Employment 2026 Comparisons

Employment Regime in India

On 21 November 2025, the Government of India overhauled the employment regime in India by bringing into effect the four labour codes: the Code on Wages 2019 (“Wages Code”), the Code on Social Security 2020 (“SS Code”), the Industrial Relations Code 2020 (“IR Code”) and the Occupational Safety, Health and Working Conditions Code 2020 (“OSH Code”) (collectively, the “Labour Codes”). Such codes have consolidated and consequently repealed and subsumed 29 central labour laws and have brought about a more cohesive and modern framework for compliance. The consolidation exercise in the form of the Labour Codes does bring with it certain changes in the earlier labour law regime.

There are two main kinds of classification of employees: one based on the nature of work, and another based on the duration of employment.

Classification Based on Nature of Work

Depending on the predominant nature of their responsibilities, an employee may be classified as:

• a worker, as defined in the IR Code; or
• a managerial employee.

To determine whether an employee is a “worker”, the actual or primary work performed by the employee is examined. Some cases wherein the courts have considered the functions of an employee as being of a managerial nature are looking at the progress of work vis-à-vis quality and timeliness, ensuring compliance, manpower planning, contract management, monitoring costs, mentoring team members, and involvement in policy-making decisions regarding any aspect of the business or service, the conditions of workers/employees and other such similar powers.

The significance of this classification is that persons qualifying as “workers” are entitled to various statutory protections/entitlements, such as severance compensation and notice (or the payment of a fixed salary/wages in lieu thereof) in cases of termination of employment for reasons other than the employee’s misconduct, and prior notice in case of any adverse change in the conditions of service. Notably, the IR Code has expanded the scope of coverage by raising the wage threshold for supervisory employees. Namely, under the erstwhile Industrial Disputes Act 1947, supervisory employees earning wages above INR10,000 per month were excluded from the definition of “workman”; however, the IR Code excludes supervisory employees earning wages above INR18,000 per month from the definition of “worker”.

Classification Based on Duration of Work

An employee could be either a permanent employee or a fixed-term employee, depending on the duration of work. For fixed-term employees, the duration is predetermined and limited, often tied to specific project requirements. For permanent employees, the employment relationship continues until one of the parties terminates it.

Fixed-term employees are entitled to at-par treatment in employment terms with permanent employees performing the same work. Importantly, fixed-term employees who have completed one year of continuous service are entitled to pro-rated gratuity upon the expiry of their contract. However, for permanent employees, the erstwhile requirement of five years of continuous service for gratuity eligibility continues to apply.

Other Classifications

Other than the above broad classifications, there may be other kinds of classification for very limited purposes. For instance, under the social security regime (namely, the SS Code), the manner of contributions by employers and employees varies depending on whether an employee is a domestic employee (an employee working in India and holding an Indian passport) or an international worker (an expatriate employee).

In India, employment contracts can be definite (fixed-term) or indefinite (permanent), depending on the purpose/duration of the relationship envisaged by the parties. The distinction between the two kinds of employment is explained in 1.1 Employee Status.

An employer-employee relationship can either be express or implied, written or verbal. However, to avoid any dispute regarding the terms of employment, it is a common practice to execute an employment contract. Under the OSH Code, employers are now required to mandatorily issue appointment letters to all employees in a prescribed format containing key details such as the role and responsibilities associated with the job, benefits applicable and certain identification information. In practice, many employers already capture these details through existing employment/onboarding documents, so this largely formalises and standardises current processes. Separately, a few Indian states, such as Karnataka and Delhi, had already required commercial establishment (a non-manufacturing establishment) to issue written appointment letters to employees, which would set out basic particulars such as wages, job designation, the nature of their duties, etc.

Certain terms that are generally incorporated in an employment contract include:

• nature of work (job description);
• place of employment;
• date of commencement of employment;
• remuneration structure;
• assignment of intellectual property by the employee to the employer;
• cessation of employment (including notice period); and
• restrictive covenants (such as non-solicitation).

