States Move to Regulate Gig Economy, Impose New Obligations on Platforms

The traditional employer-employee relationship, forming the basis of most labor laws in India, do not apply to the gig economy. As a result, platform-based workers are often not entitled to certain statutory social security benefits (provident fund, gratuity etc.). Recognizing this legislative void, several state governments such as Karnataka, Rajasthan, and Bihar have now all passed laws aimed at providing social security and welfare benefits to gig workers, signaling a major regulatory shift for the platform economy.

Karnataka Notifies Gig Worker Welfare Act

The Karnataka Legislative Assembly has passed the Karnataka Platform Based Gig Workers (Social Security and Welfare) Act, 2025 (Karnataka Act) on September 12, 2025, establishing a comprehensive legal framework for the welfare of gig workers in the state. The Act imposes several new obligations on companies operating as “aggregators” or “platforms”

1. Applicability: The Karnataka Act applies to every aggregator or platform that provides services listed in the Schedule, which includes ride-sharing, food and grocery delivery, and e-marketplaces. It also applies to every gig worker registered with the newly constituted Welfare Board.

2. Key definitions:

• • • Gig Worker: “a person who performs work or participates in a work arrangement that results in a given rate of payment, based on terms and conditions laid down in such contract and includes all piece-rate work, and whose work is sourced through a platform, in the services specified in the Schedule.”

3. Aggregator: “a digital intermediary for a buyer of goods or user of a service to connect with the seller or the service provider, and includes any entity that coordinates with one or more aggregators for providing the services.”

4. Platform: “any arrangement providing a service through electronic means, at the request of a recipient of the service, involving the organization of work performed by individuals at a certain location in return for payment, and involving the use of automated monitoring and decision-making systems or human decision making that relies on data.”

5. Governance Framework: The Act establishes a new institutional structure to oversee gig worker welfare:

• • • The Karnataka Platform Based Gig Workers Welfare Board (Board): This Board, comprising government officials and nominated representatives from worker bodies and aggregators, is tasked with registering workers and platforms, implementing social security schemes, and monitoring the collection of welfare fees.

• • • Gig Worker’s Social Security and Welfare Fund (Fund): This Fund will finance the welfare schemes. Its primary source of income will be a Platform Based Gig Workers Welfare Fee levied on aggregators for each transaction, ranging from 1% to 5% of the payout made to the gig worker.

6. Key Compliance Obligations for Platforms:

• • • Mandatory Registration: All aggregators must register with the Board within 45 days of the Act’s commencement. They are also required to provide the Board with their database of all onboarded gig workers and submit regular updates.

• • • Fair Contracts & Transparency: All contracts with gig workers must be transparent, comprehensive, comply with the provisions of the Bill and “shall comply with fair terms of piece and /or time rate norms including payments, deductions, incentives and calculations of all work done and will explicitly contain the workers right to refuse tasks offered”.

• • • Termination Safeguards: An aggregator cannot terminate or deactivate a gig worker without providing valid written reasons and a 14-day prior notice, except in cases involving “bodily harm”.

• • • Grievance Redressal: Every registered aggregator must establish an Internal Dispute Resolution Committee to address worker grievances concerning payouts, deductions, and termination.

• • • Transparency in automated monitoring: Platforms must also be transparent about the automated monitoring and decision-making systems they use, especially concerning fares, earnings, and customer feedback, and inform the same to the platform-based gig worker in “simple language”. The aggregator or platform shall take measures to prevent discrimination on the basis of religion, race, caste, gender, or place of birth or on the grounds of disability by the automated monitoring and decision-making systems deployed by them.

• • • Income security and working conditions: Payouts to gig workers must be made daily, weekly, biweekly, or monthly, and any deductions must be clearly explained in the invoice. Aggregators must also ensure a safe working environment, which includes providing for adequate rest periods and access to sanitary facilities.

• • • Reporting: Aggregators must submit electronic returns in the prescribed manner to the Board.

7. Penalties for Non-Compliance:

• • • Interest on Delayed Payments: Failure to remit the welfare fee on time will attract a simple interest of 12% per annum on the amount due.

• • • Fines: The State Government can impose a fine of up to INR 5,000 for the first offence and up to INR 100,000 for subsequent contraventions of the Act’s provisions.

Bihar Notifies Gig Worker Welfare Act

Following Karnataka, the Bihar Legislative Assembly has also enacted The Bihar Platform Based Gig Workers (Registration, Safety and Welfare) Act, 2025 (Bihar Act), on August 12, 2025, creating a framework to govern the welfare of gig workers within Bihar. While sharing the common goal of providing social security, the Bihar Act introduces its own distinct set of compliance requirements, governance structures, and penalties for aggregators and platforms.

1. Applicability: The Bihar Act applies to every “aggregator” or “platform” operating in Bihar, or providing services in Bihar, which are specified in the Schedule (which include services such as and grocery delivery, and e-marketplaces), as well as to every gig worker registered with the Welfare Board.

2. Governance Framework: The Bihar Act introduces an institutional structure to administer and oversee gig worker welfare:

• • • The Bihar Platform Based Gig Workers Welfare Board (Board): The Board is tasked with registering workers and platforms, implementing social security schemes, and monitoring the welfare fund and comprises various government officials and nominated representatives from worker bodies and platforms.

• • • Platform Based Gig Workers Social Security and Welfare Fund (Fund): The Fund shall finance welfare schemes through a ‘Welfare Fund Fee’ levied on platforms, ranging from 1% to 2% of the payout made to the gig worker. The Bihar Act also guarantees certain benefits to gig workers, including a INR 400,000 ex-gratia payment for accidental death on duty, INR 16,000 ex-gratia payment for accident requiring hospitalisation for more than a week and 90 days of maternity benefits.

3. Key Compliance Obligations for Platforms:

• • • Mandatory Registration: All aggregators must register with the Board within 60 days of the Act’s commencement or 30 days from commencement of operations, and provide their complete database of onboarded workers.

• • • ‘Simple’ Contracts & Transparency: Platforms must provide contracts in simple language and give 14 days’ prior notice for any change in the terms of the contract.

• • • Termination Safeguards: An aggregator can only terminate a worker with valid reasons and a 7-day prior notice, except in cases involving a threat (physical or mental) to the end user.

• • • Grievance Redressal: The Act establishes a state-run grievance system with a Grievance Redressal Officer and an Appellate Authority being appointed to resolve disputes between gig workers and aggregators. Platforms with 100 or more registered gig workers must also form an Internal Dispute Resolution Committee.

4. Penalties for Non-Compliance:

• • • Failure to Pay Welfare Fee: Non-payment of the mandatory welfare fee is punishable with imprisonment for up to one year or a fine up to INR 200,000, or both.

• • • Failure to Submit Returns: Failure to submit required returns or reports is punishable with imprisonment for up to 3 months or a fine of INR 50,000.

These initiatives in Karnataka and Bihar are part of a broader trend of attempts to formalise and provide social security to the gig economy. Rajasthan pioneered this move with its own legislation, the Rajasthan Platform Based Gig Workers (Registration and Welfare) Act, 2023.

However, it is crucial to note that these statutes are not yet operationalised as enforcement of key provisions (such as the collection of the welfare fee, the mandatory registration process, and the functioning of the Welfare Boards) are contingent on the notification of the accompanying rules by the respective state governments. As of now, these rules are yet to be framed and published in Karnataka, Bihar, and Rajasthan, meaning the core obligations of these statutes are currently not in effect.