Analysis: Ola’s contract with drivers shows they’ve got a raw deal

Alok Prasanna Kumar March 21, 2017 12 min

There have been sporadic but effective protests by drivers of Ola and Uber cabs in India against cab aggregation companies over the last few months. The drivers have been organising strikes, not only refusing to accept trips, but also preventing other drivers from doing so — in Delhi-NCR, Bengaluru and Hyderabad; drivers in Mumbai have threatened to go on strike from today, March 21.

Keep in mind that the drivers don’t have anything like a formal union or representative body, but have somehow organised themselves well enough to warrant Uber or Ola to approach the courts seeking injunctions against the striking drivers.

The ostensible cause for the drivers’ ire is the increase in number of Ola and Uber cabs, penalties on drivers, and suspension of incentives. It carries an eerie echo to the now (in)famous video of Uber CEO Travis Kalanick arguing with Fawzi Kamel, an Uber driver in the US, over the terms and conditions of the service for drivers.

The complaints there too are lower fares, decreasing commissions and increasing competition from fellow Uber drivers. Kemal, like many of his counterparts in India, bought an expensive new car on loan, but as a result of Uber’s changing fares and conditions, is struggling to pay off the loans.

Part of the grievance can perhaps be traced to a certain set of claims made by app-based taxi companies. The drivers are told that they are “partners” – free agents who are not employees and free to choose their hours subject to a minimum and other conditions of the contract. They are rated by users and in effect, the taxi companies claim, they are only putting drivers in touch with passengers who wish to ride from one part of town to the other.

This claim of app-based taxi companies has been questioned across the world by governments and taxi unions who argue that drivers of services such as Uber are actually “employees” and entitled to the appropriate protections under law. The employment tribunal in the United Kingdom, for instance, has held in favour of the drivers holding that they are “workers” (and not “self-employed”) for the purposes of the laws governing employment in the UK. Likewise in Brazil and in the state of New York in the United States, but a contrary view has been taken in Florida.

The Indian view

What would their position be under Indian law? Several different terms are used in different laws, e.g “workman” for the purposes of the Industrial Disputes Act, 1947, which deals with the manner in which disputes between employers and employees are to be decided. The Supreme Court has recently laid down six criteria to determine whether a given relationship is one of employment or not:

“(i) who appoints the workers; (ii) who pays the salary/remuneration; (iii) who has the authority to dismiss; (iv) who can take disciplinary action; (v) whether there is continuity of service; and (vi) extent of control and supervision, i.e. whether there exists complete control and supervision.”

While most of the others are straightforward, what constitutes “control and supervision” in this case requires deeper examination. FactorDaily recently reviewed the copy of the contract entered between drivers and Ola, Uber’s biggest rival in India. We cannot be sure that the document is the most current version of the contract in use and remains unchanged or whether there are other rules that govern the Ola-driver relationship. Still, an analysis of the document gives the public a sense of the terms of the relationship. (A similar agreement or pro-forma document used by Uber in India was not available.)

The “Master Service Agreement” (MSA) covers all aspects of the relationship between the driver and Ola. It is valid for a period of three years, and lists out the specific obligations and rights of each party. It contains certain clauses applicable to those who have a fleet of taxis that they want on the Ola platform, but seems to have the same set of obligations for individual drivers and for drivers of such fleet taxis.

In contrast, Ola itself limits its own “liability” to a small Rs 200 in total for any and all failures under the MSA. In addition, Ola requires the driver to be exclusively available only to Ola and no other competitor.

It also lists out in detail how the driver is supposed to carry out his duties, e.g. arrive 15 minutes ahead of time, ensure insurance and all legal requirements are met, et al. Ola also gives itself the right to give any discount at any time and the driver has no say in the matter. The driver is also required to notify Ola three days in advance of any leave that he chooses to take.

In addition, there are detailed lists of what the driver should not do and the penalties which Ola can impose on him for doing so. The penalties range from warnings to fines of Rs 5,000 to termination of the agreement with immediate effect. For instance, the driver is required to keep the car and dashboard clean. Failure to do so the first time invites a warning with a fine of Rs 300 for each subsequent failure. On the other hand, a driver who drives drunk will be suspended immediately and a fine of Rs 5,000 imposed on him. A driver cannot also refuse a duty assigned to him by Ola by switching off his phone and will invite a fine of Rs 2,500 if he does so.

In contrast, Ola itself limits its own “liability” to a small Rs 200 in total for any and all failures under the MSA. In addition, Ola requires the driver to be exclusively available only to Ola and no other competitor.

From the contract, it’s obvious that the first five criteria for “employment” as laid down by the Supreme Court are met: Ola appoints the drivers, Ola fixes the prices and determines how much a driver gets, Ola dismisses a driver for violating the conditions, and the driver is with Ola for a fixed period of three years. Is there sufficient “control and supervision” of the driver on the part of Ola?

To recap, these are some of the key clauses which relate to the level of control and supervision by Ola over the driver:

  • Ola drivers are not free to charge the passengers on their own (asking for tips results in a fine).
  • Ola fixes the fares unilaterally and does not consult the driver.
  • Ola has no obligation to the driver to keep the app functional always and is not responsible for any failure in the app.
  • Ola’s liability for any failure is negligible.
  • Ola has a detailed list of dos and don’ts for the driver, breach of which results in a monetary fine or being removed from the platform.
  • There’s no exclusivity on the part of Ola but the driver is required to work exclusively for Ola.
  • The driver is required to go per the route chosen by Ola and not one of his own choice.

All of this shows that there is clearly a significant amount of control that Ola exercises over the driver in the performance of his duties. Given the terms and conditions in totality, it looks less like a contract between two principals and more between an employer and employee.