However, the Indian courts have taken the view that certain terms and conditions of service which are regulated by statute will constitute implied terms of a contract of employment. Therefore, provisions relating to payment of wages, bonuses, gratuity payments, and contributions towards employees’ provident funds and employees’ state insurance can be considered to be implied terms of a contract of employment and need not be recorded in writing. Similarly, an employee’s duty to remain faithful in their duties towards the employer and to maintain the confidentiality of the employer’s proprietary information is considered to be implicit in the employment contract.

Working hours for manufacturing establishments are governed by the OSH Code, while working hours for non-manufacturing commercial establishments are now governed by the OSH Code as well as the applicable state-specific shops and establishments laws (the “S&E Acts”).

The applicable laws generally prescribe normal working hours of eight to nine hours per day and 48 hours per week. Any work beyond these limits attracts overtime pay at twice the employee’s ordinary wages or total pay, as applicable. Certain laws also prescribe limits on the maximum overtime that may be worked over a week or quarter. Flexible working arrangements are permissible, provided these statutory limits are complied with.

That said, most provisions of the OSH Code apply only to workers, which excludes employees engaged in a managerial capacity and employees engaged in a supervisory capacity earning wages exceeding INR18,000 per month. This is a departure from the erstwhile Factories Act 1948, under which working time restrictions applied to all employees in factories. As a result, employers now have greater flexibility in determining the working hours of managerial employees engaged at manufacturing establishments. More generally, the working hours of managerial employees are primarily governed by their employment contracts.

Minimum Wages

The minimum wage requirements are governed according to various periodic central government and state notifications under the Wages Code. Under the Wages Code, the central government is required to set a national floor wage, and states may fix their minimum wages at or above this level. Further, unlike the previous regime which covered only “scheduled employments”, as per the Wages Code, minimum wages are now prescribed for all kinds of employment.

Statutory Bonus

The Wages Code regulates the payment of statutory bonus to employees whose wages do not exceed INR21,000 per month. The statutory bonus provisions apply to establishments employing 20 or more persons. Eligible employees are entitled to a minimum annual bonus of 8.33% and a maximum of 20% of their salary, with the calculation being capped at INR7,000 per month or the applicable statutory minimum wage, whichever is higher. The Code also provides that an employee who is dismissed following a conviction for sexual harassment is disqualified from receiving statutory bonus.

Government Intervention in Compensation

Indian employment law generally allows employers to determine employee compensation contractually, with limited government intervention. However, the Labour Codes introduce a revised definition of “wages” that affects the calculation of several statutory benefits. The Labour Codes distinguish between “wages” and certain excluded components of remuneration, such as house rent allowance, conveyance allowance and commissions. They also provide that the wages component should ordinarily constitute at least 50% of an employee’s total remuneration. If it does not, wages are deemed to be 50% of total remuneration for the purpose of calculating statutory benefits linked to wages, such as gratuity, retrenchment compensation and certain social security contributions. This does not require employers to restructure salaries, but it may increase the cost of providing statutory benefits.

The Wages Code also requires wages due on termination to be paid within two working days of the employee’s cessation of employment. This timeline applies only to “wages” as defined under the Labour Codes and not necessarily to all termination-related payments.

Apart from these requirements, and rules governing the payment and permissible deductions from wages, Indian law generally does not prescribe salary structures, mandatory allowances or annual increments. These matters are primarily governed by the employment contract, although collective bargaining agreements may apply in unionised workplaces.

Leave and Holiday Entitlements

The working conditions of employees, including their leave entitlements, are mostly regulated according to the nature of the entity by which they are employed.

If the entity is a factory (engaged in manufacturing activity) covered under the OSH Code, employees who have worked in the factory for 180 days or more in a calendar year must be allowed, in the subsequent calendar year, 18 privilege leaves with wages. This leave is additional to public holidays to which workers are entitled. In addition, the OSH Code now provides for a 30-day carry-forward limit on accrued earned leave, encashment of excess earned leave (ie, in excess of 30 days) at the end of each year, and in-service encashment for the earned leave standing to credit upon demand by the worker.

