RECOGNISING CAB AGGREGATORS’ DRIVERS AS EMPLOYEES SETS A DANGEROUS PRECEDENT

KARNATAKA HIGH COURT’S RULING RECOGNISING CAB AGGREGATORS’ DRIVERS AS EMPLOYEES SETS A DANGEROUS PRECEDENT

– YAJAT KUMAR

A single judge bench of the Karnataka High Court (“HC,” hereinafter), in a judgement titled Miss X v. ICC and Ors.,¹ has held that the Driver-Partners onboarded by OLA are its “employees” for the purposes of the Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013 (“PoSH Act,” hereinafter). While doing so, the HC also ordered ANI Technologies, the proprietor of OLA, to pay a compensation of five lakh rupees to the woman who reportedly was sexually harassed at the hands of a Driver-Partner during a cab ride in 2019. This decision is an unprecedented development in the Indian labour jurisprudence. The judgment has been on the receiving hand of commendations expressed by employees and employers alike, and across traditional and social media, with many hailing it as a watershed moment, akin to the jurisprudential shift led by judgments of Bangalore Water-Supply & Sewerage Board, etc. v. R. Rajappa & Ors;² and Workmen Represented by Secretary v. Management of Reptakos Brett. and Co. Ltd. and Anr.³ in the sparsely traversed sub-domain of Constitutional Law and Employment Law concerning private establishments, especially in the background of the long-drawn fight of gig-workers towards recognition in the traditional Employment Law regime.

It is vital to discuss as to how the reasoning employed by the HC in recognizing the Driver-Partners of OLA as its “employees” is unsustainable. Along with this, we must understand how contrary to what ostensibly seems to be only limited to the precincts of the PoSH Act, the logic deployed in this judgment can even be used by gig workers to avail benefits under other labour legislations.

To set out the basics, OLA – a cab aggregator platform – enters into agreements with individual Driver-Partners to hire taxis to pick up and drop customers from one point to another. One important factor to take into consideration is that these Driver-Partners are not bound to work with OLA and can work simultaneously with other Aggregators and can leave OLA at any time. Further, there are no fixed/minimum working hours for these Driver-Partners; for all they desire they may work for as little as half an hour, or as much as eight hours per day and have the option of not working at all. Unlike regular employees, they are not paid any fixed salaries and are instead paid out of the cab fare, from which OLA deducts some commission. The taxis that these Driver-Partners deploy are not provided to them by OLA.

Fares and Commission Rates

According to the HC, OLA’s computing and the payment thereof of fares to the Driver Partners under the Service Agreement indicates that the “whole and entire control of revenue being generated from the business is absolutely vested with OLA”. The HC goes on to say that the entire monetary process involved in the transaction – from deciding the rates and fixing the commission to the actual payment – is managed by OLA in which the Driver-Partner has no role to play. Leaving aside the logistical constraints of consulting Driver-Partners to establish fares for each ride, it is untenable to assert that this factor alone determines an employer-employee relationship. This assertion is particularly undermined by the Supreme Court’s prior rulings, such as in Shankar Balaji Waje v. State of Maharashtra⁴ (“Balaji”, hereinafter) and Sushilaben Indravadan Gandhi v. The New India Assurance Company Ltd.⁵ (“Sushilaben”, hereinafter), which did not prioritise the payment of fixed rates to independent contractors as a principal criterion for such a relationship. In these instances, it is predominantly the management that dictates the remuneration, which is a universal characteristic in commercial agreements of any nature. In Balaji, the SC negatived the contention concerning the existence of a master-servant relationship when the worker was paid at filed rates on the quantity of bidis (small and inexpensive cigarettes) turned out and there was no stipulation that he had to turn out any minimum quantity of bidis in a day. The case before the HC was similar, albeit wrapped in a latter-day blanket of technology and conveyance. Necessary, it would be to point out that most Cab Aggregators charge – on an average – more than the fares prescribed by the Government for individual taxis. It would not be gainsaid to point out that as per the Motor Vehicle Aggregators Guidelines, 2020, cab aggregators have to limit their commission to a maximum of 20% of the fare. True it is that these Guidelines are only persuasive and do not have any binding value, but states such as Karnataka and Delhi, among other states and union territories, have come up with their own Aggregator Rules and Schemes, with Karnataka putting stringent limits on the fare and consequent deductible commission. Similarly, providing certain extra payment to the Driver-Subscribers on fulfilling targets cannot be said to be creating any fiduciary relationship between the two, as against what the HC opines, since the same is solely a measure to provide the Driver-Partners with incentives for staying on their platform for longer time; a similar strategy is employed universally by most business when the independent contractors get done with their work sooner than the prescribed deadline. Thus, when these Driver-Partners avail unlimited (virtually) riding opportunities with higher than usual fares and the commission limit of the arrangement will come to be regulated by the State, there is no question of any employer-employee relationship being established, at least solely on this count.

