Future of Workers: The California AB5 legislation and the prospects for India

Aapti Institute
Sep 17, 2019 · 4 min read

Bhavani Seetharaman

In this piece, we examine the new AB5 legislation in California that includes platform workers as employees and the prospects for India

The American Context

On September 11 2019, California passed the AB 5 amendment to revise labour laws in the state to compel organizations and businesses to include those previously defined as independent contractors as employees. The amendment comes after the historic California Supreme Court judgement that found that a person was an employee unless the organisations were able to prove a) the individual was free from the control and direction of the organisation with respect to the performance of work, b) he/she performs work that is outside the usual course of the organisation’s business and c)he/she is engaged in an independent established trade, occupation or business of the same nature as the work performed for the organisation (Dynamex Operations West, Inc. v. Superior Court of Los Angeles, 2018 ).

This is otherwise known as the three-part test or the ABC test. Gig workers whose employers cannot fulfill the ABC test now have the ability to avail labour protection such as health insurance, overtime payment, minimum wage requirements, paid parental leaves, etc. California has set a precedent to legitimise the employment status of workers under the digital platform economy. This is a radical move since California is the home of Silicon Valley and its GDP is dependent on these platforms. Yet, it is estimated that California loses an estimated 7 billion dollars a year from misclassification of workers through payroll tax loss.

It is argued that the with improved state of the US economy post the 2008 recession — with unemployment reaching a fifty -year low of 3.6 percent in July 2019 and the GDP growth rate growing steadily since 2010 — the goals of the administration should shift from crafting an economy that promotes the creation of work to an economy that allows for the protection of workers. It is no surprise that platforms such as Uber, Lyft, Amazon, etc that depend on the supply of offline workers such as cab drivers and delivery executives have prospered extensively during post-recession America where employment generation was critical. This has been compared to the factory owners in the early industrial age.

The renaming and reformatting of work that was once protected under various labour legislation, has benefitted corporations extensively by cutting the cost of labour to become the global conglomerates that they are today.

The situation in India

Digital platforms like Uber have entered global markets, making it also important to look at the ways in which such legislations could be translated onto other countries. Their entry has given rise to local competitors who profit from similar business models such as Ola in the ride-hailing space and similarly Dunzo in the delivery space. After the US, India and China are expected to lead the platform economy by 2020.

India is in a very different position than the US. Platforms are often seen as a boon to the Indian economy, with roughly 13 lakh Indians joining the gig economy in the last half of 2018–19 alone, while Niti Ayog estimating that 22 lakh Indians have joined this space.

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Early entrants to driving platforms joined in 2014–15 imagining the possibility of earning even Rs 90,000 a month. Yet, growing research is showing that there is a reduction in earnings, surveillance and gamificiation of work and a lack of protections for workers. In the recent past, there have been protests by drivers across the country. Many other jobs — such as those on food delivery platforms (such as Swiggy and Zomato) or personal service platforms (Urban Clap) continue to be unregulated.

Like in the US, workers on digital platforms in India are defined as independent contractors and are not directly given any legal protections under Indian labour laws. Unlike the US however, India has had a relatively higher dependence on the informal labour which has made the regulation of work under platforms even harder to resolve. Despite the ‘Unorganised Workers’ Social Security Act, 2008 workers under the digital platform economy in India are unable government-sponsored programmes.

An outlook for an Indian law

India is still a critical market for the platform economy due to its large size, and despite its current economic woes. If left unregulated, there can be unfortunate consequences on workers’ safety, health and security. India must account for longer-term benefits of protecting workers. In this context, it is important that the government must not take on board the cost of social security for workers (which would be the case were these considered as the unorganized sector). The AB5 is a great example of how legislation should formalize the position of the digital platform workers under a broader spectrum.

A valuable approach could be to start by re-looking the Factories Act, 1948. By including platform workers, workers would have overtime wages and protections against use of child labour. Platforms are also not liable in case of any accident or issue, but by using the Factories Act framework, safety and security could be accounted for.

Uber has claimed that its business will be adversely affected by the conversion to employees . And yet the question that we should ask now, as we navigate what many are calling the fourth industrial revolution, is how to shift towards a more nuanced approach guided by the mobilisation of the platform workers themselves for better protection mechanisms at work. India must proactively begin to work on protective legislation for workers under the platforms.

Despite the numerous benefits the AB5 amendment created it still does not push for collectives to enhance capacity amongst platform worker communities. Due to the far-reaching power and impact of platforms, it is imperative to continue to navigate spaces toward the protection and empowerment of workers.

This work is being supported by a grant from Microsoft Research India.

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