frameworks. Through analyzing court decisions and legal precedents, the research aims to assess how various courts have handled the uncertainty regarding gig worker’s employment classification as either independent contractors or employees, and the potential consequences for both platform businesses and workers. The paper also discusses the importance of regulatory measures to protect gig workers’ rights and ensure fairness in labor practices, given the growing importance of their role in the economy. In the end, the main goal of this paper is to offer a detailed insight into the obstacles brought by digital platforms to the traditional notions of employment.

Introduction

Technological advancements such as artificial intelligence, blockchain, and autonomous systems have revolutionized the global economy in the 21st century. Among these changes, digital platforms have notably disrupted conventional employment by enabling services to be provided through mobile applications and algorithms. This development has created a paradigm shift from traditional work structures to digitally mediated work arrangements, often allowing workers flexible working hours. Platforms that exemplify this shift include Uber, Amazon, and Flipkart.

The International Labour Organization (ILO) categorizes these digital platforms into four main types^[1]:

• Platforms providing services directly to users (such as Paytm and Facebook),
• Platforms facilitating exchange (such as Amazon),
• Platforms mediating work (such as Uber and Ola), and
• Hybrid platforms that combine these various functions.

 Correspondingly, digital platforms have created two distinct forms of employment relationships: internal employment, where the platform directly hires the workers, and external employment, where workers operate as independent contractors offering services via the platform^[2]. This widespread transition to digitally mediated work has significant consequences, primarily by blurring the boundaries between traditional employees and independent contractors. This situation has subsequently created legal uncertainty in critical areas, specifically concerning the definition of a worker’s employment status and the determination of overall accountability within these new structures.

Employer-employee relationship in the digital economy

In traditional employment, there is vicarious liability where the employer is responsible for the action’s employee within the course of employment but in the modern digital economy, there have been substantial changes in the dynamics of employer-employee relationships. Unlike conventional employees who frequently depend on manual work. Alternatively, digital labourers leverage their technical skills and expertise, positioning themselves as valuable resources in a swiftly expanding economy. Employers are facing difficulties in keeping skilled workers due to the increasing demand for their services. Employers must invest in training these workers to meet the organization’s unique requirements, which can be expensive. Moreover, it is crucial to establish a flexible work environment that can adapt to employee’s needs to promote productivity and development. In this particular situation, strong relationships between employers and employees are more crucial than ever before.

Workers in the digital space often operate as independent contractors rather than employees, reducing company’s liability for providing benefits or controlling the manner of work. These changes lead to the key legal question of whether gig workers should be classified as employees, independent contractors, or self-employed individuals. Gig workers often fall into the second category: external employees or independent contractors. They are not entitled to benefits traditionally provided by employers, such as health insurance or paid leave. While they enjoy greater flexibility, they face greater economic insecurity. This raises crucial questions about the extent of liability that aggregators (e.g Uber, and Amazon) should bear for their gig workers’ actions.

Research Question

It can be challenging to define the employment status on digital platforms when workers complete tasks online through apps or websites. This circumstance resulted in challenges with finding a job. It is challenging to classify gig workers as independent contractors or employees.

1. How do digital platforms affect the traditional employee-employer relationship in the context of gig workers?
2. To what extent can platform companies be held liable for the actions of gig workers, and what role does the classification of these workers play in determining liability?

Gig Workers and Traditional employment

The United Nations Economic Commission for Europe (UNECE) Handbook on Forms of Employment defines gig workers as^[3]

1. People who accept the short-term task
2. Paid for that work
3. Inadequate assurance of consistent work and need to put in extra effort on their own to complete each assignment.

