Karnataka HC Declines to Stay Gig Workers Act, Orders Platforms to Deposit Fees

The Karnataka High Court has refused to grant a stay on the Karnataka Platform-Based Gig Workers (Social Security and Welfare) Act, 2025. However, the court has provided interim protection to petitioners, including major internet companies like Swiggy, Zepto, and Urban Company, against coercive actions under the law. This protection is conditional on the platforms depositing the welfare contribution due for the April-June quarter with the court within three weeks.

The court has directed the state government to file its objections to the petition by July 30 and has scheduled the matter for further hearing on August 14. The petition, filed jointly by companies such as Swiggy, Zepto, Urban Company, and Zomato's logistics arm Eternal, challenges the constitutional validity of the Act. The consortium argues that the state law creates a redundant regulatory framework parallel to the Central government's existing Code on Social Security, 2020.

In their petition, the companies, represented by the Internet and Mobile Association of India (IAMAI), allege that the Act and its associated rules are arbitrary and infringe upon fundamental rights. They are seeking to strike down the Act, the rules, and various notifications issued under the legislation, including those related to dispute resolution and welfare fee notices.

The Karnataka Act, enacted in September 2025, was the first state-specific legislation for gig workers, establishing a welfare board and fund. A key point of contention is the 1% welfare fee per transaction imposed by the state government, which was due for deposit from July 5 for the April-June quarter. Funds collected under the Act are intended to provide benefits such as insurance, medical assistance, and old-age protection.

Penalties for non-compliance with the Act include annual interest on delayed welfare fee payments and potential fines of up to ₹1 Lakh for repeated violations. The case highlights the ongoing legal and regulatory challenges faced by platform companies operating in India's gig economy.