The Impact of Labour Legislations in the E-Commerce Sector

The Impact of Labour Legislations in the E-Commerce Sector

Author:  Amruth Anand , 
 School of law, Christ University.


Since 2010, India has seen a booming e-commerce sector with market giants like Flipkart, Amazon India, Swiggy and such other companies that provide means of such services, by usually appointing third parties. The rise in the e-commerce sector has continued, and
this can be credited with the fact that it has created numerous jobs- administrative, legal, managerial, logistical. But one is not aware much about the working behind such booming companies, especially with respect to the labour domains. In order to sustain themselves in the rat-race being the top providers, these companies have taken a backseat with respect to compliance with the labour mandates under various statutes in India. To lay a brief picture, Swiggy has sever repercussions if the targets are not met by the delivery boys, Flipkart and Amazon have been accused of not maintaining safety standards in their warehouses and not following the wage scale for its logistics and warehouse wings.

            The author of this paper shall attempt to assess the impact of the e-commerce market in the labour sector and draw an analysis on the adequacy of labour legislations in India with the legislations and international principles recognized by the ILO. There shall be an analysis of the amendment made in the Rajasthan Shops and Commercial Establishments Act, and assessing the same in lieu of the present situation in India. This paper shall thus be based on a non-empirical doctrinal method of research bearing in consideration and comparing the labour legislations in India with the international legislations and mandates of labour and social security.
Key words:
Compliance, E-Commerce, Employees, ILO, Labour Legislations, Workmen, Gig Workers


            Web-based, digital labour platforms permit the real-time hiring of labour for a myriad of tasks from IT programming, web development, graphic design, copywriting or routine clerical tasks. Since the 2010’s, India has seen a rapid growth in the e-commerce sector, especially in the good-delivery market, due to players like Flipkart, Swiggy, Uber, Amazon and businesses of the same nature. Prior to these companies, the delivery mechanisms for goods were undertaken and are still undertaken by players like Indian Post, DHL, DTDC, FedEx are a few to name. These traditional players in the market have been functioning by abiding the various labour laws and their own governing bye-laws. The issue that is of concern is pertaining to the fairly new-market players, who are turning into or are Multi-national groups. The Indian e-commerce market is mostly funded by marquee foreign investors and have managed to maintain a distance by dwelling outside the domain of rulebooks so far.

Compliance with the labour requirements for such bodies has become a challenge for the primary factor as to under whose responsibility would the fate of the delivery boys lie with- the contractors or the principle employers. Furthermore, the working conditions that the delivery boys are faced with is of utter despair as the basic standards have not been met to ensure the right working conditions that they are entitled to.


            Recognizing the difficulties of failure to comply with the general standards, the ILO’s Global Commission on the Future of Work had called for an International Governance System for Digital Labour platforms for establishing platforms to respect the certain minimum rights and protections for all workers.  Microtask platforms (for example, Amazon Mechanical Turk, Crowdflower or Clickworker) are an important subset of online labour platforms, where workers typically undertake shorter tasks that are paid at a piece-rate. As with most other types of digital labour platforms, A Web-based online platforms often identify their employees as self-employed, resulting in a lack of labour rights and social security benefits offered by employers.[1] In addition, since workers are in many cases classified as independent contractors, this deprives them of the right to organize collectively.[2]There are, however, also some critical areas of concern about compensation and social security benefits, job flexibility and dispute settlement mechanisms. The 2017 ILO survey showed average hourly earnings ranging from US$ 2 to US$ 6.5, with a high proportion of workers earning less than the prevailing minimum wage in their jurisdiction, a finding also documented in other studies.[3]The ILO survey showed that lack of social protection was also a real concern.

International labour standards, including the Protection of Wages Convention, 1949 (No. 95) and the Private Employment Agencies Convention, 1997 (No. 181) disfavour the practice of charging fees to workers. The Protection of Wages Convention, 1949 (No. 95) states that “Any deduction from wages with a view to ensuring a direct or indirect payment for the purpose of obtaining or retaining employment, made by a worker to an employer or his representative or to any intermediary (such as a labour contractor or recruiter), shall be prohibited” (Art. 9). Similarly, Article 7 of the Private Employment Agencies Convention, 1997 (No. 181) states that “Private employment agencies shall not charge directly or indirectly, in whole or in part, any fees or costs to workers.”[4]
To this end, the ILO’s Tripartite Declaration of Principles on Multinational Enterprises and Social Policy (MNE Declaration), 2017 could be a useful starting point. It provides guidance to multinational companies on social policy and inclusive, responsible and sustainable workplace practices.


