The last year saw the near finalisation and implementation of various labour codes and associated rules (described below) in an attempt to streamline and standardise several labour and employment statutes that currently exist in India. The focus of this exercise was to make the law easier to comply with, remove inconsistencies and ambiguities and align the law to the current business environment. For example, a uniform definition of "wages" has been introduced to address the issue of various labour laws stipulating their own unique and often conflicting definition of "wages", which made compliance difficult and confusing; the codes provide for unified registrations and filing of returns, etc.
All the codes (Wage Code, the Code on Social Security, the Occupational Safety, Health and Working Conditions and the Industrial Relations Code – together, the "Labour Codes") have received presidential assent but are yet to be formally implemented. The associated central and state-level delegated legislations are open for public consultation and feedback. Further, to fully implement the Codes, state-level labour laws will have to be harmonised with the Codes to avoid conflict between central and state labour laws. Although these changes are anticipated, the government has not released any clarification on when these reforms will be implemented. Therefore, in the interim period, the existing central and state level labour law framework will subsist.
The Occupational Safety, Health and Working Conditions Code
The Occupational Safety, Health and Working Conditions Code, 2020 (OSHW Code) amends and consolidates provisions on health, safety and working conditions under 13 statutes governing inter alia contract labour, workers in mines, docks, plantations, factories, building and other construction workers, migrant workers, working journalists, etc.
The salient features of the OSHW Code are:
The Industrial Relations Code
The Industrial Relations Code, 2020 (IR Code) amends and consolidates three prominent labour legislations – namely, the Industrial Disputes Act, 1947 (ID Act), the Trade Unions Act, 1926 (TU Act) and the Industrial Employment (Standing Orders) Act, 1946 (SO Act).
The salient features of the IR Code are:
The Code on Social Security
The Code on Social Security, 2020 (SS Code) amends and consolidates nine legislations relating to social security benefits including the Employee's Provident Fund Act, 1952 (PF Act), the Employees State Insurance Act, 1948, (ESI Act), the Payment of Gratuity Act, 1972 (PG Act) and the Maternity Benefit Act, 1961 (MB Act).
The salient features of the SS Code are:
Most of the legislative actions on COVID-19 have been dynamic and evolving, and generally commensurate with the rate of infections. As has been the case in many other jurisdictions globally, lockdown measures have been a common mechanism to combat the spread of the infection in India. As part of these measures, employers were most commonly directed to facilitate work from home to the extent possible, or alternatively to allow only a limited number of employees to report to work, while ensuring COVID-19-appropriate behaviour – for example, use of face masks, social distancing, thermal screening, use of health monitoring applications and other disinfection and sanitisation measures. Some state governments also directed employers to grant additional paid leaves (ie, over and above statutory sick leave) to infected employees.
Protection against Termination of Employment/Salary Cuts
Given the impact of COVID-19 on businesses, the central government issued directions in March 2020 restricting employers from effecting pay cuts or terminations. However, these orders were challenged by employers before the Supreme Court (Ficus Pax Private Ltd v Union of India). In its interim order, the Court directed that no coercive action should be taken against employers. Despite this direction by the Supreme Court, few state governments subsequently issued informal requests and orders against termination of employment during the lockdown period or for employees who had contracted COVID-19.
Vaccination Rollout and Enforcement
In India, the vaccination drive started off in a phased manner, initially for vulnerable or high-priority groups, and eventually came to be universally extended to all citizens over the age of 18. Vaccines administered through government channels are free of charge while vaccines administered through private channels are chargeable at a regulated price. Private procurement of vaccines by employers has been allowed and facilitated, subject to co-ordination with the local health authorities/private healthcare providers and adherence to guidelines issued by the Ministry of Health and Family Welfare. The guidelines detail identification of eligible beneficiaries, registration, conveyance of vaccination details to health authorities, transportation and cold storage of vaccines and deployment of trained personnel to administer the vaccine.
