On May 27, 2025, the Karnataka Government promulgated the Karnataka Platform Based Gig Workers (Social Security and Welfare) Ordinance, 2025’ (“Ordinance”), making it the second state after Rajasthan to formally recognize and protect gig workers. This move is an attempt to fill the gap in existing central legislation, i.e., Social Security Code, 2020 (“COSS”), which despite mentioning gig workers, fails to provide adequate safeguards for this expanding employment sector (i.e., gig workers). The Ordinance seeks to protect the rights of the platform-based gig workers and enhance social security and welfare for gig workers in Karnataka, while placing specific obligations on aggregators and platforms regarding transparency, fair treatment, and financial contributions to worker welfare.

Introduction: Commencement and Applicability

1. Commencement: The Ordinance will come into force on such date as the State Government may appoint by notification in the Official Gazette. Once the Ordinance has come into effect, it must be tabled before the Karnataka Legislative Assembly and Council within 6 (six) weeks of their reconvening. If not substituted by an Act during that period, the Ordinance will cease to operate.

2. Applicability: The Ordinance applies to ‘aggregators’ (i.e., a digital intermediary that connects buyers of goods or users of services with sellers or providers, and includes entities coordinating with one or more aggregators to deliver such services) or ‘platforms’ [i.e., any electronic service that upon user request, organizes work by individuals at a specific location in return for payment (using automated or data-driven decision-making systems)], providing specified services within the State of Karnataka. Such services are ride sharing, food and grocery delivery, logistics, B2B or B2C e-marketplace (both marketplace and inventory model), professional activity provider, healthcare, travel and hospitality, and content and media services.

The Ordinance also applies to every ‘gig worker’ (i.e., person engaged in piece-rate work, under a contractual arrangement for defined payment, whose work is sourced through a platform in the specified services) registered with the Karnataka Platform Based Gig Workers Welfare Board (“Board”).

Rights of platform-based gig workers: Under the Ordinance, the gig workers has the (a) right to be registered with the Board; (b) right to  access to all general and specific social security schemes; (c) right to minimum number of transactions or gig work undertaken by the gig worker with any aggregator or platform in a quarter; and (d) right to approach the internal dispute resolution mechanism, established by the aggregator or platform. 

Compliance obligations of aggregators and/or platform:

1. Mandatory registration: Every aggregator and/or platform must register themselves and all the gig-workers they onboard with the Board within 45 (forty-five) days from the Ordinance’s commencement.

2. Grievance redressal mechanism: An Internal Dispute Resolution Committee (“IDRC”) must be established, through which gig workers may file grievances, either in person or through a web portal (link to be provided on the platform).  Additionally, a human point of contact must be appointed for gig workers to seek clarifications under the Ordinance.  The contact details of such person should be accessible on the gig worker’s platform accounts.

3. Welfare fee contribution: The Ordinance introduces a welfare fee contribution by aggregators and/or platforms ranging from 1% (one percent) to 5% (five percent) of each gig- worker's payout per transaction to the Karnataka Gig Worker’s Social Security and Welfare Fund (“Karnataka Fund”). This fee will be collected on a quarterly basis, starting from 6 (six) months from the commencement of the Ordinance. This contribution shall be counted as the total contribution payable under the COSS with any discrepancies reconciled annually.

4. Reporting: Payments made to gig workers and the welfare fee deducted by platforms must be mapped/sent to Payment and Welfare Fee Verification System (“PWFVS “) for each transaction.

5. Quarterly Returns: Quarterly returns must be submitted to the Board. The government may by notification, allow half-yearly or annual submissions based on ease of doing business requirements.

6. Other obligations:

Contractual obligation: Contracts with gig workers must be fair and transparent. Any changes to contract terms require a minimum of 14 (fourteen) days' prior notice.

Transparency: Gig workers must be informed about the procedure to seek information on how automated systems affect fares, earnings, and customer feedback. Additionally, all payment deductions including their reasons must be clearly mentioned in the invoice for the work performed.

Anti-discrimination: Automated monitoring and decision-making systems must not discriminate based on religion, race, gender, place of birth, or disability.

7. Additional safeguards:

Protection against arbitrary termination: The Ordinance safeguards against arbitrary termination by requiring the aggregator and/or platforms to provide a 14 (fourteen) day prior valid written notice of the reason for termination or deactivation. They must also adhere to principles of natural justice. Immediate termination without notice is only permitted in cases involving bodily harm.

Safe working conditions. Gig Workers must be provided with safe working conditions that do not pose health risks. This includes adequate rest periods, access to sanitary and rest facilities, and reasonable travel time to such facilities.