Also, Gig worker is defined under section (35) of the code on Social Security 2020 as

 “Gig worker” means a person who performs work or participates in a work arrangement and earns from such activities outside of traditional employer-employee relationship ^[4]

Gig workers function beyond the confines of regular employees, who are usually employed under fixed contracts, have job security, and get benefits like social security. They operate on a temporary, task-based basis without long-term obligations or controlled employer supervision, using digital platforms to support their job. Gig workers are less bound by the rules of where they work, when, and how they work than those in regular employment. Nonetheless, employment stability and perks like health insurance or pensions are sacrificed in order to achieve this flexibility. In the traditional sense, gig workers are not employees because their connection with the platform is based on temporary jobs without a set salary, and they frequently depend on their own resources like cars, tools, or equipment. Gig workers are governed under the legal framework of

1. Code on Wages 2019
2. Industrial Relations Code 2020
3. Code on Social Security 2020
4. Occupational Safety, Health and Working Conditions Code, 2020

Gig Economy

In the gig economy, there is a triangular interaction between three parties: (i) customers who use a particular service; (ii) platform-based gig workers who are paid for their services; and (iii) the aggregator that arranges the connection between the consumer and the platform-based gig workers. This can be explained through an example, Platforms like Amazon, Uber, Ola, Swiggy, and Zomato are all considered to be aggregators. We look over how these transactions take place, for example when a customer needs any service they go to the app of the aggregator and book for service. Aggregator links the gig worker with the customer based on the location and in the end of service, they keep part of the payment as a commission for facilitating the transaction. In this we cannot say they are employee because gig workers carrying on their own vehicle.  In these, customers use services like rides, food, and products from delivery persons who are connected to the consumer by an app or website. A 2019 study estimated the global sharing/gig economy’s value at USD 204 billion in 2018, with projections of reaching USD 455 billion by 2023, driven by increasing consumer receptiveness and digitalization. The Covid-19 pandemic and changes in labour law and technology, such as the potential introduction of self-driving cars, may significantly alter the future landscape of the sharing/gig economy.^[5]

The differentiation between a contract of service and a contract for service is foundational to determining employment rights and employer liability.

1. Contract of Service (Employee): This relationship implies the employer has the authority to oversee and manage the work, including instructing the tasks and methods of the employee’s work. Contracts relating to benefits intended to protect workers are typically read by courts as contracts of service, favoring the employee.
2. Contract for Service (Independent Contractor): This indicates that the contractor has the autonomy to perform their functions and the employer only provides direction, but does not exert influence over the worker. If the worker is performing the service on their own account, rather than for the employer, it signals a contract for service.

The liability of the employer (the master) for acts committed by the worker is governed by the concept “Qui facit alium per se.” This principle means the employer is accountable only when the independent contractor’s work is not delegable.^[6]

Key Legal Tests for Defining the Relationship

The Supreme Court has established several tests, detailed in cases such as Sushilaben Indravadan Gandhi v. The New India Assurance Company Limited^[7] and Dharangadhara Chemical Works v. State of Saurashtra,^[8] to ascertain the true nature of the relationship:

1. The Control Test

The initial and primary examination is whether the employer has the authority to oversee and manage the work, which includes instructing the tasks and methods of the employee’s work. Key considerations under this test include:

• Control over Work and Manner: Whether there is Control of the employer on employee’s work and the manner of that work been conducted.
• Level of Control: The degree of control required to define the employer-employee relationship will differ in each business and cannot be precisely defined. If the employer just provides direction, allowing the worker freedom, it suggests a contract for service.

2. The Integration Test

Courts examine whether the employee is integrated into the employer’s company, or whether they are just an accessory.

3. Financial Ownership and Risk

The courts assess who owns the resources and benefits financially from the project:

 If the employee is the owner of the resources and assumes the risk, this indicates a contract for services. Courts also check whether wages are given by the employer to the employee.

4. Dependency Test

A service contract is highly likely if the employer maintains control over the employee’s means of subsistence, skill, and Continued employment (i.e., whether the employee directly relied on the employer).

Comprehensive Factors and Application to Digital Platforms

In the case of Balwant Rai Saluja v. Air India Ltd^[9], the court listed comprehensive factors for determining the employer-employee relationship, including:

1. Who appoints the worker.
2. Who pays the remuneration.
3. Who has the authority to dismiss.
4. Who can take the disciplinary action.
5. Whether there is continuity of service.
6. Whether there exists complete control and supervision.