For shops and commercial establishments, leave entitlements are governed by the applicable S&E Act read together with the OSH Code. As the S&E Acts continue to remain in force alongside the OSH Code, employers are required to harmonise the two frameworks and comply with the more beneficial provisions. State-specific leave entitlements generally range from 12 to 20 days of earned leave per year, with many states also providing for casual leave and sick leave.

At the time of separation, an employee is also entitled to wages/total pay for accrued but unused privilege leave, up to the maximum accrual limits set out under the OSH Code, the state-specific S&E Acts or the employer’s policies, whichever is more beneficial.

Maternity Benefit

As per the SS Code, every woman who has completed 80 days’ service with an employer is entitled to paid maternity leave of 26 weeks. However, women with two or more surviving children are entitled to 12 weeks of paid maternity leave. Commissioning mothers and adoptive mothers are also entitled to paid maternity leave. Other kinds of paid leave envisaged under the law are in respect of special situations such as miscarriage, medical termination of pregnancy, tubectomy operations, etc.

Confidentiality and Non-Disparagement

There are no standard laws regarding confidentiality and non-disparagement, but it is standard practice to include these provisions in the appointment letter/employment agreement. Note that these obligations are typically continued even after the cessation of employment. The employee can be held liable under the law of contract if there is a violation of such stipulations.

Validity

The Indian Contract Act 1872 stipulates that an agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind is, to that extent, void. A restrictive covenant, such as a non-compete, extending beyond the term of service is void, irrespective of the reasonability of such restriction, except in cases involving the sale of goodwill.

There is, however, case law recognising an exception to the rule covering restrictions aimed at protecting the employer’s legitimate business interests, such as its business connections and trade secrets. Therefore, clauses relating to post-employment non-solicitation of employees or customers and the protection of confidentiality with respect to trade secrets are not caught by the above restrictions and have been enforced by the courts, albeit on a case-by-case basis.

Enforcement

For a breach of a restrictive covenant (being a breach of contract), the remedies discussed in the following paragraphs are available to an employer in such cases, to the extent the covenant is valid and enforceable.

Where a breach has occurred but the employer has not suffered a loss, and the contract provides a pre-estimate of the loss (in the form of liquidated damages) that might be incurred due to breach of contract, the party may claim said amount (to the extent the court determines it to be a genuine pre-estimate of the loss), irrespective of any actual loss arising on this account.

However, where the contract does not provide for such pre-estimate and the breach has occurred (as is usually the case with employment contracts), courts would typically grant an injunction restraining the former employee from continuing the breach.

Where a breach has occurred and the employer has suffered an actual loss, the employer can claim unliquidated damages for the loss caused to it which the parties knew would be caused as a result of the breach, regardless of whether or not the employer has stipulated a pre-estimate of the loss in the contract.

As mentioned in 2.1 Non-Competes, covenants with respect to non-solicitation and non-disclosure of confidential information may be enforced post-cessation of employment on a case-by-case basis, depending on the impact of the restriction on the ability of an individual to exercise lawful pursuits.

In the case of Desiccant Rotors International Private Limited v Bappaditya Sarkar and Another [CS (OS) Number 337/2008], the Delhi High Court noted the following: “Clearly, in part at least, the obligation agreement sought to restrain defendant number 1 from seeking employment with an employer dealing in competitive business with the plaintiff after he had ceased to be an employee of the plaintiff, and that too for a period of two years. Such an act cannot be allowed in view of the crystal-clear law laid on this issue. However, in the impugned order dated 20 February 2008, the injunction restraining defendant number 1 is limited in scope, in the sense that it does not restrain defendant number 1 from working with defendant number 2 or any other person/company, thereby steering clear of impinging the former’s freedom to choose his own workplace. The injunction only restrains defendant number 1 from approaching the plaintiff’s suppliers and customers for soliciting business which is in direct competition with the business of the plaintiff. Hence, the injunction which has already been granted by order dated 20 February 2008, is made absolute.”

