Uber, Ola and the gig economy; how the evolving jurisprudence will have a bearing on it

Published: April 26, 2017 6:03 AM

With just a tap on our smartphones, we have the luxury of an air-conditioned Ola or an Uber cab waiting at our doorstep.

These handy services use a technology platform, usually a mobile-based app, to connect the service provider with the consumers willing to rent assets. (Reuters)

With just a tap on our smartphones, we have the luxury of an air-conditioned Ola or an Uber cab waiting at our doorstep. We have to thank the advent of the gig economy or shared economy, which affords us this convenience. These handy services use a technology platform, usually a mobile-based app, to connect the service provider with the consumers willing to rent assets.

However, the advent of this disruptive gig model in the transport world brings its own challenges in terms of compliance with local laws, defining the employer-employee relationship and the appropriate tax regime, as these services are often provided by remotely located companies rather than local players.

The ministry of transport and highways has realised that these aggregators are, in fact, filling in the lacunae created by lack of infrastructure in public transport, and benefiting the consumer gripped in the clutches of the slothful “kaali-peelis”.

The aggregators perceive themselves as an algorithm and as forbearers of the new emergent dominant sharing economy.

However, the recent strike in Delhi, wherein the drivers demanded reinstatement of their original incentives and increase in base fares shows that there are several complex issues which need to be dealt with to ensure long term success. More important, companies needs to address questions like, what is the status of the drivers on the platform? Are they mere partners (as the aggregators would have it), and thus independent contractors. .

The Delhi High Court’s interim order in a recent case filed by Uber India Systems Pvt Ltd & another versus Sarvodaya Drivers Association of Delhi (SDAD) and Rajdhani Tourist Drivers Union, held that the relationship between the cab drivers of these unions was purely contractual, and if they do not desire to continue they can choose a more lucrative option. On April 17, the Delhi HC issued a permanent injunction against SDAD and Rajdhani Tourist Drivers Association for disrupting services.

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Juxtapose this with the views by courts in the US and the UK. In an appeal filed by Uber Technologies Inc vs Barbara Berwick, the superior court of California held that the driver was an employee of Uber. In this case, Uber described itself as a “neutral technological platform” designed simply to enable passengers and drivers to transact the business of transportation. Uber claimed to have worked with licensed driver partners, with multiple safeguards such as driver and vehicle information, ETA to ensure that all trips are accountable/traceable. No control is exercised over the drivers and no minimum trips prescribed. If they are just contractual partners, as Uber claimed, then it cannot be held responsible for the acts of its partners but can only be responsible for its platform. The Court inter alia held that by connecting clients in need of service; and the drivers, Uber retains control over the transaction. The driver is an integral part of Uber’s service, without drivers, the business of Uber would not survive.

In the case of Yellow Cab cooperative, the workers compensation board held that, notwithstanding some factors indicative of the fact that the workers are independent contractors, the overriding factor is that the persons performing the work are not engaged in businesses that are distinct from that of the cab company. Rather, their work is the basis for the business. If the company retains pervasive control over the operation as a whole, the workers duties are an integral part of the operation and the nature of the work makes detailed control unnecessary.

Two Uber drivers, James Farrar and Yaseen Aslam, won a landmark judgement in their favour wherein an employment tribunal in the UK dismissed the notion that Uber in London is a mosaic of 30,000 independent businesses. The tribunal accepted Uber’s defence, that there was no compulsion to keep the app on. But held that the assumption when the app connects the driver to the customer, the driver is free to negotiate the price, is inaccurate. The tribunal held that Uber interviews and recruits drivers, controls key information of the passengers to the exclusion of the driver, it penalises drivers for cancellation of trips, it fixes the fare which the driver cannot increase, and for these reasons, Uber runs a transportation business and the drivers provide skilled labour. It also held that the essence of the contract between it and the driver is that for a reward the driver carries Uber’s passengers to their destination.

These developments raise several pertinent questions on the ambit of responsibilities of a technology platform acting as a mere conduit. The services being offered by Airbnb is merely facilitating the hiring of an apartment and connecting the customer with all other service providers. Can Airbnb be deemed an employer for all these service providers?

The consumer has hugely benefited from these low-cost intermediary platforms. Similarly, restaurants and sightseeing companies have benefited from additional customers without the advertising costs. Would classifying the technology-enabled platforms as en masse employer allow them to exploit all the efficiencies?

The evolving jurisprudence in this sphere, in India and abroad, will have a bearing on the burgeoning gig economy and a host of other technology based intermediaries, such as, telecom operators, Urban Clap, Zomato, etc.

-By Sayali Phatak

(With inputs from Payal Malik, associate professor, economics and senior consultant, competition law, policy and regulation.)

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