Gig workers deserve a better deal in cases of corporate insolvency

India’s urban economy relies heavily on them. Delivery riders weave through traffic, couriers move parcels and drivers ferry passengers, all on behalf of digital platforms that call them ‘partners,’ yet treat them as anything but. If a platform collapses, gig workers may discover that their place in the insolvency queue is right at the end, far from that of formal employees.

That blind spot is turning more dangerous. By 2030, India may have 90 million gig workers. Their legal status remains ambiguous. In insolvency proceedings, they risk losing unpaid dues, incentives and social-security contributions. This is not just an ethical failure, but an economic hazard.

Deregulation in the developed world in the 1970s and 80s, combined with globalization and automation, accelerated the gig economy. America’s railroad workers, for example, still nominally permanent, were placed on call like gig workers. Truck drivers were reclassified as independent contractors, bearing fuel and maintenance costs while earning less than minimum wage.

Now automation and artificial intelligence (AI) are threatening gig jobs. Globally, robots are delivering pizzas and driverless cabs are on streets. The lesson from Britain’s industrial revolution is sobering: wages for artisans collapsed for decades before recovering. India risks a similar depression.

Our ranks of gig workers have swelled partly due to high youth unemployment—over 40% of Indians aged 20–24 are jobless and many graduates settle for delivery work. Some appreciate the flexibility, but for most, gig work is full-time, low-paid and insecure. Workers get suspended for taking water breaks in blazing hot summers, women face harassment from customers, musculoskeletal injuries from long hours on bikes are common and platforms can deactivate worker accounts based on opaque ratings, with little recourse available to them.

Half-hearted steps have been taken. The Code on Social Security 2020 (COSS), though not yet notified, defines gig and platform workers and advocates the creation of a welfare fund. Rajasthan, Karnataka and Telangana have gone further. Yet, the COSS places gig workers outside the traditional employer–employee framework.

Under the IBC, that omission is stark. Wages of ‘workmen’ rank high in the payment waterfall, but the dues of gig workers, in contrast, like those of other operational creditors, are low priority and often left unrecovered.

Further, Section 151 of the COSS disadvantages them. It grants priority to claims related to provident funds, insurance and gratuity during insolvency, but it specifically excludes Chapter IX, which covers social security for unorganized, gig and platform workers, leaving them without protection.

Indian courts have long interpreted the term ‘workman’ broadly, lifting the corporate veil when companies hid behind contractors, as in the case of Hussainbhai, Calicut vs Alath Factory Thozhilali. Supreme Court rulings in cases ranging from salt-pan workers in Dharangadhara Chemical Works Ltd vs State of Saurashtra to beedi rollers in Messrs. P.M. Patel & Sons vs Union of India suggest that gig workers could well be considered employees under a functional test of control and integration.

The EU has passed a directive, applicable from December 2026, presuming gig workers to be employees. It will apply to all administrative and judicial proceedings. Mexico reclassified them as employees with certain conditions for insolvency protection. British Columbia in Canada has granted equivalent rights and Ontario makes directors liable for unpaid claims of gig workers in insolvency.

In Canada, Foodora’s bankruptcy led to a financial settlement with couriers after they were recognized as “dependent contractors.” In the Netherlands, Helpling cleaners were deemed temporary agency workers.

The rights of gig workers in insolvency cases need to be addressed because when a platform fails, thousands of workers may go unpaid. When gig workers, heavily reliant on microloans and unsecured credit, miss repayments, the non-performing assets of banks rise. Lower disposable incomes could hit consumption just when India needs such demand to power its economic growth. State governments, faced with stress, may be tempted to give fiscal freebies that weaken public finances. Some workers retreat to farming, reversing decades of urbanization.

India’s insolvency law should balance the interests of all stakeholders. By according gig workers low priority, India risks an imbalance. Three reforms are a must. First, amend the IBC to recognize gig workers as ‘workmen,’ at least where economic dependence on a single platform is clear. Second, revise the COSS to ensure their claims are prioritized. Third, institute rules that cover gig workers as a separate class.

Terms like ‘partner’ or ‘independent contractor’ should not imperil a worker’s fate. The law must pierce contractual facades and look at control, dependence and integration. India will reap a demographic dividend only if we invest wisely. Treating tens of millions of gig workers as expendable creditors in bankruptcy is unwise. Gig workers kept so low down the pecking order not only fails them, it could also fail our economy.

The author is an INSOL fellow & interim leader.