At present, the limited provisions on the protection of information are set out under the Information Technology Act 2000 and the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules 2011 (the “SPDI Rules”) framed thereunder. The SPDI Rules protect individuals (whether employees or otherwise) from an entity obtaining access or using their sensitive personal data or information (SPDI). The term “sensitive personal data or information” is defined in the SPDI Rules to mean personal information relating to:

• passwords;
• physical, physiological and mental health conditions;
• financial information, such as bank account details;
• sexual orientation;
• medical records; and
• biometric information.

If the requested information falls within the purview of the SPDI Rules, consent from the employee would be required before the data is collected. Typically, such consent is taken at the commencement of employment itself (through a consent clause in the employment contract/company policy); even so, it is advisable for employers to procure consent at the time of the collection and/or transfer of such protected information, so that an employee has an effective opportunity to withdraw consent, which is an opportunity that must be given to the employee under the SPDI Rules.

Employers are also required to implement reasonable security practices and procedures in relation to the storage of SPDI.

It should be noted that India recently enacted the Digital Personal Data Protection Act 2023 (the “DPDP Act”). The DPDP Act received the assent of the President of India on 11 August 2023. Currently, the central government has clarified that provisions vis-à-vis consent, grounds for processing data, notice and data fiduciary obligations, as set out under the DPDP Act, will come into force from 14 March 2027. The DPDP Act widens the ambit of the data protection regime in India by not only covering SPDI but also including within its purview any data about an individual who is identifiable by such data. The DPDP Act provides that a person (which would include an employer) may process the personal data of a data principal (who would be an employee in the context of an employer-employee relationship) for a lawful purpose for which the data principal has given their consent, or for certain “legitimate uses” (where express consent would not be needed). The expression “legitimate uses” includes purposes associated with employment, and measures to secure the interests of the employer.

Indian labour laws do not prescribe any limitations in respect of the engagement of foreign workers by Indian establishments. However, there are certain additional compliance requirements from a social security standpoint that an employer will have to undertake, such as making employees’ provident fund contributions if the foreign worker qualifies as a non-exempt “international worker” under the SS Code. That said, the constitutionality of the International Worker regime under the SS Code is currently pending before the India Supreme Court of India and the Division Bench of the Karnataka High Court. Until a conclusive decision is reached or further clarification is issued by the EPFO or the courts, the aspect of social security contributions of international workers in India entails a degree of legal uncertainty.

With respect to Overseas Citizens of India (OCI) specifically, in 2021 the Ministry of Home Affairs of the Government of India prescribed various conditions/requirements to be fulfilled by OCI cardholders before being engaged as an employee of an Indian entity. Primarily, all OCI cardholders are now permitted lifelong multiple entries to India for any purpose. However, OCI cardholders will have to seek special permission from a specified competent authority – the Foreigners Regional Registration Office (FRRO) or the relevant Indian mission – to be engaged as research scholars, in journalistic activities, or as interns or employees in foreign diplomatic missions/foreign government organisations in India (which is a special category). For OCI cardholders who are employed by an Indian entity to render services apart from the work falling within the ambit of the special category, there is no requirement to seek prior permission from any competent authority or FRRO.

Depending on the duration of a foreign employee’s stay in India and the nature of services proposed to be rendered, they will also have to comply with the applicable immigration laws for obtaining the appropriate visa (ie, a business/employment visa) to enter India.

Foreign nationals entering India on an employment visa which is valid for more than 180 days are required to register themselves with the FRRO within 14 days of their arrival in India. No such registration is required if the employment visa is valid for 180 days or less.

Furthermore, all OCI cardholders residing in India (including those rendering services apart from those in the special category) are required to notify the FRRO by email of any change in their permanent residential address or occupation (this is not a registration requirement per se).

In 2022, the government of India amended the Special Economic Zones Rules 2006 in relation to work from home arrangements for employees working out of Special Economic Zones (SEZs). A company in an SEZ may allow certain employees to work from home or from any place outside the SEZ, and needs to notify this to the Development Commissioner through an email on or before the date on which such work from home is permitted. The unit can provide an employee working from home duty-free goods, such as a laptop, a desktop and other electronic equipment, and these goods shall be allowed to be taken outside the SEZ without the payment of duty, subject to such goods being duly accounted for in the appropriate records.