Judicial Interpretation in the Gig Economy

Recent court decisions addressing digital platforms have often focused on the degree of control exerted by the platform, applying a subordination test. In the Take it Easy case^[10], a French court determined that drivers for the platform were employees, not independent contractors. The court found that the drivers were in a relationship of subordination because the platform had the power to direct, control, and impose sanction. Similarly, the court in Uber France V Max ^[11]determined that drivers were employees. However, a driver could be considered self-employed if they could choose their clients, fix their own tariff, and were not dependent on the platform. The conditions under which employees are performing work are crucial to determining the relationship. In essence, the matter hinges on interpreting these varied tests in the modern context where technological direction (via algorithms and apps) often substitutes direct human supervision, yet still establishes subordination and control.

Liability of gig workers

Generally, employer is liable for the actions of the employee (Gig worker) which is vicarious liability. But this principle won’t be applicable if the gig worker is an independent contractor.

Kavita S. Sharma V Uber India ^[12]– Uber driver’s negligence led to the passenger missing his flight. As a result, the passenger filed a lawsuit against Uber for providing inadequate service according to the CPA. Uber argued that its drivers are independent contractors and not employees, therefore it should not be held liable for the driver’s actions. However, the forum rejected this argument, stating that Uber appoints and manages the drivers, making them agents of the company. The court found that Uber exercises significant control over the drivers, including determining fares and additional charges, which are paid to Uber, not the drivers. This ruling has sparked discussions around the classification of gig workers and the responsibilities of companies like Uber. Despite holding Uber responsible for the driver’s conduct, the judgment did not address the nature of the employment relationship or social security implications.

The issue of Gig workers revolves around whether employers are liable for their actions and obligated to provide social security benefits. Employers are typically responsible for both in an employer-employee relationship. Big techs like Uber, Ola, Amazon, etc. naturally prefer to keep their workers as independent contractors, because it provides the twin benefit of (i) non-payment of social security and (ii) no liability for the acts of its drivers. The court in Govind Prasad Sharma v. Board of Revenue ^[13]ruled that agents cannot be held accountable for independent contractors, except in bad faith cases. The court’s decision to refer to Uber drivers as “third-party contractors” creates confusion about liability for workers who are not classified as employees. This ruling contradicts established principles of vicarious liability and Indian legal precedent Ram Singh v. Union Territory of Chandigarh^[14]. Penalizing hirers for independent contractors they cannot supervise or control appears unreasonable.

One potential defense for holding Uber liable as a marketplace e-commerce entity in the Gig Economy could be the Consumer Protection Act (CPA) and E-Commerce Rules 2020. The CPA allows for intermediary liability for defective goods or services. The E-Commerce Rules detail instances where platforms cannot claim immunity as intermediaries under the IT Act. Recent consumer forum decisions have held platforms like Amazon accountable for defects, even when acting as intermediaries. This suggests that an active intermediary like Uber could be held liable without an employer-employee relationship.^[15]

Amazon Seller Services Private Limited v. Vishwajit Tapia^[16]

The complainant purchased a mobile phone from Amazon for Rs. 11,750. Upon opening the package, the claimant found the packing and seal to be tampered with, and the phone did not charge. The complainant accused Amazon of unfair trade practices, but Amazon claimed to be just a facilitator for third-party retailers. The District Commission ruled in favour of the complainant, ordering Amazon to pay legal costs of Rs. 3000 and refund the phone’s price. This decision was upheld by the State Commission. The court found that as an online marketplace, Amazon earns revenue from customer visits and must ensure seller credentials. Intermediaries like Amazon are responsible for verifying sellers. The court held Amazon accountable for the faulty phone transaction and ordered compensation to the complainant. Amazon’s claims of being a mere facilitator do not absolve them of their responsibilities towards customers in ensuring quality products and fair transactions.