There is, of course, one significant difference between the usual contract for employment and this agreement: salary. There is no guarantee of a certain fixed pay or certain number of customers a day for the taxi drivers. The taxi driver’s earnings are dependent solely on how many rides he picks up (along with any bonus based on number of rides) and Ola gives no commitment to paying him any fixed amount daily, weekly or monthly. However, a fixed salary is not a necessary aspect of a contract for employment and one cannot necessarily take the view just on this basis, that there’s no full-time employment intended.

All of this shows that there is a significant amount of control that Ola exercises over the driver… Given the terms and conditions, it looks less like a contract between two principals and more between an employer and employee.

This is also where things get murky between the drivers and Ola, leading to a source of the present conflict. Drivers say that they were promised a certain level of income from driving an Ola cab (or for that matter an Uber cab)* and based on this, had taken out loans and other liabilities for the car. This does not find its way into the contract but clearly the drivers believed this and acted upon it. The Ola website clearly states that drivers can expect to earn up to a lakh a month (but subject to the city they’re working in) and says the driver is free to work as per his convenience.

Screenshot from partners.olacabs.com

As we see in the contract, far from being empowered as independent contractors free to choose their hours of work, Ola drivers have little agency or control over their work and are subject Ola’s whims in matters of pay and conditions of service. There’s also no real mechanism to address grievances. There’s a badly drafted disputes clause that confusingly allows party to file a suit in court and arbitrate privately at the same time! With no form of collective bargaining envisaged or any transparent process for redress of drivers’ grievances, it is perhaps no wonder that Ola drivers found no way to express their unhappiness except going on strike.

Kemal’s outburst at Kalanick suggests that this is also true of Uber drivers and seems to be a feature, and not a bug, in the business model of app based taxi aggregators.

They seem to have ended up with the worst of both worlds – enjoying neither the independence of a freelancer, nor the financial security of an employee. Kemal’s outburst at Kalanick suggests that this is also true of Uber drivers and seems to be a feature, and not a bug, in the business model of app based taxi aggregators.

Legal troubles aren’t just about law not keeping up with technology

As we had seen in the previous part, app-based taxi aggregators’ business model seems to favour a legal arrangement with drivers that ends up giving the drivers the worst of both worlds — neither the security of full time employment nor the independence of freelancers. Theoretically, drivers could challenge Ola and Uber’s classification of them as independent contractors in court and like their counterparts in the UK and certain jurisdictions in the US, demand to be treated as employees for the purposes of Indian law.

This has not happened yet, but it would just be the latest in the long line of legal troubles that app based taxi aggregators have run into.

It is hard to think of another startup sector which has run into such trouble with regulators on such a frequent basis in a short span of time. And it is not just in India. Across the world, Uber and other app based taxi aggregators have been hit by courts and regulators for not operating with licenses or not following the relevant rules for taxi businesses.

The answer that has been put forward is that regulations have not kept up with the innovations in technology and its applications. The law is almost always a few steps behind the latest advancement and needs to be updated to better reflect. This is a truism but it is also just a half truth.

Not all technological innovations are necessarily good or even harmless. The law being a few steps behind technology can mean one of two things: that the law is holding back a technology with potential for good use or it has not accounted for given technology’s potential for misuse. It could also mean that technology has been developed to expressly overcome some limitation laid down by law. Without understanding why the limitation exists in the first place, whether the technology is being put to good use or being misused, saying that the law and regulations are holding back technology does not mean much.

Without understanding why the limitation exists in the first place, whether the technology is being put to good use or being misused, saying that the law and regulations are holding back technology does not mean much.

No doubt there is much needed by way of legal reform in the urban transportation sector in India, especially the Motor Vehicles Act, 1961. However, such reform cannot be pushed only in the interests of app based taxi aggregators and their customers alone. It risks creating regulatory capture by the elite and create a system tilted against the interests of other stakeholders. A blase attitude to the law and legal regulation also creates risks for the company and the industry — the blowback from the Uber rape in Delhi (attributable to the absence of any background checks on drivers and the unwillingness to take responsibility) hurt not just Uber, but Ola and TaxiForSure as well.

Motor vehicles and their use is regulated for a reason — they are masses of metal and rubber moving at high velocity on a daily basis and in close proximity to millions of humans every day. They are under the control of very fallible humans, and the dense framework of regulations have been made keeping in mind these basic facts and the experiences of the past. The future promises to take the control of vehicles out of human hands and into the metaphorical hands of (hopefully) less fallible algorithms. App-based taxi aggregators are at the forefront of this revolutionary technology, but there is no way that it will reach its full potential without a proper regulatory framework.

To do so, app based taxi aggregators have to be at the table as responsible and mature businesses and not slash-burn “disruptors” who are trying to bend reality to their valuation. This requires an acknowledgement that no business is possible in the absence of reasonable regulation.

The views expressed here are the author’s own. Alok Prasanna Kumar is an advocate based in Bengaluru. He has practiced at the Supreme Court of India and was a Senior Resident Fellow at the Vidhi Centre for Legal Policy. He tweets @alokpi and can be reached at alok.prasanna@vidhilegalpolicy.in

Editor’s note: The analysis of the Ola contract does not in any way imply exclusive criticism of Ola as a service while exonerating other app-based taxi aggregators’ contract with drivers. It simply means we were able to source the Ola contract while the Uber contract proved elusive. We will update this analysis with a follow-up as and when we can find a reliable source for the Uber contract. If you have a copy of this, tweet to us @factordaily or write to us: hello@factordaily.com.

Lead graphic: Angela Anthony


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