On September 17, the Ministry of Labor and Employment issued the third draft of the Social Security Code Bill 2019, which included the terms “gig workers,” “platform workers”. Gig Worker means a person who performs work or participates in a work arrangement and earns from such activities outside of traditional employer-employee relationship.[5]Gig workers are usually referred to in the context of on-demand work, such as drivers for Uber and Ola, deliverers for Zomato and Swiggy, and so on. Essentially, they are engaged in jobs created by a tech-enabled platform where the worker is not bound to the organization and can choose to work as long as he or she wants.
Platform workers are those who have been “employed in organizations or individuals use an online platform to access other organisations or individuals to solve specific problems or to provide specific services in exchange for payment.[6]

The complexities of labour laws are part of the traditional employer-employee relationship. A worker is hired directly or through a contractor on a permanent basis or on a fixed-term basis. But gig workers do not fit into the definition of “employee” or “worker” and therefore remain outside the scope of India’s labour law. Gig workers will therefore persist outside the applicability of the Employees ‘ Provident Fund and Employees ‘ State Insurance, Compensation and Maternity Benefits legislation if the draft code becomes law. These are some of the schemes in which the overall impact of monetary contributions is meted by companies. The proposed legislation suggests that the central government will establish social security schemes for gig and platform workers, some of which might cover life and disability, health and maternity benefits and the safeguards of old age.


A.    Rajasthan:
In 2015, to tackle the problem about the regulation of e-commerce bodies under the Indian Labour Legislations, the Government of Rajasthan has taken an active step to try and bring the e-commerce industry under the purview of the labour legislations. Under the Rajasthan Shops and Commercial Establishments Act, 1958, there had been a proposal to incorporate ‘e-commerce’ businesses under the coverage of the Act, but less came to success. But nevertheless, under Schedule IV of the Act, provides for the recognition of the delivery boys who could come under the purview of the said Act.
E-commerce hasn’t yet been mentioned or defined under the scope, neither as a shop, nor an establishment in both, the Central and State labour laws. The proposal was to try and incorporate under the Act “any premises where any trade or business or e-commerce is carried on, which is not covered under a shop or a commercial establishment[7]. By doing so, it would legitimize and enforce that e-commerce companies are to mandatorily follow rules for basic working conditions.
B.    Karnataka:
In 2019, the Karnataka Government in its cabinet, labour minister S Suresh Kumar said he has directed the deputy labour commissioner to hold discussions with the industry stakeholders of e-commerce and submit such recommendations as to how the gig workers can be best instilled in the scope of the existing labour legislations. A few of the proposals laid down are as follows:
     ·       Setting up of Tripartite committees
     ·       Redefining core and non-core jobs for contract labourers
     ·       Reworking the Shops and Establishment Act


However, this comes with its own difficulties which need to be resolved by the legislators, so that they do not turn sour. The primary disadvantage to workers in the gig economy is their treatment as independent contractors and not as employees. This has resulted in a lack of job security[8]  or social security benefits[9] , a lack of fixed income[10]  and an inapplicability of employment standards legislations[11].

Furthermore, the definition of the gig worker is quite broad, as it encompasses any job situation outside the ‘standard employer-employee relationship.’
This oversimplification of ‘gig jobs’ does not tackle variations in the forms of employment, such as online and offline activities, quality of facilities, outsourcing to temporary staff companies, etc. This could lead to common regulatory mechanisms for, say, freelance writers and logistics employees who are subject to various occupational hazards. There is therefore a need for clear and distinct legislation to address the complexity of platform practice, particularly given the ever-changing nature of platform models.

While the Code requires that platform and contract workers ‘schemes include’ the context in which the scheme is administered; the agency or agencies administering the scheme; the role of aggregators in the scheme and the sources of funding for the scheme,’[13] such a definition of aggregators is misleading as it ignores the power and influence of these ‘ intermediaries ‘ over workers.