On a separate yet related note, the model standing orders issued by the central government applicable to the services sector, under the Labour Codes, states that, subject to the conditions of appointment or agreement between the employer and the workers, the employer may allow a worker to work from home or remotely for such period of time as may be determined by the employer. However, not much would be impacted as far as obligations of employers are concerned. Therefore, the onus is on employers to determine and notify employees of the guidelines in relation to working remotely. Employers continue to be liable for the health and safety of their employees when working remotely and should ensure that employees take relevant measures to ensure that their remote workplace is ergonomically sound, clean, safe and free of obstructions and hazardous materials, and does not pose a risk to their health and safety. Employers should also require their employees to comply with all building/social codes and health and safety requirements as may be applicable to employees. Employers may also be required to pay compensation to employees who are injured (which includes partial or permanent disability) or die due to accidents arising out of or in the course of their employment, whether working remotely or otherwise.

Indian data privacy laws and social security laws are central pieces of legislation and do not vary from state to state. Accordingly, there would be no change in the employers’ or employees’ obligations in this respect on account of working remotely.

Sabbatical leave is not statutorily governed under Indian labour laws. Organisations consider and allow employees to avail themselves of sabbatical leaves at their discretion and according to mutually agreed terms and conditions. Typically, sabbatical arrangements are unpaid and would envisage the complete absence of any pecuniary relationship between the employer and the employee. Since no salary is paid to the employee during this period, no statutory social security contributions have to be made. However, employees may continue to be eligible for any other contractually agreed or policy-driven benefits like insurance coverage during the sabbatical period.

A major reform under the OSH Code is the extension of an annual health check-up requirement for specific categories of employees and in specific classes of establishments such as docks and mines. Another notable development under the OSH Code is the express permission for women to work in night shifts, subject to certain conditions such as obtaining their consent and providing transport, security and other safeguards. This marks a progressive shift, enabling greater workforce participation for women in establishments where night-shift operations are prevalent.

A further significant reform under the OSH Code is the prohibition of engagement of contract labour for core activities of an establishment. Under the earlier central regime, there was no such restriction (only the states of Telangana and Andhra Pradesh had prescribed similar prohibitions). The OSH Code defines a “core activity” as an activity for which an establishment has been set up, including any activity essential or necessary thereto. The OSH Code also identifies certain activities that are considered non-core (such as sanitation, loading and unloading, security services, housekeeping and transport services) unless the establishment has been specifically set up to carry out those activities. However, contract labour may be engaged for a core activity if the activity was ordinarily done through contractors, the work does not require full-time workers, or there is a sudden increase in workload. This reform has prompted many organisations to review and restructure their existing third-party manpower arrangements.

From an enforcement standpoint, the Labour Codes represent a shift towards a facilitative regime. The earlier framework was characterised by minuscule fines, slow enforcement and lengthy proceedings. The Labour Codes improve this position by prescribing enhanced monetary penalties and the option to compound offences; that is, employers can admit a violation and pay a prescribed amount upfront (50–75% of the maximum fine), which can avoid protracted litigation. Compounding is, however, not available for repeated offences committed within three years. Additionally, under the new framework, authorities shall not initiate prosecution without first affording the employer an opportunity to rectify non-compliance within a prescribed timeframe.

In India, the IR Code provides for the registration of trade unions (which is an optional process for a trade union); such registration confers on the union certain rights and liabilities which a non-registered trade union does not have. For example, a worker who is a party to an industrial dispute can be represented by a registered trade union. Furthermore, a registered trade union can acquire and hold movable and immovable property and can contract, sue and be sued in its name.

The IR Code introduces a formal verification-based process for the recognition of trade unions across India, which was previously available only in a few states such as Maharashtra and Telangana. Under this framework, a trade union or group of trade unions may become a negotiating union or negotiating council following a verification of worker representation notified by the relevant government. Specifically: (a) where there is only one registered trade union, it will be recognised as the sole negotiating union; (b) where there are multiple registered trade unions, the one having 51% or more worker representation shall be recognised as the sole negotiating union; and (c) where no single union has 51% or more representation, a negotiating council shall be constituted comprising representatives of trade unions with the support of at least 20% of the workers. A trade union that is both registered and recognised has the right to collective bargaining with an employer, so that if the employer refuses to negotiate with such union on the terms and conditions of employment of the workers being represented, the union can file a claim before the competent authority alleging unfair labour practices by the employer.

