By Anuradha Gandhi and Isha Sharma
The advent of ride-hailing services has revolutionized how people navigate the country’s bustling cities, offering a convenient, flexible and cost-effective alternative to traditional transportation methods. With just a mobile and internet connectivity, users can easily access these services, making them an integral part of daily life for many, especially in urban areas. However, this growing sector also presents serious challenges, particularly in terms of safety and security of women.
Numerous reports have highlighted disturbing incidents over the past few years where women have faced sexual harassment or felt unsafe while using these services.
The issue of safety associated with these services especially for women who rely on them for their daily commute recently made headlines in the Karnataka High Court, where a significant legal question was raised: Can action be taken against cab drivers under the POSH Act? The court is deliberating whether gig workers, like cab drivers can be classified as employees under this legislation?
Introduction:
Recently, ANI Technologies, the parent company of Ola cabs, found itself entangled in a legal battle as it urged the Hon’ble Karnataka High Court on August 20, 2024, to dismiss a petition filed by a woman passenger against one of its drivers under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH Act). The petition seeks action against an Ola driver for alleged sexual harassment during a cab ride in August 2018.
The case has garnered attention as it touches upon the relationship between digital platform operators and their contractual workers, and the extent of their liability under existing labor laws.
Petitioner’s Plea: Responsibility of Ola to ensure safety and accountability
The petition was initially filed by a woman in the year 2019, who alleged that she was sexually harassed by an Ola driver during a cab ride in August 2018.
She claimed that the driver engaged in inappropriate behavior, including staring at her through the mirror and watching a pornographic video on his phone in a manner that it was visible to her. She further alleged that the driver also engaged in disturbing behaviour masturbating during the ride and refused to stop the cab upon her request. The woman argued that Ola’s response to her complaint was -merely blacklisting the driver and sending him for counselling-which was insufficient and that further action was necessary under the POSH Act.
Dissatisfied with the Company’s response, she lodged a formal police complaint and eventually moved to the High Court seeking redress under the POSH Act.
Ola’s Contention: Drivers does not fall under the ambit of “Employees”
During the hearing, the Senior Advocate representing Ola, presented the company’s stance before a single judge bench of Hon’ble Mr. Justice MGS Kamal. He argued that cab drivers are independent contractors, not employees of the Company and as such, the provisions of the POSH Act, which applies to employers and employees, cannot be invoked in this scenario.
The advocate representing the company highlighted that the Ola operates as an independent platform connecting cab drivers, who are independent contractors with passengers. It was further emphasized that these cab drivers operate under the terms of contract executed with Ola but retain autonomy over their vehicles and operations, making them independent entities rather than employees.
“Based on the terms of contract (with the driver), it is not Ola’s cab. The lease holder has a right over it. I am an intermediary. If I train the drivers, or place some terms and conditions, that does not take away the fact that I am merely an intermediary. The driver is independent,” the advocate representing the company said.
It was also informed to the court that Ola had already blacklisted the cab driver involved in the incident following the woman’s initial complaint, underscoring that while the driver should be “brought to book., Ola itself should not be held accountable for the driver’s actions. He argued that the company’s role does not extend to direct control over the driver’s conduct and categorising drivers as employees under the POSH Act would be an extreme stretch.
“The petition for prosecution under POSH Act is not maintainable. Labor legislations cannot be applicable when the drivers are independent. In terms of the relief sought, action has already been taken against the driver. Beyond this, to introduce a definition of a driver as an employee will be an extreme stretch, and therefore, the petition should be dismissed,’ the advocate added.
Observations of the Court
In response to Ola’s defense, the petitioner’s counsel argued that passengers, especially women, place their trust in reputed companies like Ola for their safety. The counsel pointed out that the very premise of booking an Ola cab, as opposed to hailing a random cab from the street, is the expectation of enhanced security and accountability. The petitioner asserted that Ola’s disavowal of responsibility in such cases undermined the trust placed in the company by its users.
The advocate representing Ola seek to draw a parallel between Ola and e-commerce platforms like Amazon, or Flipkart, suggesting that just as these platforms are intermediaries in transactions, Ola functions in a similar capacity.
However, Hon’ble Justice Kamal rejected this comparison, noting that the nature of services provided by a cab aggregator like Ola involves physical interaction, which is not the case with online or digital market platforms.