The role of platform owners in the management of employees takes us to the elements of control and oversight which are defined tests to determine the employer-employee relationship.[14]The various formats in which online platforms function represent the varying degrees of control exercised by the employer. Not only that, sometimes their tasks and the way in which they are performed are monitored.


In addition to a large portion of the population engaged in low skilled work, rising unemployment rates in India only contribute to the vulnerability of such workers to online platforms. There is therefore a need not only for the reclassification of workers employed by platforms, but also for the regulation of the working methods of such platforms themselves. In such circumstances, labor law must evolve over time in recognition of how technological developments and customer behavior play a key role in the elimination and misclassification of the workforce, while maintaining the stability of the digital economy model.[15]
The ILO recently published a research paper, covering the technological development of ‘ labour markets,’ describing how digital platforms build technical barriers to workers ‘rights and encourage market efficiency and consumer satisfaction over workers’ needs.[16] A system that would help ensure quality of employment for employees without undermining the digital economy paradigm would involve the portability of workers ‘ knowledge and reputational structures between channels to improve their prospects.

All relevant labour laws apply to e-commerce companies, depending on the structure of the employment agreement. The definitions of’ industry’ and’ worker’ are vast. The Workmen’s Compensation Act and the Industrial Dispute Act should apply. Since most of these businesses do not employ distribution workers directly, contract labor law should also apply. Furthermore, the definition of ‘industry’ under the Industrial Disputes Act[17]can extend to such modes of employment.

Any e-commerce business will either have to be regulated by the Factories Act (central legislation) or the Shops and Commercial Establishment Act. While the former has only been revised three times since Independence, the latter has seen more than a hundred changes in the past and would be much safer for e-commerce companies. Even though States have taken a step towards ensuring that the scope of the legislations are extended, no
active measures have taken place.

[1] ILO, Policy responses to new forms of work: International governance of digital labour platforms—dgreports/—cabinet/documents/publication/wcms_713378.pdf

[2] Id.

[3] Berg, J. 2016. “Income security in the on-demand economy: Findings and policy lessons from a survey of crowdworkers”, in Comparative Labor Law and Policy Journal, Vol. 37, No. 3, pp. 543–576.

[4] Supra, at 1.

[5] The Code on Social Security 2019, Ministry of Labour & Employment, Government of India, §2(35).

[6] The Code on Social Security 2019, Ministry of Labour & Employment, Government of India, §2(55), 2(56). c

[7] Somesh Jha, Rajasthan brings e-tail under shops law, Business Standard,

[8] David Weil, The Fissured Workplace: Why Work Became So Bad for So Many and What Can Be Done to Improve It, Harvard University Press (2017).

[9] Molly Tran and Rosemary Sokas, “The gig economy and contingent work: an occupational health assessment”, 59(4) J. Occup. Environ. Med., e63–e66 (2017).

[10] “Report on the Economic Well-Being of U.S. Households in 2018”,  Federal Reserve Board (May 2019), available at:

[11] Janine Berg, Marianne Furrer, Ellie Harmon, Uma Rani and M. Six Silberman, “Digital labour platforms and the future of work: Towards decent work in the online world”, International Labour Organisation (2018).

[12] The Code on Social Security 2019, Ministry of Labour & Employment, Government of India, §2(35).

[13] The Code on Social Security 2019, Ministry of Labour & Employment, Government of India, §114.

[14] Dhrangadhara Chemical Works v. State of Saurashtra, 1957 LLJ 478; D.C. Dewan Mohideen Sahib & Sons v. Industrial Tribunal, Madras, AIR 1966 SC 370.

[15] Kim T, “The Gig Economy is Coming for Your Job”, The New York Times, January 10, 2020 at 6.

[16] Faiz Siddiqui, “Uber’s secret project to bolster its case against AB5, California’s gig-worker law”, The Washington Post, January 6, 2020, available at:

[17] Section 2(gg)(j) of The Industrial Disputes Act, 1947, ‘industry’ is defined as: “any systematic activity carried on by co-operation between an employer and his workmen (whether such workmen are employed by such employer directly or through any agency, including a contractor) for the production, supply or distribution of goods or services with a view to satisfy human wants or wishes.” 

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