8. Penalties for non-compliance: Non-compliance with the Ordinance can result in fines up to Rs. 5,000 (Rupees five thousand) for first contravention and up to Rs. 1,00,000 (Rupees one lac) for subsequent contraventions. Failure to pay welfare fees on time will attract a simple interest of 12% (twelve percent) on the fee due from the date on which such payment is due till the date of actual payment.

Analysis

1. Impact on e-commerce entities: While the mandatory registration of gig workers and aggregators and/or platforms affirms formal recognition to the gig workers, it simultaneously tightens the regulatory noose on the e-commerce entities by overburdening them with new compliance requirements.  Given the overarching definition of ‘aggregator’, e-commerce entities must now apply for registration under the Ordinance and ensure registration of all gig-workers they onboard. This requires maintaining an organized and updated record of all gig-workers and establishing suitable mechanisms to promptly notify the Board in case of any change in the number of gig-workers onboarded. 

On the technical front, all gig worker-facing applications may require significant updates to include features that provide easy access to grievance redressal and dispute resolution mechanisms, along with contact details of designated human point of contact. These platforms must also facilitate gig workers’ access to work-related data and clearly outline the procedures for making such requests. Additionally, e-commerce entities will need to implement robust systems capable of accurately recording all transactions with gig workers and generating the requisite quarterly returns.

The Ordinance also mandates a review and if found necessary, a revision of all existing contracts with gig workers to ensure that they meet the regulatory standards. However, ambiguity exists around the terms ‘fair’ and ‘transparent’ as these are not explicitly defined. It remains unclear whether adherence to existing laws, such as the Payment of Wages Act, 1936 would be deemed sufficient for compliance. Until further guidance is issued, ensuring all contracts meet the regulatory threshold for fairness and transparency remains a significant challenge for compliance.

2. Key areas of ambiguity: While Ordinance mandates a notice for termination, it is unclear whether this requirement extends to cases that do not involve bodily harm, such as instances of fraud or breach of contract that may otherwise warrant immediate termination. Additionally, the Ordinance is also silent on the definition of ‘bodily harm’ and whether aggregators and/or platforms have the discretion in determining what constitutes such harm.

Another area of concern is the ambiguity surrounding the term ‘transaction’. While the Ordinance requires a mandatory contribution to the Karnataka Fund for each gig-worker’s payout per transaction, the term ‘transaction’ is not defined. A similar gap exists in the Rajasthan Platform-Based Gig Workers (Registration and Welfare) Act, 2023, (“RGW Act”) which also adopts a similar ‘per-transaction’ contribution model without defining the term. 

Additionally, unlike the ‘per transaction’ model under the Ordinance, the COSS requires aggregators to contribute 1–2% of their ‘annual turnover’ towards the social security fund for gig workers, capped at 5% (five percent) of the total amount paid to them. Since contributions made under the Ordinance will be adjusted against those required under COSS and reconciled annually, it is unclear why a per-transaction approach has been adopted under the Ordinance instead of aligning with the turnover-based model used in COSS.

3. Overlap Between the Ordinance and the COSS: The COSS grants the Central Government the exclusive authority to establish a social security fund for unorganized workers, gig workers and platform workers, while the State Governments are empowered to create welfare fund only for unorganized workers. However, the Ordinance introduces the Karnataka Fund (defined above), a state-level welfare fund specifically for platform-based gig workers which appears to overlap with the COSS. This raises questions about potential conflicts in the division of powers and responsibilities between the Centre and States under the COSS framework.

4. Mitigation of dual levy of charges: Another notable observation is that, unlike the RGW Act which imposed a dual levy on aggregators by requiring separate contributions to both State and Central funds, the Ordinance eases this burden. It clearly states that contributions made to the Karnataka Fund will be counted as the total contribution payable under Section 114(4) of the COSS (i.e., the contribution to the Central fund). Any discrepancy between the welfare fee collected and the amount payable to the Central fund may be reconciled annually. This provision helps prevent dual financial obligations on aggregators and/or platforms.

While the Ordinance marks a significant step toward formalizing protections for platform-based gig workers, it also introduces a heightened compliance framework for aggregators and/or platforms, which if implemented, are likely to result in increased operational costs and a more substantial compliance burden moving forward.

The Karnataka Platform Based Gig Workers (Social Security and Welfare) Ordinance, 2025 can be accessed here.

This update has been contributed by Jitendra Soni (Partner) and Abhirami Retheev (Associate).

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