Control and Supervision

The Service Agreement lists out certain obligations (among others) that the Driver-Partners must follow: 

• General Diligence, like understanding the terms and conditions of the Agreement, to be informed of his surroundings, to not do anything unlawful;
• Maintain his and customers’ security;
• Ensure registration of Vehicle;
• Ensure comprehensive insurance;
• Not tamper with the customer’s property if unintentionally left behind in the vehicle;
• Personal responsibility in case of any failure, damage, loss, cost, penalty, liability or negligent act;
• Maintenance of relevant records to prevent any discrepancies;
• Maintenance of personal hygiene;
• Not behave rudely with customers;
• Not use mobile phone while driving;
• Not indulge in rash Driving.

The HC attributes the above-provided obligations as relevant considerations for establishing that OLA exercised control and supervision of the Driver Partners. In this context, it would be imperative to understand what the ‘control and supervision’ test is. The Supreme Court has in a catena of judgments such as Balwant Rai Saluja v. Air India Ltd.⁶ (“Balwant Rai Saluja”, hereinafter); Workmen of Nilgiri Coop. Mkt. Society Ltd. v. State of Tamil Nadu⁷; International Airports Authority of India v. International Air Cargo Workers’ Union⁸; and Sushilaben observed that primary control would be exercised when the employer controls not just the work that is given but how it is to be done.

In Sushilaben, it was the opinion of the Supreme Court that the control test would not be of much significance in complex cases involving persons like taxi drivers. However, even if the control and supervision test were to be deployed in the case of OLA as the sole criterion for slotting the relationship as either a contract of service or a contract for service, no real veil would be pierced. It would be profitable to note that majority of the obligations of the Driver-Partners listed above also find themselves enumerated in the Karnataka Aggregator Rules, 2016 and the Central Aggregator Guidelines, making it mandatory for the Platform Owners to make their Partners adhere to them. Pulling up Aggregators based on the ground of strictly adhering with the Aggregator Guidelines would not only place them in a catch-22 situation (and obfuscate the very necessity of the Rules/Guidelines), but it would also fall under the category of a situation that the Apex Court lamented in Balwant Rai Saluja –  just because one is bound to observe legislative propriety in one area would not imply that he should be recompensed upon in an entirely different area. A mere tertiary perusal of the obligations would go on to show that they are stricto sensu control inducing for they prescribe (or proscribe, as the case may be) the obvious: conditions such as maintaining a degree of general security and not abusing your customers are already implied conditions of an agreement of this sort, their codification per se is not even required.

The HC observes that the Driver-Partners do not have the liberty of booking the ride and deciding the route to take. This observation does not correspond with how the mechanism works. The Driver-Partners are given a window of 10-15 seconds to decide whether to take up the ride as a matter of choice. The rides are not manually assigned to them. It is also not true that the Driver-Partners are not allowed to change the route; quite often, it is the customers themselves, as common experience would tell, who ask the Drivers to change the route as it would take less time to reach the destination that way. Merely notifying OLA about the route change would not be of any major concern for the platform must be aware of it to ensure customer safety. As against the argument of the lack of freedom of cab-cancellation on the driver’s own volition without having to face any penalty, it is but obvious that imposition of penalties for cancelling rides without any explanation is sequitur to business prudence: cancellation leads to loss of money for both the Aggregator and the Driver-Partner; if it were not for the Aggregator, the Driver-Partner would not have been able to avail the ride in the first place. Additionally, compensation and damage clauses are common in almost all commercial agreements.

It would further appear that the HC did not deploy other tests such as that of economic reality (wherein the Court goes into the question of whether the economic well-being of the employee vests fully/partially on his current employment and whether sudden termination would leave him in a difficult situation; (see Hussainbhai, Calicut v. Alath Factory Tezhilahi Union, Kozhikode & Ors.)⁹ for applying them would have made it reach an objective conclusion of the lack of employer-employee relationship between OLA and the Driver-Partners as the Driver-Partners are fully competent to seek and avail simultaneous opportunities corresponding to their economic aspirations and would not be left in shambles if terminated tomorrow. The multi-pronged test laid down by some of the English judgments (see Sushilaben), namely, whether wage or other remuneration is paid by the employer; whether there is a sufficient degree of control by the employer (often considered to be the most full-proof test) wasn’t used by the HC.