The judge further pointed out that in situations involving physical or sexual harassment, the role of intermediary cannot be easily dismissed.
Furthermore, the court criticized the State government for not taking adequate action following the woman’s complaint, which she had lodged at the Cubbon Park Police Station in Bengaluru.
Moreover, the Karnataka High Court has reserved the judgment on this matter, leaving the legal community and the public to await its decision.
Legal Analysis on relationship between Aggregators and Independent Contractors
This case is not an isolated incident. The gig economy has witnessed several cases where the boundaries of responsibility between aggregators and independent contractors have been tested.
The issue gained significant attention in 2015 when the Hon’ble Delhi High Court convicted a former driver for Uber, an app-based cab service, for the rape of a 25-year-old passenger in the case of Shiv Kumar Yadav vs. State of NCT of Delhi. Following this horrific crime, the Delhi government imposed a general ban on the online taxi-hailing services in Delhi. In addition, the government modified its existing radio taxi licensing rules. For the first time, these changes allowed app-based taxi aggregators to qualify for a radio taxi license, explicitly outlining that “Licensees, including app-based taxi aggregators like Uber, must abide by all relevant statutes, including the Motor Vehicles Act, 1988 and the Information Technology Act, 2000”[1]
In the year 2021, a leading food delivery service in India faced legal action under the POSH Act after a deliver executive was accused of making unwelcome sexual advances towards a female customer.[2] The company was held responsible by its Internal Committee, which found that it failed to ensure a safe, harassment-free environment for its customers and employees. Consequently, the company was liable to compensate the victim and implement measures to prevent such incidents in the future.
As the gig economy expanded over the years, another important ruling was delivered by the District Consumer Forum in August 2022[3]. This ruling arose from a complaint about service deficiency involving Uber India. The Commission held Uber India liable for providing deficient services after a driver’s negligence caused a passenger to miss her flight. The Commission noted that since the passenger had booked the service through the Uber app and paid the cab fare to Uber India rather than directly to the driver, it established that driver was acting on behalf of the Uber India. This made the passenger a consumer of Uber India, with the driver serving as an agent. Consequently, Uber India was held responsible for the driver’s actions, and the Commission directed Uber India to pay compensation to the complainant for her loss.
From a global perspective, a landmark ruling by the French Supreme Court (the highest court of France) concerning Uber marked a significant moment in this ongoing subject in Uber France vs. MAX[4]. For the first time, the court recognized the existence of an employment contract between a digital platform like Uber and its drivers. The court’s decision was based on several key factors namely[5]:
- The driver had joined a transportation service that was entirely created and organised by Uber. The platform controlled all aspects of driver’s work, including setting fares and determining the terms and conditions under which the service was provided. Unlike a self-employed individual, the driver had not freedom to set prices or choose routes; sometimes, the final destination is not even disclosed to the driver beforehand;
- Uber also imposed strict controls on the driver’s behavior. For instance, the company reserved the right to temporarily disconnect the driver from its platform after three refusal of ride requests. Moreover, if a driver exceeded a certain order cancellation rate or was reported for problematic behavior, they could permanently lose access to the app;
These key elements led the court to conclude that the driver is in a subordinate relationship with Uber and therefore, that the driver’s self-employed status was merely fictitious, and in reality, an employment relationship existed between the driver and Uber. This ruling set a precedent in recognizing the rights of gig workers and challenged the conventional classification of such workers as independent contractors.
Further, in this context, the Hon’ble Supreme Court’s ruling in Sushilaben Jindravadan Gandhi & Anr vs. The New India Assurance Company Limited & Ors.[6] stands out as a pivotal decision. This ruling is particularly important as it helps clarifying the criteria used to distinguish between a contract of service and contract for service, which is essential for understanding the nature of employment relationships.
- The prima facie test is the existence of the right in the master to supervise and control the work done by servant not only in the matter of directing what work the servant is to do but also the manner in which he shall do his work or in the words of Lord Uthwatt in Mersey Docks and Harbour Board vs Coggins & Griffith Ltd. “the proper test is whether or not the hirer had authority to control the manner of execution of the act in question.”
