India’s gig economy has grown exponentially over the past decade, but its legal framework has struggled to keep pace. While digital platforms have transformed sectors such as food delivery, ride-hailing and home services, gig workers have largely remained outside the protections traditionally afforded to employees under labour laws. To address this gap, Parliament enacted the Code on Social Security, 2020 (“Code“), which, for the first time, recognised “gig workers” and “platform workers” as distinct categories of workers and envisaged a framework for their social security.
However, even before the Code was fully operationalised, several States began introducing their own welfare legislation. Karnataka’s Platform-Based Gig Workers (Social Security and Welfare) Act, 2025 (“Act“) is the most comprehensive of these initiatives and has now become the subject of a constitutional challenge before the Karnataka High Court (“High Court“) in the case of Internet and Mobile Association of India (IAMAI) & Ors. v. State of Karnataka & Ors[1]. While the proceedings raise important questions concerning the relationship between Central and State legislation, the High Court’s recent interim order on July 3, 2026, has shifted the focus from the validity of the Act to the practical challenges of implementing a parallel welfare framework.
The Karnataka Act: A Comprehensive Welfare Framework
The Act came into force on May 30, 2025, and subsequently, the Karnataka Platform Based Gig Workers (Social Security and Welfare) Rules, 2025 (“Rules“) were notified on November 19, 2025.
Unlike the Code, which principally lays down an enabling framework for the formulation of welfare schemes, the Act establishes a comprehensive regulatory architecture governing platform-based work within the State of Karnataka. The key provisions of the Act include:
Welfare Board
At the heart of the Act is the Karnataka Platform-Based Gig Workers Welfare Board (“Welfare Board“), a body comprising representatives from the Government, aggregators, gig workers and civil society[2]. The Board is entrusted with implementing welfare schemes, maintaining worker records, monitoring compliance and adjudicating disputes arising under the Act[3]. The Board was constituted by a notification dated January 27, 2026.
Welfare Fee
The centrepiece of the Act is the introduction of the platform-based gig workers welfare fee[4]. Every aggregator is required to contribute a welfare fee which shall not be less than 1% and not more than 5% of the payout made to a gig worker in respect of each transaction. These contributions are deposited in the Karnataka Gig Workers’ Social Security and Welfare Fund, from which welfare measures are proposed to be financed[5].
Grievance Redressal and Fair Contracts
Aggregators are required to constitute Internal Dispute Resolution Committees with a two-tier escalation to the Welfare Board[6], provide transparent contracts[7], honour a gig/platform worker’s right to refuse tasks without adverse consequences and observe a 14-day written notice period before deactivation of gig/platform workers from their platforms[8].
Collectively, these provisions demonstrate that the Act is not merely a welfare legislation, rather, it establishes an independent regulatory regime governing platform work within Karnataka.
The Challenge before the High Court
The challenge before the High Court was instituted by the Internet and Mobile Association of India, along with several leading platform aggregators, including Swiggy, Zomato, Zepto, Blinkit, Urban Company and Valmo Transportation (collectively “Petitioners“). The Petitioners have challenged not only the Act, but also the Rules framed thereunder, the notification dated January 27, 2026, constituting the Welfare Board, the Government Order dated February 13, 2026, operationalising the welfare fee, and the notice dated May 21, 2026, directing aggregators to constitute Internal Dispute Resolution Committees.
The principal challenge of the Petitioner concerns the relationship between the Act and Code. The Petitioners have relied upon Article 254 of the Constitution of India, 1950 (“Constitution“), which governs the inconsistencies between Central and State laws enacted on subjects contained in the Concurrent list. Labour welfare and social security fall within the Concurrent List, enabling both Parliament and State Legislatures to legislate. However, where a State law is repugnant to an existing Central legislation occupying the same field, the Central legislation ordinarily prevails unless the State law satisfies the requirements of Article 254(2) of the Constitution.
The Petitioners have contended that the Parliament has already occupied the field through the Code. The Code defines both “gig workers” and “platform workers” and empowers the Central Government to frame social security schemes for such workers[9]. Furthermore, the Code contemplates financial contributions from aggregators ranging between 1% and 2% of their annual turnover. Whereas, the Act levies a per-transaction fee, thereby exposing the aggregators to overlapping contributions and dual compliances. Therefore, according to the Petitioners, the Act creates a parallel regulatory regime.
The High Court’s Interim Order
While the challenge remains pending, the High Court, by an interim order has declined to stay the operation of the Act. Instead, the Court adopted a balanced approach that seeks to protect the interests of all stakeholders pending final adjudication.
The Court directed the Petitioners to deposit the welfare fee for the second quarter (April to June 2026) with the Registry of the High Court, instead of remitting it to the State Government, within three weeks. Further, the Court declined the Petitioners’ request to furnish an unconditional bank guarantee in lieu of the deposit. Simultaneously, it granted protection against coercive action for non-payment of the welfare fee during the pendency of the proceedings.
Although the order refrains from recording any conclusive finding on the merits of the challenge, it is significant for two reasons. First, it reflects judicial reluctance to suspend welfare legislation merely because its constitutional validity has been questioned. Secondly, by directing the welfare contributions to be deposited with the Court instead of the State, the High Court has preserved the competing interests of the parties, recognising that the fee is exacted under a statute whose validity is under challenge rather than demanded as a charity. Should the Act ultimately be upheld, the welfare funds remain secured and conversely, if the Petitioners succeed, the disputed amounts remain outside the State’s control.
The interim order therefore represents a procedural balancing exercise rather than an endorsement of either party’s position.
Pending Issues before the High Court
The High Court’s order leaves the central issues unresolved at the present stage. One of the most significant questions is whether the intent behind drafting the Act was to avoid repugnancy with the Code.
Section 20 of the Act expressly provides that the welfare fee payable by the platform aggregators shall count towards the contribution payable under Section 114(4) of the Code, with provision for annual reconciliation. The objective appears to be to ensure that aggregators are not required to make duplicate contributions under both legislations.
However, the Petitioners contend that the reconciliation mechanism cannot cure the inconsistency because the two statutes adopt fundamentally different methods of calculating contributions. While the Code bases contributions upon an aggregator’s annual turnover, the Act computes the welfare fee on the payout made to the gig/platform workers on each individual transaction. Since the contribution mechanisms themselves are materially different, the Petitioners contend that the possibility of duplication and inconsistent compliance continues to exist notwithstanding the reconciliation clause.
Conclusion
The High Court’s interim order ensures that the constitutional challenge proceeds without disrupting the implementation of the Act or exposing aggregators to immediate coercive action.
The final decision will have implications extending well beyond Karnataka. As several States explore similar legislation, the Court’s interpretation of the relationship between the Act and the Code is likely to shape the future of gig and platform worker regulation in India. For platform aggregators, the litigation underscores the growing importance of monitoring State-level labour reforms alongside developments under the Code.
[1] WP 19746/2026.
[2] Section 4 of the Act.
[3] Section 6 of the Act.
[4] Section 20 of the Act.
[5] Section 19 of the Act.
[6] Section 22 of the Act.
[7] Section 12 of the Act.
[8] Section 14 of the Act.
[9] Section 114 of the Code.
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