LAW & SOCIETY
Code on Wages and
the Gig Economy
Alok Prasanna Kumar
The Code on Wages, 2019
ostensibly seeks to harmonise
four different laws governing the
payment of wages and minimum
wages in India, and “simplify and
rationalise” the law. However, it is
a missed opportunity to update
the definition of “employee” in
the context of the rise of the “gig
economy,” a source of livelihood
for a large number of workers
who do not enjoy formal
protection under the labour laws.
Alok Prasanna Kumar (alok.prasanna@
vidhilegalpolicy.in) is a senior resident fellow at
Vidhi Centre for Legal Policy, and is based in
Bengaluru.
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T
he last month saw two very
important developments in labour
law. First, the Supreme Court of
India delivered its judgment in Officer
In-Charge, Sub-Regional Provident Fund
Office v Godavari Garments (2019), hold-
ing that for the purposes of the Employ-
ees’ Provident Funds and Miscellaneous
Provisions Act, 1952 (EPF Act), women
who worked from home doing piece
work would be considered “employees”
of the company which had engaged them
to do so, even if there was no direct con-
tract of employment between the two.
Though previous judgments had held
thus in the context of bidi workers, this
judgment’s significance lies in the current
context of the so-called “gig economy,”
where workers are not necessarily work-
ing out of a fixed place of employment,
whether at home or elsewhere.
A second important development was
the passage of the Code on Wages, 2019
by the Lok Sabha and the Rajya Sabha
after having first been introduced in
2017. The Code on Wages, based on the
recommendations of the report of the
Second National Commission on Labour
in 2002, seeks to repeal and replace four
separate legislations dealing with wages—
namely the Payment of Wages Act, 1936,
the Minimum Wages Act, 1948, the Pay-
ment of Bonus Act, 1965, and the Equal
Remuneration Act, 1976—with one
comprehensive code which covers all
the aspects of payment of wages hitherto
covered under these laws.
These two developments gain signifi-
cance at a time when job creation is not
just slowing down, but the new reality is
the widespread job losses resulting from
structural changes in the Indian econ-
omy (Roy 2016). At the same time, the
very nature of work and employment is
changing thanks to technological changes.
The so-called “gig economy” wants us to
AUGUST 24, 2019
believe that we can all be “entrepre-
neurs,” whether we are driving cars,
delivering biryani, or writing code.
Workers in the gig economy, unlike per-
manent employees, supposedly enjoy
the freedom and flexibility of choosing
their hours and employers. However, the
reality is that they are largely doing poorly
paid work with none of the legal protec-
tions and rights enjoyed by permanent
employees (Surie 2018).
In this column, I propose to talk about
the significance of the Godavari Garments
judgment and why the Code on Wages is
a missed opportunity to make labour
law forward-looking. When I refer to
workers in the gig economy in this col-
umn, I am primarily referring to those
who are “platform gig workers,” such as
app-based taxi drivers and delivery
persons;1 specifically those workers who
enjoy little control over their work and
receive a lot of direction through apps
(Kumar 2017).
Judicial Expansion of Laws
In the Godavari Garments case, the
Supreme Court was concerned with the
EPF claims of women workers who
stitched clothes at home, using their
own sewing machines, but using mate-
rial provided by the factory in return for
payment. When they organised and
sought EPF benefits, they were rebuffed
by the employers contending that they
were not “employees” for the purposes
of the act since they worked from home.
The EPF authorities had agreed with the
claims of the women workers and, when
the company appealed, it took a 30-year-
long litigation battle to finally settle the
point of law.
While piece workers, specifically bidi
rollers, have been held to be “employees”
for the purposes of the EPF Act (M/s PM
Patel & Sons and Ors v Union of India and
Ors 1986), the Godavari Garments judg-
ment is the most emphatic rejection of the
idea that an employee–employer relation-
ship requires the employee to work at
the employer’s premises in any way. In
the present context, reaffirming that
the test to determine the relationship of
employment is the test of control and not
vol lIV no 34 EPW Economic & Political Weekly

necessarily location, has large implica-
tions for workers in the gig economy.2
However, this judgment also illustrates
the problem of relying purely on the
judicial process or judicial precedent to
assert workers’ rights. An obvious aspect
is time, as even for workers who do find
a sympathetic government, the judicial
process can still be frustratingly long.
