Introduction:
We are currently in the era of rapid technological advancements and increased knowledge-sharing, where the employees are not just working but having access to companies very important data and information. With this comes the risk of data breach. Its punishable if done during the course of employment but after leaving the job or work, the risk still persists. This key issue was resolved in the case of Niranjan Shankar Golikari vs The Century Spinning And Mfg. Co. Ltd 1 when the company has stopped the employee from working anywhere else after quitting the job in his company, but the court ruled that you cannot stop an employee from working somewhere else but as this would be violation of Section 27 of Indian Contract Act, 18722, which prohibits any person to restrain the other person from trade, instead they have to protect trade secrets of the previous company.
What Are Trade Secrets?
"Trade secrets are a form of intellectual property consisting of confidential business information that provides a company with a competitive advantage. Trade secrets can include a wide range of proprietary knowledge, such as formulas, processes, business strategies, customer lists, manufacturing methods, or marketing techniques."3 There was a dispute in protecting trade secrets among the employees of the company but with emerging trends and needs of the society there was introduction of something called Gig workers. "Gig workers in India are individuals who work on a freelance basis, providing short-term or project-based services to clients on a contractual basis. These workers are typically not employed by a single company or organization but work independently, using online platforms to connect with potential clients." Until now the issue was only with the employees who work for the company and who have signed NDA with the company but with incoming gig workers who are often skilled professional who have chosen to work as independent contractors rather than seeking a traditional employment the risk of breach of trade secret has increased as they are not only part time working for your company but working for other companies as well. And here in the cases like this, its not like the company will not provide any confidential information to them, since the nature of work demands, the companies have to have reveal certain secret information or strategy to them.
Gig Workers: Legal Grey Area
"The workers are a constant source of monetisable data to the platform, without the former receiving any proportionate dues. Uber drivers continuously generate useful data by relaying data to the central platform, wherefrom inferences from data like frequency of brakes, speed of acceleration, traffic patterns and user demand can be drawn. This subsequently feeds into the algorithm-based price determination This collected data is useful to the platform for business planning, enhancing operations, accelerating decisions, maximising profits, or responding to dynamically changing environments. The gathered insights can also be sold to other companies for advertising or other commercial purposes, generating further revenue."4
Challenges in Indian Legal Framework:
The confusion was there but what has instigated the confusion in a big problem is lack of a codified structure facilitating the protection of trade secrets is one of the most urgent legal issues in the developing Indian gig economy. In contrast to a country like the United States, which can rely on a pervasive federal regime on the subject of trade secrets through the Defend Trade Secrets Act of 2016, which is used to define, protect, and enforce property in trade secrets of all forms, with few exceptions, India has not framed a specific legislation on the topic yet. In its place businesses must resort to an inconsistent amalgamation of the contract law, equitable remedies and random judicial decisions. This lack of a definite legal criterion casts a huge doubt on firms, especially as far as gig workers and independent contacts are concerned who habitually gain access to proprietary knowledge, customer records, or sensitive business processes.
What makes the matter even more complicated is the blurry legal status of gig worker in regards to the Indian labour laws. The majority of the statutes that were applicable in the past, e.g., the Industrial Disputes Act, 1947 and the Factories Act, 1948, do not specify the gig or platform-based workers in the definition of an employee or a workman. Consequently, such workers are not subject to fiduciary and contractual obligations that usually transpire between a formal employment relationship. Nevertheless, though the Code on Social Security, 2020 is a major step forward, instating the reality of the existence of gig and platform workers, it only has the objective of providing the social welfare benefits. It cannot be described as an instrument that assigns the status of an employee to the individual, and it does not provide any requirements that are statute-regulated in terms of trade secrets protection and information confidentiality.
