Rewriting Rules Of The Gig: Inside Karnataka's New Platform Worker Law

The enactment of the Karnataka Platform-Based Gig Workers (Social Security and Welfare) Act, 2025 ("Act") marks a significant regulatory milestone in India's ongoing attempt to formalize the gig economy. Karnataka's law represents the first comprehensive, state-level legislative initiative to institutionalize social welfare measures for platform-based gig workers, a class that has until now existed in a legal and economic limbo. The law's passage follows a period of judicial and policy debate on whether gig workers qualify as employees within the meaning of existing labour codes and to what extent digital platforms should bear social security obligations.

The gig economy in India has expanded rapidly over the last decade with major platforms such as Swiggy, Zomato, Ola, Uber, Urban Company and Dunzo employing millions of delivery partners and service providers. However, the traditional employer-employee model of labour regulation has struggled to accommodate the flexible, algorithm-driven relationships that underpin these platforms. The Karnataka Act therefore, represents a policy intervention designed to bridge this regulatory gap providing a statutory structure for welfare while maintaining operational flexibility for platforms and aggregators.

Legislative Context

The roots of the Karnataka Act can be traced to the Code on Social Security, 2020 ("Code") which for the first time recognized 'gig workers' and 'platform workers' as distinct classes. Sections 2(35)¹ and 2(60)² of the Code define 'gig worker' as a person who performs work outside of a traditional employer-employee relationship and 'platform worker' as a person engaged by an online platform to provide specific services. However, the Code left much of the implementation to delegated legislation and its provisions on gig worker welfare funds have not yet been operationalized. Karnataka's initiative therefore, fills a practical void by establishing a state-level framework for registration, welfare, funding and the like. The Act also aligns with judicial trends recognizing the economic dependency of gig workers on digital intermediaries. The Delhi High Court in Uber India Systems Pvt. Ltd. v. Union of India³ observed that the absence of statutory protections for platform workers could result in social inequities urging rapid legislative intervention. Additionally, the Act builds upon the recommendations of the NITI Aayog's 2022 report, India's Booming Gig and Platform Economy⁴ which highlighted the lack of social safety nets for gig workers and proposed a hybrid welfare model involving contributions from both the state as well as platforms and aggregators.

Insights on the Act

The Act applies to all aggregators and digital platforms operating within Karnataka's jurisdiction. The Act has attempted to comprehensively address aspects like registration, governance, funding, welfare entitlements, dispute resolution and the like.

1. Registration Framework

The Act mandates that every aggregator register on the Karnataka Gig Workers Welfare Portal, providing detailed information on the number of workers engaged, the nature of services offered and the digital platform's operational structure. Gig workers are also required to register through a self-declaration system linked to Aadhaar verification facilitating identification and benefit distribution. This dual-registration model mirrors provisions of Section 114⁵ of the Code, which envisaged a similar digital registry but was never fully implemented at the central level. Karnataka's adoption of an online, state level registry reflects the increasing trend of digital compliance ecosystems replacing traditional paper-based regulation.

2. Welfare Board and Governance

A Karnataka Platform-Based Gig Workers Welfare Board is established under the Act, consisting of representatives from the state government, aggregators and gig worker associations. The Board's statutory mandate includes formulating welfare schemes, managing contributions and adjudicating benefit eligibility. The Board operates as a quasi-autonomous body corporate. The use of a tripartite governance structure reflects an effort to balance competing interests, regulatory oversight, business viability and most importantly worker welfare.

3. Karnataka Gig Works Welfare Fund

One of the Act's most substantive features is the creation of a welfare fund financed through multiple sources:

1. Contributions by aggregators up to 1-2% of annual turnover subject to prescribed limits)
2. Grants or loans from the State Government
3. Voluntary contributions and penalties collected under the Act

The Fund will be utilised to provide social security benefits including health insurance, accident cover, maternity benefits and skill development assistance. The contribution model broadly aligns with Section 141⁶ of the Code but adds a state-administered collection and disbursement mechanism. The Supreme Court in Regional Provident Fund Commissioner v. Vivekananda Vidyamandir⁷ emphasized that statutory welfare schemes must ensure practical enforceability rather than nominal compliance. The Karnataka Act's reliance on a dedicated fund with aggregator contributions provides a tangible mechanism for enforcement.