In addition to trade unions, the IR Code provides for the constitution of a works committee in an establishment with 100 or more workers, in the event that the relevant government issues any specific or general directions to that effect. Such works committees have an equal right of representation of workers’ representatives and employers’ representatives, and the right to discuss the terms and conditions of employment of workers in an amicable manner. Separately, the IR Code makes it mandatory for employers employing 20 or more workers to set up a grievance redressal committee consisting of employer and employee representatives, even where a grievance redressal mechanism is already in place. This is a departure from the erstwhile Industrial Disputes Act 1947, which did not mandate such a committee if an alternative mechanism existed. The decisions of the grievance redressal committee are to be made on the basis of the majority view, provided that more than half of the members representing the workers have agreed to such a decision; otherwise, it shall be deemed that no decision could be arrived at by the committee.

Furthermore, the chapter on standing orders under the IR Code, which governs aspects of employment of workers such as the disciplinary process in cases of misconduct, now applies to all commercial establishments with 300 or more workers. Under the erstwhile regime, the Industrial Employment (Standing Orders) Act 1946 applied primarily to industrial establishments (such as factories, mines and plantations), with only a few states extending its application to commercial establishments. Larger commercial establishments meeting the threshold will now have to either comply with the model standing orders released by the central government or get their own standing orders certified from the authority notified by the appropriate government.

In India, collective bargaining agreements are primarily the product of a charter of demands and several rounds of negotiations between a particular employer and its employees, who are typically members of a trade union. Collective bargaining agreements are a predominant feature of employment in the manufacturing sector, although the existence of such agreements in the services sector is not uncommon. Collective bargaining agreements can only establish better employment conditions than those prescribed under various employment and labour laws, and therefore these instruments cannot be used to opt out of statutory payments, benefits and protections. Collective bargaining agreements typically entail provisions relating to working hours, working conditions (such as health and safety), remuneration (including bonus and yearly increments), leave and holiday entitlements, etc.

For more details in relation to collective bargaining, please see 6.1 Unions.

In India, an employer may terminate the services of an employee on two main grounds, either with or without cause.

Termination Without Cause

Employment can be terminated at the employer’s discretion for any reason other than proven misconduct by simply invoking the notice period provisions in the employment agreement/applicable law/policies. Such termination could be on account of:

• an employee’s unsatisfactory performance;
• redundancy of the role/downsizing/closure of the establishment; and
• frequent absence from work due to continued ill health, etc.

Termination without cause (or termination simpliciter) includes scenarios wherein there may be underlying reasons for the separation but the employer, as per its assessment of such reasons or cause, does not intend to or does not deem it appropriate to:

• mention or assign such reasons for the separation in the exit documentation; and/or
• deprive the employee of any contractual or statutory benefit pursuant to their exit.

The employee will be entitled to all service benefits (statutory as well as contractual) that have been earned up to the date of the cessation of employment. Workers who have rendered at least 240 days of service will be entitled to notice of at least one month (or total salary/wages (as applicable) in lieu thereof) and statutory severance compensation (calculated at 15 days’ wages for every year of completed service or part thereof in excess of six months) (“Retrenchment Compensation”). In addition, the IR Code introduces a requirement for every employer to contribute an amount equal to 15 days’ wages (last drawn by the worker) to a worker reskilling fund constituted by the government, for every worker whose services are terminated. This payment is not made to the worker directly but to the government-constituted fund. In cases of collective redundancies involving workers, as per the IR Code, employers will also have to comply with the “last in, first out” principle.