Another aspect is the uncertainty in judi-
cial outcomes. The Court in the Godavari
Garments case also distinguishes itself
from its judgment in CESC Limited v
Subhash Chandra Bose (1992), where,
in the context of the Employees’ State
Insurance Act, 1948 (ESI Act), it was held
that workers working under the supervi-
sion of a contractor in execution of a
works contract could not be considered
the employees of the agency for which
such works contract was being carried
out. Here, emphasis was laid on the term
“supervision” which occurs in the defini-
tion of “employee” under Section 2(9) of
the ESI Act to hold that they were not
employees of the principal employer.
Even though both the EPF and ESI laws
essentially deal with social security for
workers, minor differences in the defi-
nition of “employee” can have vastly
different outcomes.
It was for this precise need to harmo-
nise definitions and terms that the four
wage codes were introduced in Parlia-
ment by the union government over
the years.3
A Missed Opportunity
On the face of it, the Code on Wages, in
Section 2(k) contains a definition of
“employee” far wider than any of the
laws it repeals. It is largely drawn from
the Minimum Wages Act and seems to
be worded widely enough to potentially
cover workers in the gig economy, and for
good measure including those declared
by the “appropriate government” (state
or union) as employees. This, however,
does not address the entirety of the issue.
One common feature of platform
workers in the gig economy is that they
are not tied to any one particular plat-
form by law. There are usually contrac-
tual terms to this effect, but the level of
enforcement is unknown. This leaves
open the question: Who is the employer?
Economic & Political Weekly EPW AUGUST 24, 2019
If a delivery person switches between
two non-competing delivery apps, or
even competing taxi apps, would they be
considered an employee of both entities?
Another issue specific to minimum
wages emerges in the context of the
Code on Wages and gig workers in the
platform economy. While the Code on
Wages refers to those who are doing
time work or piece work, what about
those who are paid on the basis of tasks
fulfilled? Even if interpretation gives a
wide definition, how will their mini-
mum wages be fixed in the absence of
any guidance from the law?
An expansive definition, even widely
interpreted, may not, therefore, meet
the needs of workers of the gig economy
if the structure of the act is still designed
to meet the needs of a very different
economy. At the very least, state govern-
ments will struggle to make sense of
how to set minimum wages for workers
in the gig economy, even if they were to
assume that such workers are “employees”
given that the Code on Wages only refers
to piece work and time work.
Far better, perhaps, would have been
for the Code on Wages to acknowledge
the workers of the gig economy and create
separate provisions for them, keeping in
mind the peculiar nature of work and
the trend of economic and technological
change in the country.
Conclusions
The fact that the Code on Wages remains
somewhat backward-looking means that
it risks becoming obsolete almost as
soon as it becomes law. While harmonis-
ing and simplifying the definitions of
employee and employer is all very well,
it is not by far the most important legis-
lative need being felt in the sector. With
the structural changes taking place in
the Indian economy, where perhaps the
very notions of what a job is and who an
employer/employee is are undergoing
radical change, it might have been a
worthwhile effort to go deeper into the
definitions of “employee” and “employer”
in the law itself.
Needless to say, it looks like the task
will now lie before the judiciary and
possibly state governments to take the
lead on the matter. As gig economy
vol lIV no 34
LAW & SOCIETY
workers potentially organise and place
their demands over payment to their
employers and governments, it is possi-
ble that the remedy will come in the
form of judicial or state government
intervention. While this might provide
some succour to workers in the gig econ-
omy, it risks the fragmentation of gains
as different courts take different app-
roaches (as we have seen in the United
States; Das Acevedo 2019) or state gov-
ernments come up with entirely different
regulatory mechanisms (as we have seen
with the regulation of app-based taxis;
Ahmad 2016). Needless to say, both situ-
ations will create precisely the kinds of
problems that the Code on Wages is
supposed to solve, the uncertainty and
confusion in the law.
notes
1 On the debate on how to classify workers in the
gig economy, see Lobel (2019).
2 On the test of control see Kumar (2017).
3 It may be noted here that the ESI Act and EPF
Act are among the laws sought to be harmo-
nised in the Labour Code on Social Security
Bill, 2019 which has not yet been cleared by
Parliament.
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