The Legal Battle That Could Reshape India’s Gig Economy

by · Inc42

SUMMARY

  • The Karnataka High Court is hearing a landmark case that could determine whether states can independently regulate and fund gig worker welfare alongside the Centre
  • At the heart of the dispute is Karnataka's 1% welfare levy, which platforms say could raise costs and create a patchwork of state-level compliance rules across India
  • The legal battle is not only about who has the authority to regulate gig worker welfare but also about who ultimately bears the cost
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“…the amount is not being demanded by the state as a charity. It is demanded in terms of promulgation of a legislation… Therefore… the amount of the second quarter shall be deposited with this court within three weeks from today.”

With these observations, the Karnataka High Court refused to stay the Karnataka Platform-Based Gig Workers (Social Security and Welfare) Act, 2025 earlier this week, directing platform aggregators to deposit the disputed welfare contribution with the court registry while the constitutional challenge proceeds.

The interim order marked the latest chapter in what could become one of the most consequential legal battles over India’s gig economy. At stake is not merely a 1% welfare contribution but a larger question: Can states build and enforce their own social security framework for gig workers before the Centre operationalises its own?

The dispute stems from the Karnataka Platform-Based Gig Workers Act, which came into force last year after months of stakeholder consultations. Earlier this year, the state began implementing the law by constituting the Welfare Board, notifying the welfare contribution, and issuing compliance notices to platform companies.

In response, the Internet and Mobile Association of India (IAMAI), along with Eternal, Swiggy, Zepto, Urban Company, and Meesho’s logistics arm Valmo, moved the Karnataka HC, challenging not only the Act but also the accompanying Rules, the constitution of the Welfare Board, the welfare contribution notification and the subsequent compliance notices.

The companies contend that Karnataka’s legislation occupies a field already covered by the Centre’s Code on Social Security, 2020, which recognises gig and platform workers and empowers the Union government to frame welfare schemes for them. According to the petitioners, the state law is “repugnant” to the central legislation and is therefore “unconstitutional”.

During the hearing, Justice M. Nagaprasanna acknowledged that the case raises an important constitutional question. While observing that Parliament had already legislated in the area, the HC also questioned if a state could nevertheless improve upon the Centre’s welfare framework.