This statutory-legal vacuum, combined with a lack of a definition of the status of the gig workers as employees, form a grey zone in which the protection of business secrets is extremely vulnerable. Many businesses sometimes recruit the gig workers without any strong confidentiality agreement or data security procedures, thinking that the informal relationships are good enough. Yet, given that the protection of confidential information by such workers is not guaranteed by the law and therefore not enforced, any breach or misuse of this information may leave businesses with very little recourse to the law. This leaves courts with the choice of determining such cases either on the terms of the contract, assuming there were any and on principles of general equity -disjointed and uncertain in its result.
Practically, this translates to the fact that Indian companies employing gig workers are at a high risk of failing to preempt or punish the unauthorised use or disclosure of trade secrets as such redress measures are legally blocked, because the body of the law does not cater to either the kind of worker or the level of sensitivity of the information being shared. The more the gig economy grows to encompass work in fields such as tech, consulting, media and design where intellectual property and secret knowledge are crucial competitive advantages, the pressing need to fill that legal gap becomes even greater.
Judicial Trends and Global Best Practices:
Companies in India do not remain completely helpless in spite of the current legal vacuum. Without legal protections, the initial defence line would be the contractual protection. Employers should make sure that each and every interaction with a gig worker must be under a transparent and legally binding contract. That comprises the strong and solid Non-Disclosure Agreements (NDA) and articulate confidential clause stating the type of trade secret and time within which one must maintain confidentiality and the penalty to the violation. Other provisions can be used as equalizers too, like the data management clause, ownership of intellectual property and restrictions on post-engagement (including non-solicitation or limited non-compete).
The trends of Indian judicial decision making are at least promising, albeit with reservations. The courts have acknowledged and relied upon the confidentiality provisions as long as the companies give clear documentary observations as to the sensitive character of the information as well as the breach. Without a written contract or other set terms, the courts are hesitant to assume an obligation on implied terms, more so when the person in question is not an employee. It further underlines the role of proactive drafting of law, particularly in a flexible and ephemeral setting of a world of gig work.
Greater perspective and protection come in when looking globally in a comparative look of global practices. In the United States, trade secrets are under federal protection statutes, the Defend Trade Secrets Act (DTSA), 2016, which encompasses not only employees, but also contractors and consultants. This law gives a very clear definition of trade secrets, enables civil action to be taken in the Federal courts and remedies such as injunction action, damages and seizure to recover stolen material. The United Kingdom even without a written agreement, the courts can impose a duty of confidence where it is evident that the information has been discussed in a confidential environment. This is also applied to freelancers and former employees and has provided more flexibility and immunity to the employer in court.
Such international templates highlight the need to introduce a formal, binding legal framework on trade secrets which takes the realities of contemporary work regimes into consideration.
Conclusion:
The increasing number of gig workers in India (in sectors of tech, logistics, media, and finance) requires a review of safeguarding trade secrets as well as confidential information about the business. The absence of a codified law on trade secrets and a full classifications of labour to gig workers means that companies are doing business in an uncertain legal environment which portends to shake innovation and competitiveness in the country.
The urgent necessity is the existence of a separate statute on trade secrets or, at least, regulations by sector, establishing not only the framework of confidentiality obligations imposed on non-traditional workers like freelancers, platform workers, and consultants. With India attempting to emerge as a global innovation hub, it will prove necessary to find the right balance between the flexibility of work models and corporate confidentiality to achieve both worker enablement and business safety.
Footnotes
1. Niranjan Shankar Golikari v. Century Spg. and Mfg. Co. Ltd., 1967 SCC OnLine SC 72.
2. The Indian Contract Act, 1872, § 27. Government of India, Ministry of Law and Justice, 25 Apr. 1872.
3. Prakarsh, Pratyush, et al. "The Role of Non-Compete Agreements in Protecting Trade Secrets." International Journal of Law Management & Humanities, 7, 2024, pp. 1833-1869. HeinOnline.
4. Kapoor, Ankit, and Karthik Rai. "Gig Economy: A Tale of Algorithmic Control and Privacy Invasion." NLSIR Online, National Law School of India Review, Apr. 2023, www.nlsir.com/post/gig-economy-a-tale-of-algorithmic-control-and-privacy-invasion.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
