Author: Sukriti Chaudhary, National University of Study and Research in Law, Ranchi
TO THE POINT
The gig economy has completely changed the way we think about work today, allowing for flexible jobs that are managed through apps. But with the rapid growth and merging of gig platforms, like Zomato and Blinkit, there are some serious legal hurdles to overcome. In India, these big acquisitions and the expansion of companies like Urban Company happen in a space where gig workers don’t have formal legal recognition or protection. This article dives into how the current labour and corporate laws fall short when it comes to addressing the rights and responsibilities of gig workers during these mergers and acquisitions. It raises important questions about due diligence, accountability of algorithms, and compliance with labour laws.
ABSTRACT
This article dives into the legal hurdles that come with mergers in the gig economy, especially highlighting the role of app-based digital labour platforms in India. Traditional frameworks for mergers and acquisitions tend to focus on physical assets, financial disclosures, and legal compliance, but they often overlook the informal workforce that is so crucial to gig platforms. This oversight creates significant gaps in due diligence and the integration process after a merger, especially regarding the welfare of gig workers and how algorithms are governed. The article reviews recent corporate transactions, relevant regulations, and international case law to advocate for necessary reforms. By adopting a rights-based approach to platform mergers, we can better align India’s corporate development with constitutional labour protections and global best practices.
THE PROOF
When it comes to Indian M&A due diligence, the spotlight usually shines on shareholder rights, asset valuation, and the necessary regulatory approvals as outlined in the Companies Act of 2013 and SEBI’s regulations from 2011. But here’s the catch: gig platforms, which depend on a non-traditional workforce, need a wider lens on liabilities. Take Zomato’s $568 million acquisition of Blinkit in 2022, for example. Neither side revealed how they engaged their delivery workers, nor was there any clarity on whether those workers’ contractual rights would be impacted. The existing SEBI regulations and the Companies Act don’t require specific disclosures about platform workers, who technically aren’t classified as employees. The Social Security Code of 2020 does recognize gig and platform workers (see Sections 2(35) and 2(61)) and suggests some benefits under Chapter IX. However, it doesn’t go far enough to provide enforceable rights like minimum wage, health benefits, or collective bargaining, leaving gig workers vulnerable during ownership changes. Urban Company’s ongoing disputes with its service providers over pricing control and algorithmic deactivation from 2021 to 2023 highlight how a lack of transparency in algorithms can lead to labour exploitation an issue that M&A due diligence often overlooks. As a result, gig workers remain invisible stakeholders in corporate restructuring, even though they play a crucial role in creating value.
CASE LAWS
1. Zomato-Blinkit Merger (2022): This merger represented a major turning point in India’s quick commerce industry, but it was surprising to see a lack of public legal documents addressing gig worker contracts or the ongoing provision of welfare benefits. For more details, check out Zomato Ltd.’s
2. Urban Company Worker Protests (2021–2023): During this time, gig workers took to the streets to express their frustrations about unrealistic targets, algorithm-driven ratings, and abrupt job terminations. The lack of action from regulatory bodies underscored the glaring absence of due diligence standards for app-based labour, especially in the context of mergers and acquisitions. For further reading, see Shruti Dhapola’s article.
3. Uber BV v. Aslam : In a landmark decision, the UK Supreme Court determined that Uber drivers qualify as “workers” entitled to minimum wage and other benefits under UK law. The ruling stressed that the nature of the employment relationship should take precedence over the contractual terms.
4. Thaler v. Hirshfeld: While this U.S. case isn’t directly related to labour law, it reinforced the idea that legal personality is crucial for assigning rights in corporate and intellectual property laws. This case underscores the importance of recognizing gig workers’ legal status in corporate dealings.
CONCLUSION
The rapid rise of digital labour platforms and their quick growth through mergers in India have completely outpaced the country’s existing legal frameworks. Gig workers, who form the backbone of these platforms, often get overlooked during the mergers and acquisitions (M&A) process not because they’re ignored, but also due to significant gaps in the legal system. Existing corporate and labour laws fall short in addressing the vulnerable situation of platform workers during business transitions, leaving their rights unprotected and their employment conditions uncertain. To fill this regulatory void, we urgently need comprehensive reforms. This should involve mandatory disclosure of gig labour contracts during M&A due diligence, updates to the Companies Act of 2013 and SEBI regulations to include social impact assessments, enforcement of minimum standards for algorithmic transparency, and an expansion of the Social Security Code of 2020 to ensure that platform workers have enforceable rights and benefits. These steps are crucial to make sure that corporate consolidation in the gig economy doesn’t undermine labour dignity and legal protections.
FAQS
Q1. Who qualifies as a gig worker under Indian law?
A gig worker, as outlined in Section 2(35) of the Social Security Code, 2020, is someone who engages in income-generating activities outside the traditional employer-employee setup, often facilitated through digital platforms.
Q2. Why are gig workers left out of M&A frameworks?
Since they aren’t recognized as employees under the Companies Act, 2013 or labour laws, there’s no legal obligation to evaluate their contracts, liabilities, or welfare during mergers and acquisitions.
Q3. What risks do companies encounter if they overlook gig workers in M&As?
Companies could face reputational harm, protests from workers, or even legal issues (particularly in international contexts) if gig workers are adversely affected after a merger.
Q4. How do other countries approach this matter?
The UK and EU are starting to recognize gig workers as employees who are entitled to minimum wage, sick leave, and various other benefits. Their M&A guidelines are increasingly taking labour-related risks and social impacts into account.
Q5. What reforms are suggested?
Legal reforms should involve conducting labour audits during M&A due diligence, establishing enforceable welfare standards for platform workers, and ensuring algorithmic transparency to prevent misuse of control during and after mergers.
REFERENCES
1. Companies Act, No. 18 of 2013, §§ 230–324, India Code (2013)
2. Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, Gazette of India, Reg. 3.
3. Annual Report 2022-23 (Aug. 2023) at https://www.zomato.com/investor-relations.
4. “Urban Company Protest: Workers Call Out Unfair Practices,” in the Indian Express (Oct. 12, 2021) at https://indianexpress.com/article/technology/tech-news-technology/urban-company-protest-women-workers-fairwork-7568855/
5. Uber BV v. Aslam [2021] UKSC 5 (UKSC)
6. Thaler v. Hirshfeld 558 F. Supp. 3d 238 (E.D. Va. 202)