- The test as to whether the person employed is integrated into the employer’s business or is a mere accessory thereof, is important in order to determine on which side of the line the contract falls;
- Whether the master had the power to select the servant, whether he paid wages or other remuneration, whether the master had the right to control the method of doing the work and whether the master had the right to suspend or dismiss the employee;
- The three tier test laid down, namely, whether wage or other remuneration is paid by the employer;
- The test of who owns the assets with which the work is to be done and/or who ultimately makes a profit or a loss so that one may determine whether a business is being run for the employer or on one’s own account, is another important test when it comes to work to be performed by independent contractors as against piece rated labourers;
- The test of whether the employer has economic control over the workers’ subsistence, skill and continued employment can also be applied when it comes to whether a particular worker works for himself or for his employer.
These are merely some of the criteria’s/test suggested by the court that can help in defining the true nature of work relationships but cannot be a universal application.
“It is equally clear that no magic formula can be propounded, which factors should in any case be treated as determining ones. The plain fact is that in a large number of cases, the Court can only perform a balancing operation weighing up the factors which point in one direction and balancing them against those pointing in the opposite direction,” the court stated.
Legal Developments:
According to the comprehensive report released by the NITI Aayog on India’s rapidly growing gig and platform economy (June 2022), it is stated that “the gig workforce is expected to expand to 2.35 crore (23.5 million) workers by 2029-30. The gig workers are expected to form 6.7% of the non-agricultural workforce or 4.1% of the total livelihood in India by 2029-30.”[7]
Recognizing this rapid growth and expansion, the Ministry of Labour and Employment introduced the Code on Social Security, 2020[8] aiming to extend social benefits to employers and employees. For the first time, the definition of ‘gig worker’ or ‘platform worker’ has been provided in this Code, recognizing their role in the modern employment landscape. This move marks a significant step towards addressing the evolving needs of India’s workforce in the gig economy. To know more about this code, kindly refer to our article titled “INDIA: Changes in New Labour Codes”[9]their employee status ??
In addition, Rajasthan became the first state in India to pass a legislative framework titled “Rajasthan Platform Based Gig Workers (Registration and Welfare) Act, 2023,[10] which aimed at providing social security to platform based gig workers by establishing a welfare fee deduction mechanism that shall be integrated with the aggregator app[11]
On June 29, 2024 the Karnataka government released the draft of the Karnataka Platform based Gig Workers (Social Security and Welfare) Bill, 2024[12] making it the second Indian state, after Rajasthan, to take such a step.
The bill is designed to protect the rights of platform-based gig workers by imposing obligations on aggregators concerning social security, occupational health and safety, and transparency in automated monitoring and decision making systems, to provide dispute resolution mechanisms, to establish a Welfare Board and create a welfare fund for platform based Gig workers, to register platform based Gig workers and aggregators in the State.
However, the Bill does not clarify the employment status of gig workers. It defines a gig worker as a person who performs work or participates in a work arrangement that results in a payment based on terms and conditions specified in the contract. This definition falls short of clearly establishing the nature of employment relationship between the aggregator and the gig worker.
Despite this shortcoming, the Bill is a significant step forward in the ongoing effort to enhance the rights and social protection of gig workers. If passed, it could make substantial progress in addressing the long-standing concerns of gig workers.
Conclusion
However, to summarize, the recent case presented before the Karnataka High Court raises critical concerns about the evolving nature of work relationships in the gig economy, the responsibilities of digital platforms, and the applicability of labor laws like the POSH Act to modern business models. As digital platforms continue to redefine traditional employer-employee dynamics, the outcome of this case would set a significant precedent for how accountability is structured in the gig economy.
[1] https://blogs.loc.gov/law/2016/07/indias-regulatory-approach-to-uber/
[2] https://ssrana.in/articles/liability-online-aggregators-posh-act-2013/
[6] https://indiankanoon.org/doc/127871825/
[7] https://www.niti.gov.in/sites/default/files/2022-06/25th_June_Final_Report_27062022.pdf
[8] https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1945511
[9] https://ssrana.in/articles/india-changes-new-labour-codes/
[10] https://prsindia.org/files/bills_acts/acts_states/rajasthan/2023/Act29of2023Rajasthan.pdf
[11] https://ssrana.in/articles/rajasthan-gig-workers-registration-welfare-bill-2023/
[12] https://ksuwssb.karnataka.gov.in/storage/pdf-files/draftnotification.pdf