Termination With Cause

This includes the termination of employment for breaches of the terms and conditions of employment, misconduct, etc. Termination on account of misconduct should be preceded by a domestic inquiry conducted in accordance with the principles of natural justice (ie, the employee should be given a fair opportunity to present their case and defend themselves against the charges levelled). In cases of termination on the grounds of misconduct, the employee would not be entitled to receive notice pay or any other statutory and contractual payments, except gratuity (with necessary adjustments for losses due to misconduct, if any) and leave encashment.

The concept of “at will” employment (or hire and fire policy) is not recognised in India. Employers are required to comply with notice period requirements (or pay salary in lieu of notice) as per applicable laws/employment agreements and policies (whichever is higher) in case of termination of an employee’s services for any reason other than proven misconduct. The IR Code and state-specific S&E Acts prescribe a minimum notice period of one month in the event of termination simpliciter. While the IR Code and most S&E Acts only apply to workers, certain S&E Acts (such as those of Haryana and Delhi) also apply to managerial employees. Notice period requirements in respect of managerial employees will be governed by the terms of their employment agreement/employer’s policy in this regard.

In case of termination simpliciter (which includes termination of employment on account of redundancy or unsatisfactory performance), workers who have rendered at least 240 days of service will be entitled to Retrenchment Compensation. Employers are also required to notify the jurisdiction’s labour commissioner regarding such termination (please note that this is not an approval requirement).

Additional Requirements for Factories, Mines and Plantations

In the termination of services of workers (who have rendered at least 240 days of service) engaged in factories, mines or plantations employing at least 300 workers (the threshold has been uniformly increased from the earlier varying thresholds of 100 or 300 under the erstwhile regime), an employer is required to:

• obtain prior permission from the appropriate government;
• give the workers concerned three months’ notice or salary in lieu thereof; and
• pay Retrenchment Compensation.

There is no set list of acts of “serious/gross misconduct” or statutory guidance on what amounts to serious misconduct warranting summary dismissal. When determining an act to be misconduct or gross misconduct, factors such as whether the alleged act affects discipline in the organisation should be considered, or whether the act is backed by an improper motive and whether the act, if condoned, would send the wrong message to others.

As a general principle, termination on account of misconduct (gross misconduct or otherwise) should be preceded by a domestic inquiry conducted in accordance with the principles of natural justice. The employee should be given a fair opportunity to present their case/defend themselves against the charges levelled. To commence the domestic inquiry/proceeding, an employer is required to share a charge sheet or serve a show-cause notice to the employee concerned, so that they are aware of the charges levelled against them and can prepare to present their case. The parties should also be allowed to present their evidence/witnesses and cross-examine the witnesses presented by the other party. Following the inquiry, the findings should also be recorded and communicated to the employee.

As per judicial precedents, the requirement to conduct a disciplinary inquiry may be dispensed with in some cases, if:

• the misconduct is so apparent that a disciplinary inquiry is not required; or
• the act constituting misconduct has been unconditionally admitted by the employee.

While there is no statutory requirement for executing termination agreements/exit documentation, it is industry practice (and recommended) to record the terms of an employee’s exit in an appropriate document and set out the exit payments, the release of claims provisions, post-employment obligations and restrictive covenants, etc.

There are no prescribed procedures/formalities or limitations in respect of the execution of termination documents. Depending on the nature of the exit, the documentation may vary.

In the case of resignation by an employee, a resignation acceptance letter is issued by the employer pursuant to receipt of a written resignation letter/email from the employee concerned, and it will have to be countersigned by the employee. In the case of key employees, employers may require them to execute more detailed “settlement and release agreements” that record the full and final settlement payments, as well as the related logistics and conditions.

In the case of termination of employment by the employer, the employer will issue a termination letter/notice, which is not required to be countersigned by the employee (since such termination is a unilateral act of the employer). In the case of termination simpliciter, there is no requirement to mention the circumstances of the exit in the termination notice, while in cases of termination for cause/misconduct, the termination letter will have to set out the details of the proven misconduct against the employee.

Industrial relations laws in India (such as the IR Code and most S&E Acts) provide protection against dismissal for the non-managerial category of employees. Protections prescribed for workers against dismissal include prior notice requirements, payment of Retrenchment Compensation, prior approval requirements (in cases of employees engaged at factories, mines and plantations engaging more than the specified number of employees), etc.

