Karnataka Performance Workers Act: What to Stay and What Have Changes

The Karnataka Cabinet cleared the highly anticipated performance workers (Social Security and Welfare) bill based on Karnataka platform on April 11, which is for 2024 and is now expected to be introduced as an ordinance. If passed, this would make Karnataka the second state in the country to provide legislation for platform-based gig workers after Rajasthan.

Why legislation?

Reports show that there are about 200,000 performance workers on Bangalore working with companies such as Swiggy, Zomato, Zomato, Uber, Ola, Ola, Urban Company, Porter, Porter, Amazon, Flipkart, etc. According to a 2022 Niti Aayog report, the gig economy is expected to create 23.5 million jobs in India by 2030.

Platform-based gig workers are not full-time employees and are often called “partners” by aggregators. Unlike jobs in formal departments, they enjoy a certain degree of work flexibility.

However, given that the employment is not outside the traditional employer-employer relationship, workers do not have the safety of labor protection laws. Over the years, multiple instances of workers’ neglect and exploitation have been reported, and legislation is needed to ensure the protection and welfare of workers.

Although the central government adopted the Code of Social Security (COSS) in 2020, the regulation that defines performing workers for the first time in India, it has not been implemented. In 2023, the Congress government, then ruling in Rajasthan, enacted the Rajasthan-based performance workers (registration and welfare) bill before the state election in 2023. The subsequent BJP government remained still in the state.

What is the schedule?

In June 2024, the government led by Siddaramaiah first released a draft of the performance workers (Social Security and Welfare) bill based on the Karnataka platform. According to officials, the bill was drafted after several meetings with various stakeholders.

While it is expected to be presented at the monsoon meeting, industry agencies such as Nasscom and IAMAI have expressed strong opposition to several provisions of the bill on behalf of various tech companies and have asked for more time to submit feedback. Since then, the draft bill has been placed on the backstage burner, which frustrated me that this union has been pushing for its passes at the earliest.

In the first week of April, the top brass of the Karnataka government met with opposition leader Rahul Gandhi, which was discussed with the bill. The legislation for performing workers is one of Congress’ commitments before the general election and before the Karnataka state election. After the meeting, Karnataka Labour Minister Santosh Lad confirmed that the bill was completed and would be passed soon. On April 11, the Karnataka Cabinet cleared the bill.

What are the key clauses?

Karnataka-based Performance Workers Act Definitions a performance worker as a person who performs a work or participates in a work arrangement that defines a given payment rate based on the terms and conditions set out in the contract and includes all part work and all part work, and whose work is sourced through the platform through the schedule specified in the plan – IIIIIIIIII

The bill that emphasizes performance workers’ rights aims to create welfare funds for workers, assume obligations to aggregaters, and proposes a 1%-5% benefit fee paid to workers during each transaction. All payments received will be used for the workers’ welfare fund.

A welfare committee for performing workers will be established to ensure the platform, welfare charges and implementation of social security programs to ensure workers registration. An aggregator is required to provide the database of all its gig workers to the board.

The proposed Payment and Benefits Fee Verification System (PWFVS) will track each payment deducted by the aggregated person and additional benefits.

How does the bill help?

These platforms must provide a safe working environment that is risky to the health of workers and ensures that workers have sufficient rest periods and access to sanitation and rest facilities.

The bill states that resolving arbitrary termination is one of the main problems for workers, noting that there is no valid written reason and prior notice for 14 days, and that workers cannot be terminated unless there is a personal injury.

The bill also requires platforms to sign transparent and fair contracts with workers, and emphasizes the need for transparency in automated monitoring and decision-making systems.

It proposes a two-layer grievance mechanism in which workers are required to first contact with the Internal Dispute Resolution Committee. If the committee fails to provide a “report of action taken” or unsatisfied work within 14 days, the complaint will be forwarded to the board of directors.

Bengaluru Karnataka 14/12/2022: Performance workers hired by food delivery service platforms Zomato and Swiggy deliver food to customers on December 14, 2022 at Jalahalli Cross, Bangalore. Image source: Murali Kumar K

Any objections?

After the draft bill was published in 2024, the industry bodies, the Ministry of Electronics, IT-BT and Science and Technology, and the Ministry of Commerce and Industry raised some objections.

Key issues include how the bill defines “performance workers,” benefits for each transaction, once the summary obligations of COSS 2020 are implemented, clear on how to use the benefits funds, the benefits remediation mechanisms in the Industrial Disputes Act, and the liability for criminal liability on non-qualified platforms.

Although Coss 2020 defines a performance worker as someone who performs work or participates in a work arrangement and makes money from such activities other than traditional employer-employee relationships, the Karnataka bill does not explicitly mention that the work of the performance goes beyond traditional working relationships. Therefore, it was asked that the bill align its definition of performance workers with COSS, rather than creating a parallel system that equates performance workers with full-time employees.

What is the reason for the objection?

The IT-BT department notes that the benefits per transaction are not suitable for all business models. It argues that the fee must be 1-2% of the platform-specific state-specific turnover, accounting for 5% of the performance workers’ spending, whichever is lower. To avoid duplicate obligations to the platform’s contribution to state and central funds, it also requires that the sunset clause or transition mechanism that resolves this issue is addressed once COSS is implemented.

A previous version of the bill proposed a grievance remedy mechanism under the Industrial Disputes Act. This is strongly opposed because the law applies only to workers covered by conventional labor laws.

Seeking clarity on welfare fund utilization and objections to the Central Transaction Information and Management System (CTIMS) were proposed on the grounds that the compliance burden of the platform companies. The draft bill also objected to the need for platforms that disclosed their algorithmic decision-making processes, believing that its anonymous nature is their competitive advantage.

Before the termination, the workers also had objections to the 14-day notice period.

The Ministry of Commerce and Industry believes that providing the state government with broad powers to allow it to interfere with the platform’s algorithms, contracts and day-to-day management is contrary to the spirit of ease of doing business.

What has changed?

After the objection, some amendments were made to the draft bill.

The remedial mechanism for complaints was removed from the scope of the Industrial Disputes Act and excluded the offence of crimes. While the bill retains a 14-day notice period, it adds a provision that is not required in the event of personal injury.

The bill has a clearer definition of benefits fees than the original draft, which is ambiguous about deductions.

In response to the objection, the Labor Department pointed out that rules will be built separately for the platform, given the industry-specific business model and will not disrupt financial sustainability in the industry, across subsidies and job creation.

It also noted that the bill has introduced the Sunset clause and that if they have contributed under the state bill, the platform does not have to contribute to COSS.

Regarding opposition to CTIMS, the department believes that the aggregation has tracked and stored data at the individual level. It said CTIMS has been changed to a welfare fee verification system (WFVS), which only needs integration with the API and does not require additional compliance.

The bill adheres to its definition of “show workers,” states that it assumes employer-employer relationships only within the scope of providing basic minimum social security benefits, and clarifies that traditional labor laws do not apply to the department.

“Despite flexibility in the work of workers, the platform has contracts that define their spending, allocate and control their work and provide benefits and insurance in some cases. Therefore, the bill exists to a certain extent. The bill addresses this unique nature of this unique nature of the labor market by using any clear definition of partner status, rather than establishing any clear partner status,” he said.