It is true, though, that the case of the Driver-Partners would be squarely coverable under the integration test (integration test is applied by examining whether the person was fully integrated into the employer’s concern or remained apart from and independent of it; (see Ram Singh and Others v. Union Territory, Chandigarh & Ors.)¹⁰ as they are substantially responsible for the main and sole business. However, as laid down in Indian Overseas Bank v. Workmen, All India Overseas Bank Employees Union¹¹, the flexibility of the contract being at variance with a normal worker’s contract is a notable exception to the applicability of the integration test.   

The HC has heavily relied upon the judgment of Silver Jubilee Tailoring House v. Inspector of Shops & Establishments¹² (“Silver Jubilee”, hereinafter) to ameliorate its stance of control and supervision. In Silver Jubilee, The Court itself specified that the test of direct control was majorly applicable to simple tasks. In this regard, it must be kept in mind that stitching clothes – as was the case in Silver Jubilee – is not a task involving a lot of skill and complexity owing to which the rejection of the end product was found to be adequate to establish control. Operating platform-based cabs has multiple axioms simultaneously involved where the Aggregator does not have the right to reject the end service; it is essentially a contract between the Driver and the Consumer. Even otherwise, the Delhi High Court in the case of ANI Technologies Private Limited v. Government of NCT of Delhi and Others¹³ has already observed that the Driver- Partners associated with the platform of OLA have purely a contractual relationship with the OLA and cannot make any employment demands from it.

The HC referred to the judgment of the UK Supreme Court in Uber BV v. Aslam¹⁴ (“Uber BV”, hereinafter) wherein it was held that Uber Drivers fall under the definition “worker” under section 230(3) of the Employment Rights Act, 1996. In the UK, even a person who is self-employed but who provides his services as part of a business carried on by someone else is a “worker”. The definition of “employee” under the PoSH Act, undisputably, is not that wide.

All this is notwithstanding the aspect of a writ petition being entertained against both the Internal Complaints Committee of OLA and OLA itself on the ground of them “discharging public functions and thus being amenable to the writ jurisdiction of the HC under Art 226”. If one were to go by that logic, the statutory remedy available under the PoSH Act would simply be left to an ornamental existence. It was, in the same breath, held by the HC that OLA was performing a ‘public function’ of providing transport services to the general populace even after contradictorily observing that the nature of the activities of OLA was purely commercial.

Impact on Other Allied Legislations

The Judgment of the HC may lead to an anomalous situation in the future. A detailed reading of the judgment would go to show that the HC has held the Driver-Partners to be “employees” only for the limited purposes of the PoSH Act, albeit in doing so it has placed reliance upon precedents relating to the Shops and Establishments Act(s), the Industrial Disputes Act, 1947 and the Employees’ State Insurance Act, 1948. Many states and union territories have made employment in commercial establishments a part of ‘scheduled employment’ under the Minimum Wages Act, 1948 (“MW Act”, hereinafter). Since the Court has effectively held that Driver-Partners are “employed” with OLA under the PoSH Act – which arguably has the widest definition of coverage out of all the major employment legislations – one can today even approach the Authority under the MW Act claiming minimum wages. If such a technical interpretation of the judgment gets accepted among the Courts and Authorities, that day would not be very far away when references in thousands will be made to Industrial Tribunals/Labour Courts Employees’ Provident Fund and other Social Security Authorities would come knocking on employers’ doors! This is not to say that gig workers should not be entitled to social security or other related benefits; it’s just that the extant system is built on such an enmeshed edifice that inclusion would do them more harm than good. The Central and State Governments recognize this problem – which is precisely why the New Codes seek to solve it to some extent.

Although the judgment has been stayed by a Division Bench of the Karnataka HC, it would be interesting to see if the HC decides to follow the Uber BV course or chart its own way.

(For interested readers, the details of the case pending before the Division of the Karnataka HC are as follows: ANI Technologies Private Limited & Ms X & Others, WA 1493/2024)

Author Bio:
Yajat Kumar
Member of the Association of Industries and Institutions (AoII)
Jr. Editor – Labour Law Reporter 

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1. WP No.8127/2019 (GM-RES) dated 30.09.2024 (Karn. HC).
2. 1978 (52) FJR 197 (SC).
3. 1992 LLR 1 (SC).
4. 1961-62 (21) FJR 293 (SC).
5. AIR 2020 SUPREME COURT 1977
6. (2014) 3 LLN 568 (SC).
7. 2004 LLR 351 (SC).
8. CA No.2244/2002 dated 13.04.2009 (SC).
9. 1978 (53) FJR 278 (SC).
10. 2004 LLR 47 (SC).
11. (2006) 109 FLR 604 (SC).
12. 1974 (27) FLR 350 (SC)
13. LPA 506/2015 dated 11.08.2015 (Del. HC).
14. [2021] UKSC 5.