California passes landmark bill to treat workers of mobile application-based companies as employees. Will India follow suit?

California passes landmark bill to treat workers of mobile application-based companies as employees. Will India follow suit?

In what is being regarded as a landmark move, the lawmakers in California have passed Assembly Bill 5 (“Bill”) that paves the way for workers of mobile application-based companies to be treated as employees. The Bill be effective from January 01, 2020. Among other organisations based in California, this Bill would also have an impact on organisations like Uber, Lyft, etc. who term their drivers as independent contractors and not as its employees.

The Bill puts into effect a judgment of the California Supreme Court (“California SC”) in the case of Dynamex Operations West, Inc. v. Superior Court where the California SC had propounded what is known as the ABC test to determine whether a person is an employee or an independent contractor.

It is estimated that the implementation of the Bill would increase the cost for companies by around 30% and consequently the Bill has received widespread opposition as well. Uber and Lyft have instead suggested a guaranteed minimum wage of $21 per hour in order to mitigate the sweeping changes that would be introduced as a result of the Bill being implemented.     

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The rise in smart phone usage and increase in internet penetration the world over has given birth to the gig economy where people accept work on a per job basis and India is no exception to this. In fact, a petition was filed in the Delhi High Court in 2017 by the Delhi Commercial Driver Union that claims to represent around 1.5 lakh drivers in the national capital region, to examine whether drivers engaged by Ola and Uber are their employees and not independent contractors as claimed by these companies. However, it was withdrawn by the petitioner after some arguments, and the petition was dismissed accordingly.

In December 2018, the Court of Appeal, United Kingdom, had ruled that Uber drivers were its employees and were entitled to employee benefits such as holiday pay, minimum wage, etc. and this case is now pending before the UK Supreme Court.

While the various employer-employee tests that have evolved over years in India would indicate that drivers of Uber and Ola and other cab aggregators might be classified as employees, it remains to be seen if the Delhi High Court is going to be affected by the decision of the UK Court of Appeal or the California SC in determining whether Uber and Ola drivers would be their employees and not independent contractors.

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Disclaimer: This post has been prepared for informational purposes only. The information/or observations contained in this post does not constitute legal advice and should not be acted upon in any specific situation without seeking proper legal advice from a practicing attorney.


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