 Gig workers are frequently regarded as employees, despite not receiving all of the advantages that come with regular employment, as demonstrated by several court rulings. Additionally, there is still a lack of clarity on the legal structure that governs gig workers. Employers are liable for the acts of their workers when they are physically present under the vicarious responsibility doctrine, which is applicable in conventional employment. Employers and workers are frequently not physically present in the workplace regarding digital platforms, as the job connection is formed virtually. However, gig workers deal directly with customers by providing them with services. Incidents between gig workers and clients that occur without the employer’s awareness are a major problem in the digital employment space. Even though it might be difficult to identify the offender in certain circumstances, the employer might still be held accountable. This makes determining accountability in the gig economy a difficult task.

Conclusion

Ultimately, the move from traditional jobs to digital platform work has significantly changed how employers and employees interact. In traditional job settings, the employer has clear authority over the employee’s tasks, typically in a physical office. Vicarious liability is a principle that holds employers responsible for their employees’ actions due to their direct supervision and oversight. Nevertheless, the structure has undergone significant change with the introduction of digital platforms. The gig economy has implemented a system in which work is facilitated by technology, and the employer lacks direct control or face-to-face contact with the worker. The work dynamic is digital, as employees frequently work autonomously, offering services to clients without ever coming face-to-face with their employers. This distance poses a distinct challenge because of the traditional standards for vicarious liability.
The impact of digital platforms has resulted in a workforce that is more adaptable and dispersed, while also confusing who is responsible and accountable. Employers could still be responsible for gig workers’ behaviour, despite not having the typical supervision found in traditional employment. This change highlights the requirement for updated legal structures that can effectively handle the intricacies of the gig economy, guaranteeing protection for both gig workers and employers in this changing employment environment.

[1] World Employment and Social Outlook, “ILO Flagship Report 2021: The Role of Digital Labour Platforms in Transforming the World of Work” (2021) https://www.ilo.org/wcmsp5/groups/public/—dgreports/—dcomm/documents/publication/wcms_771672.pdf  Figure 1.1 figure 1.1, p 40

[2] World Employment and Social Outlook, “ILO Flagship Report 2021: The Role of Digital Labour Platforms in Transforming the World of Work” (2021) <https://www.ilo.org/wcmsp5/groups/public/—dgreports/—dcomm/documents/publication/wcms_771672.pdf>

[3] (UNECE, 2022, p. 62-63)

[4] Parliament and Ministry of Law and Justice, “THE CODE ON SOCIAL SECURITY, 2020” (2020) legislation https://labour.gov.in/sites/default/files/ss_code_gazette.pdf Section 2(35) of code on social security 2020

[5] Oecd, The Impact of the Growth of the Sharing and Gig Economy on VAT/GST Policy and Administration (2021) <https://doi.org/10.1787/51825505-en>

[6] “Social Security for Gig Workers, with a Special Focus on Cab Drivers” by S. Kamesh from Vol. 2, Issue 1 of the Journal of Legal Research and Juridical Sciences, with ISSN (O): 2583-0066

[7] Sushilaben Indravadan Gandhi v The New India Assurance Company Limited (2020) 7 SCC 151

[8] Dharangadhara Chemical Works Ltd v State of Saurashtra AIR 1957 SC 264

[9] Balwant Rai Saluja v Air India Ltd (2014) 9 SCC 407.

[10] Cour de Cassation, Arret No. 1737 (7 November 2018), https://www.courdecassation.fr/jurisprudence_2/chambre_sociale_576/1737_28_40778.html (date last accessed 4 September 2024).

[11] Ruling n°374 – 4 march 2020 (Appeal n° 19-13.316)

[12]  Kavita S Sharma v Uber India Systems Pvt Ltd (2021) Consumer Case No 765/2019 (NCDRC).

[13] Govind Prasad Sharma v Board of Revenue AIR 1984 SC 116.

[14] Ram Singh v Union Territory of Chandigarh (2004) 1 SCC 126.

[15] Nidhi Agrawal and Sukarm Sharma, KAVITA V. UBER INDIA: DIVERGENCE OF LIABILITY AND EMPLOYMENT IN THE GIG-ECONOMY? https://www.tcclr.com/post/kavita-v-uber-india-divergence-of-liability-and-employment-in-the-gig-economy

Amazon Seller Services Private Limited v Vishwajit Tapia (2022) SCC OnLine NCDRC 145.[16]