The SS Code also prohibits the dismissal or discharge of women (engaged in managerial or non-managerial roles) during their pregnancy or while on maternity leave.

Employees may initiate wrongful dismissal claims on various grounds, including shortfall/denial of exit payments and failure to follow the due procedure for termination – ie, failure to comply with a notice period in case of termination simpliciter, failure to conclude a disciplinary inquiry in cases of termination on account of misconduct, failure to comply with the “last in, first out” principle in cases of collective redundancy involving non-managerial employees, etc.

Only workers may approach the labour courts/industrial tribunals constituted under the IR Code with a claim of wrongful dismissal. Managerial/supervisory employees would be precluded from approaching the labour commissioner, labour court, industrial tribunal, High Court or Supreme Court for any relief, and may only approach the competent civil courts or the appropriate authorities prescribed under the S&E Acts (if applicable).

In the case of a successful claim of wrongful dismissal in respect of workers, the competent authorities may award relief of reinstatement of services (with or without back wages) and/or damages. However, in respect of managerial employees, depending on the facts and circumstances of the case, the civil courts may only award compensation/damages by way of relief; managerial employees are not entitled to any relief that is akin to the reinstatement of services.

Employees may raise claims/disputes in cases of contravention/non-compliance with any of the following anti-discrimination legislation in India:

• the Wages Code, which prohibits discrimination in relation to remuneration on the grounds of gender (whether at the time of recruitment or during employment);
• the Rights of Persons with Disabilities Act 2016, which prohibits discrimination on the grounds of the disability status of an employee;
• the SS Code, which prohibits discrimination based on the pregnancy/maternity status of a woman and provides for paid maternity leave entitlements;
• the Human Immunodeficiency Virus and Acquired Immune Deficiency Syndrome (Prevention and Control) Act 2017, which prohibits discrimination against persons with HIV and AIDS, and also prohibits the requirement for HIV testing for obtaining employment;
• the Transgender Persons (Protection of Rights) Act 2019, which prohibits discrimination against a transgender person resulting in unfair treatment in employment, or a denial of, or termination from, employment; and
• the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013, which prohibits the sexual harassment of women in the workplace.

The relief granted to the aggrieved employee can be in the form of an injunction, punishment of the offender, a penalty, compensation, reinstatement of services or another form of relief, and is subject to the provisions of the applicable law, the nature of discrimination, the impact/consequences of such discrimination, etc.

There have not been any regulations regarding virtual hearings as far as employment disputes are concerned. In most labour courts/industrial tribunals, hearings continue to be conducted in person, although a few judicial forums have allowed online filings, depending on the jurisdiction.

The IR Code provides for the appointment of conciliation officers and industrial tribunals to hear the claims of workers. A worker can raise a dispute directly in case of discharge, dismissal, retrenchment or any form of termination of service.

Managerial employees may approach the civil court or the appropriate authorities prescribed under the S&E Acts (if applicable).

The common-law principles of class action suits or representative litigation are found in the IR Code, which permits and facilitates collective bargaining by employees/workers (whether through a trade/labour union or otherwise).

Disputes between employers and employees may be subject to arbitration. In fact, the IR Code provides that the employer and workers may agree to refer industrial disputes to arbitration (as per the procedure prescribed under the IR Code) before approaching the labour courts.

In case of non-workers, the parties may agree to refer disputes arising between employers and managerial employees to arbitration in accordance with the Arbitration and Conciliation Act 1996, provided that the agreement containing the arbitration clause is adequately stamped. However, subjecting employee disputes to arbitration proceedings in India is uncommon given the personal nature of the contract as opposed to commercial agreements, and as the costs involved in arbitration proceedings mostly tend to exceed the litigation costs in employee disputes in India. Accordingly, arbitration clauses are typically not included in employment agreements in the ordinary course and are largely restricted to key executive and founders’ agreements.

While the relevant judicial authority may, at its discretion and depending upon the facts and circumstances of the case, award attorneys’ fees to the prevailing employee, there is no statutory entitlement/right in this regard.