Interface with Central Legislation

While the Code provides the national legal foundation for gig worker recognition, its implementation has been delayed. In the absence of corresponding central rules, Karnataka's law operates under Article 246(2) of the Constitution which allows concurrent legislative power on subjects such as labour and welfare. However, any eventual enforcement of the Code's gig worker provisions could create overlaps or conflicts. Under the doctrine of repugnancy articulated in M. Karunanidhi v. Union of India⁸, a state law remains valid unless it is directly inconsistent with a central law on the same subject. Since the Code has not yet operationalized its gig worker schemes, the Karnataka Act presently operates without contradiction. Nonetheless, harmonization will be necessary once central level rules are notified.

Legal Classification

A core issue in gig worker regulation is the legal characterization of the worker-platform relationship. Courts across jurisdictions have grappled with whether gig workers are 'employees' entitled to statutory benefits or independent contractors governed solely by contract law.

Indian jurisprudence has been cautious in extending employee status to gig workers. In Food Delivery Partners Union v. Zomato Online Pvt. Ltd.⁹, the Madras High Court refrained from declaring delivery partners as 'workmen' under the Industrial Disputes Act emphasizing the absence of direct supervision and control. Conversely later in Ola Drivers Union v. State of Karnataka¹⁰, the Karnataka High Court acknowledged the significant economic dependence of drivers on platforms suggesting that welfare entitlements may be justified even in the absence of a traditional employment relationship. Globally, courts have leaned towards extending limited employment protections. The UK Supreme Court in Uber BV v. Aslam¹¹ held that Uber drivers were 'workers' under the Employment Rights Act, 1996, entitled to minimum wage and paid leave, primarily due to the platform's control over pricing and contractual terms. The Karnataka Act implicitly incorporates this rationale by establishing welfare entitlements without altering contractual classification — effectively creating a third category between employee and independent contractor.

Compliance Obligations for Businesses

From the perspective of a business, the Act introduces several new compliance touchpoints. Aggregators are required, including but not limited to:

1. Register with the Welfare Board and maintain updated records
2. Deduct and remit contributions to the Welfare Fund based on turnover
3. Provide periodic disclosures regarding gig worker engagement
4. Cooperate with Board audits and inspections

Failure to comply attracts monetary penalties. For businesses operating pan-India, this state level divergence poses significant compliance challenges. Multistate aggregators will need to adapt internal reporting systems to align with varying state frameworks similar to the multi-jurisdictional compliance requirements. While Karnataka is the first mover, similar legislative discussions are underway in Rajasthan and Telangana. The broader implication is that platform-based labour regulation is likely to evolve as a state led phenomenon shaped by regional policy priorities at least for now.

Risk Management and Strategic Considerations

Corporate legal and compliance departments must adopt a multi-pronged approach to navigate the regulatory landscape in this regard. Compliance integration by means of incorporating gig worker registration and contribution workflows into HR and finance systems. Automation of periodic filings linked to the state portal can minimize manual errors. Contractual realignment by updating service agreements with gig workers to include clauses addressing welfare contributions and disclosures under the Act. Risk mitigation and ensuring proactive engagement with the Welfare Board to avoid retrospective liabilities. Maintaining cross-jurisdictional consistency for aggregators operating beyond Karnataka, standardizing internal compliance protocols will be critical to manage state-by-state variations in gig worker regulation. Legal teams should also anticipate potential litigation concerning the quantification of turnover based contributions. Judicial scrutiny of algorithmic management practices which happens to be a growing trend globally may also arise under the Act's transparency provisions.

To Sum It Up

The Karnataka Platform-Based Gig Workers (Social Security and Welfare) Act, 2025 represents a decisive evolution in India's labour and welfare jurisprudence. By designating social security for platform-based workers. The Act acknowledges the economic realities of digital labour markets while avoiding rigid employment classifications. For businesses, this legislation signals the beginning of a new compliance regime that blends welfare regulation with technological oversight. Corporate legal teams must treat this not merely as an operational compliance burden but as part of a broader ESG and workforce sustainability strategy. Ultimately, the Act may serve as a model for other Indian states and potentially influence the eventual implementation of the central Code on Social Security, 2020. As the boundaries between employment and contactor continue to blur, Karnataka's law sets a precedent for a hybrid regulatory framework — one that safeguards worker welfare without stifling innovation in India's rapidly expanding platform economy.

Footnotes

1. § 2(35), Code on Social Security, 2020

2. § 2(60), Code on Social Security, 2020

3. 2022 SCC OnLine Del 3056

4. NITI Aayog, India's Booming Gig and Platform Economy: Perspectives and Recommendations on the Future of Work, 2022

5. § 114, Code on Social Security, 2020

6. § 141, Code on Social Security, 2020

7. (2019) 2 SCC 289

8. (1979) 3 SCC 431

9. 2021 SCC OnLine Mad 2543

10. 2023 SCC OnLine Kar 1295

11. (2021) UKSC 5

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