Updated: May 28
This blog deals with the recent amalgamation of the The Payment of Wages Act, 1936, Minimum Wages Act, 1948, Payment of Bonus Act, 1965 and the Equal Remuneration Act, 1976. The author has studied the Wage Code Bill, 2019 and has compared it to the economic situation of the country. Reference has been made to the corporate sector as an attempt to better discuss the topic. Read on to know in details.
The Code on Wages Bill, 2019 (hereinafter referred to as the ‘Code’) was introduced in Lok Sabha in August 2017 and finally received the Presidential assent on August 8, 2019. It codifies and amalgamates four major central laws on wages and bonus i.e., (i) The Payment of Wages Act, 1936, (ii) The Minimum Wages Act, 1948, (iii) the Payment of Bonus Act, 1965 and (iv) the Equal Remuneration Act, 1976.
The Code reflects uniformity in terms of providing key definitions like that of wages and employment. Furthermore, the Code prohibits gender discrimination, which not only provides for rights and protection of male and female employees but also the transgender. It imposes stricter remedies in case of violations and has been drafted in a way to significantly benefit the employees. Moreover, the Code is also considered to be progressive as it recognizes the rights of people engaged in the unorganized sector such as the persons working in food stalls and domestic help. Under the veil of legislative protection, it also paves a way for regulating the gig economy workers such as the cab operators and people engaged in the services of food delivery apps, under the labor law regime. Previously, the provisions of Payment of Wages Act, 1936 was only applicable to workers working in the Scheduled employment sectors as against the workers of the unorganized sector. Such workers will now get legislative protection under the Code. [i]It ensures that a large proportion of the economy should be paid fair wages and is protected from discriminatory practices.
UNDERSTANDING THE WAGE CODE
The Code provides for a simplified universal definition of “wages” which earlier was one of the primary reasons for labor litigations. It is also a positive initiative as it would streamline the glaring inequalities of the Indian economy. The definition provides for inclusions and specific exclusions. It includes salary, allowance, or any other component expressed in monetary terms but excludes any bonus, house rent allowance, or traveling allowance payable to the employees. [ii]The Central Government is empowered to fix a national floor wage rate based on geographical factors, skills, and the living standard of the workers (as opposed to the nature of employment). However, the minimum wage rate set by the state government has to be mandatorily higher than the national wage rate. The concept of the national floor wage rate aims to ensure a uniform standard of living across the country. To ensure transparency and accountability, the Code also provides for a review and inspection after an interval of every 5 years. Furthermore, to assess overtime wages, the Code provides for Central and State government to fix the number of hours which would constitute a normal working day and employees working more than normal working hours shall be entitled to overtime wages which shall not be less than twice the normal rate of wages payable to the respective employee. [iii]
However, one of the core challenges that the Code will face is its flexibility in implementation to afford legislative protection to the emerging “gig economy” or the “platform workers”. The next section shall elaborate on the same.
THE DYNAMICS OF GIG ECONOMY
The Code aims to simplify the labor laws for both the organized and the unorganized sector. Under the unorganized sector, platform workers constitute a large chunk of the current Indian economy. Gig economy constitute of those persons who earn from activities outside of traditional employer-employee relationship and platform workers are the ones who are engaged in such activities through online platforms. [iv]From a cab driver to a food delivery agent, mall salesgirl, software coders, etc. all form a part of the booming Indian economy. They all are engaged in temporary jobs and no healthcare benefits, minimum wage rights or retirement benefits were extended to them. It is extremely difficult to ascertain the employee-employer relationship in such cases. Most of the employers deny extending such benefits to them (workers) on the ground that they simply provide technological platforms to the independent contractors who deliver services to the customers and therefore they are not under any obligation to extend social security benefits to them. [v]However, they are still vulnerable as the code does not provide for a mechanism to extend protection to such workers.
Even though the Social Security Code, 2019 confers healthcare, maternity, and old age protection benefits to the platform workers it does not guarantee the same social security benefits as provided to regular employees. It does not guarantee minimum wages them neither does it prescribe sick paid leaves. It imposes no liability on the employer against arbitrary termination of the employees.[vi]
Section 2(k) of the Code provides for the definition of “employee” which is widely defined to include the workers of the gig economy as well as any person whom the government believes to be qualified as an employee. The definition has been heavily borrowed from the Minimum Wages Act. Nevertheless, it is silent on the scope and status of the employment of a platform worker. For instance, will a person who switches between two competing or non-competing apps be considered an employee of both entities. Secondly, most of the platform workers are hired on contractual terms, and hence it is difficult to ascertain the employer. Furthermore, concerning minimum wages, the Code provides for ascertaining wages based on piece work or time work but there are no specific guidelines to set wages based on tasks fulfilled. Therefore, an expansive definition though aimed to broaden the scope is a missed opportunity as it does not answer the contemporary challenges faced by the gig economy workers. [vii]
The issue at hand can be further explained by analyzing the Master Service Agreement of Ola which covers all aspects of the relationship between the Ola and its registered drivers. It lists down in detail all the duties of the driver, legal requirements, insurance compliance, etc. Further, it provides a detailed list of what the driver can do and what he cannot. The penalties of infringing the agreement can be as high as Rs. 5000. On the other hand, Ola limits its liability to a small sum of Rs. 200 for any breach and prohibits the driver from entering into a contract with other competitors. This implies that Ola has massive “control and supervision” over the driver and should extend the benefits of employees to the drivers. [viii] Recently, the District Court in California held that control exercised by Uber over its driver i.e. the gig workers is sufficient to categorize them as its employees. In furtherance to it, California approved a landmark bill called, AB5 which will mandate companies like Uber and Lyft to treat contractual workers as employees[ix].
It is the need of the hour to provide equivalent protection and rights to the platform workers. Hence, to achieve the intent of the legislation in India, it is necessary that the Central government takes into account such issues and accordingly frame guidelines on the same.
The underlying principle behind the introduction of the Wage Code was to subsume four conventional laws on wages into one and minimize the multiplicity of definitions and compliances. It is one of the significant steps undertaken to streamline the comprehensive and conventional labor laws in India. However, it is essential to note that whether this Code satisfies the needs of the contemporary Indian labor diaspora. Even though the Code recognizes the rights of the unorganised sector it has a poor enforcement mechanism. With the advent of the gig economy, the Code is unclear on the definition and scope of employer and employee as it defines the same broadly by giving ample discretion to the center. It can be realized that the philosophy of the Code will now be developed and enhanced only through the interpretations given by judicial intervention. To strengthen the implementation of the Code, the ability and involvement of regulatory authorities in the unorganised sector should be enhanced and promoted. Moreover, the Central Government should frame separate guidelines for the platform workers, bearing in mind the peculiar nature of work and rising economic and technological shifts in the country. Hence, to truly realize the objective of the Code and stimulate the growth of labor laws in India, it is imperative to fix the exiting lacunae and have a strong implementation methodology to achieve the end goals.
[i] Vaishnavi Eshwar et al., India: Wage Code- A step in Right direction, Mondaq (August 27, 2019) https://www.mondaq.com/Article/839894 [ii] The Code on Wages § 2(y), (2019) [iii] The Code on Wages § 14, (2019) [iv] Abhimanyu Pal et al., There’s an app for that’- The recognition of Gig Workers in India, People Matters (January 29, 2020) https://www.peoplematters.in/blog/gig-economy/theres-an-app-for-that-the-recognition-of-gig-workers-in-india-24509 [v] R.Srinivasan, The coming disruption in India’s job market, The Hindu Business line (October 16, 2019) https://www.thehindubusinessline.com/opinion/columns/r-srinivasan/the-coming-disruption-in-indias-job-market/article29711633.ece [vi] Ibid Note 5 [vii] Alok Prasanna Kumar, Code on wages and the Gig Economy, Economic Political Weekly, 54(34), ( August 24, 2019) https://www.epw.in/journal/2019/34/law-and-society/code-wages-and-gig economy.html?0=ip_login_no_cache%3Dbee6bbd85762175abbe82c691581c3de [viii] Alok Prasanna Kumar, Analysis: Ola’s contract with drivers show they’ve got a raw deal , Factor Daily ( March 21, 2017) https://factordaily.com/ola-contract-driver-analysis/ [ix] Kate Conger and Noam Scheiber, California Bill Makes App-Based Companies Treat Workers as Employees, The New York Times ( September 11, 2019) https://www.nytimes.com/2019/09/11/technology/california-gig-economy-bill.html
Vaishnavi Vyas & Priyanshu Agrawal,
NMIMS Kirit P. Mehta School of Law, Mumbai.
(Image used for representational purpose only.)