The question of whether vaccines can be made mandatory by employers is currently being debated before courts. There have been a series of cases filed in various courts on the issue of discrimination based on vaccination status, forced vaccination and right to refuse vaccination. These issues are yet to be tested in the private employment sphere, but these cases could have a bearing on the outcome in such cases as well.
The High Court of Meghalaya ruled that compulsory vaccination drives without allowing any scope for making an informed choice could potentially violate a person's fundamental rights. In contrast, the High Court of Madras has expressed reservation over whether there even exists a "right to refuse" the COVID-19 vaccine when the larger public interest is involved, due to the possibility of further infection. Additionally on this front, the Gujarat High Court recently took into consideration an Indian Air Force officer's refusal to get inoculated on the ground that he has a right to receive treatment of his choice and vaccination is voluntary. Based on this, the court stayed the officer’s termination and granted interim relief by directing authorities to conduct a fresh inquiry taking into account the officer’s issues with the vaccination. The Guwahati High Court has also held that the Mizoram government's directions restricting unvaccinated persons from earning their livelihood, as well as from free movement to procure essential items, are arbitrary.
Recently, a PIL (public interest litigation) was filed in the Supreme Court requesting data on the clinical trial and effects of vaccines, and a stay to be issued on the various orders passed mandating vaccines/restricting access due to being not vaccinated. The Supreme Court did not grant any interim relief, however. Further, the Supreme Court observed that the petition pressed personal autonomy against public interest, and said that unless everyone is vaccinated, no one is safe. As is apparent, these are evolving judicial precedents at present.
In any case, there is noticeable movement by the state towards furthering the vaccination agenda in the country at present.
Reports indicate that local authorities in states like Uttar Pradesh have passed "no vaccination, no salary" orders in a bid to encourage citizens to get vaccinated. Recent government orders issued in Karnataka impose an obligation on employers to ensure that the employees are vaccinated and that employees take at least one dose by 31 August 2021. In Maharashtra, all establishments whose staff are fully vaccinated can now operate with full capacity. These orders have not been judicially tested as yet.
In practice, while we have seen private companies incentivise employees who have taken the vaccine/cover vaccination costs, etc, they have generally shied away from mandating vaccination or penalising employees.
In addition to the above, the government announced a few benefits for employees and employers. For instance, it announced an economic stimulus package, Aatmanirbhar Bharat Rozgar Yojana, to (i) incentivise creation of new employment and (ii) restore employment lost during the pandemic. Under the scheme, the government will cover the Provident Fund contribution for eligible beneficiaries, up to 24 months, until June 2021.
In addition to this, the Employees State Insurance Corporation (ESIC) has enhanced existing unemployment benefits for covered workers. It came out with a COVID-19 Relief Scheme to support the family members/dependents of employees who passed away due to COVID-19 (valid until March 2022). The Scheme provides that the dependants will be entitled to receive a monthly payment (of 90% of their average daily wages) of the deceased employee during their life.
The Employees' Deposit Linked Insurance Scheme is an insurance scheme and provides monetary benefit to the family members of deceased employees if the death occurred while in service. The Scheme was amended to enhance the maximum benefit available thereunder and to provide for a minimum assurance benefit of INR250,000.
Indian law does not specifically categorise employees as "blue collar" or "white collar" or even define these terms. Taking their commonly accepted meanings, however, a fair distinction would be whether their conditions of employment are governed by the Factories Act, 1948 (FA) or the local shops and establishments statutes (S&E Act) in a given state. The former prescribes various requirements for employees working in factories and manufacturing industries (ie, blue-collar workers) while the latter applies to employees working in commercial establishments (ie, white-collar workers). Both statutes provide for health and safety requirements, statutory leave, working hour restrictions, overtime, etc.
Workmen versus Non-workmen
Essentially, employee relations in India are typically governed by the Industrial Disputes Act, 1947 (ID Act). This statute applies to both factories and commercial establishments but distinguishes between "workmen" and "non-workmen" which determines the applicability of the legislation and associated rights, benefits and protections. Note that the term "workmen" is meant to be used in a gender-neutral fashion and covers women as well (in fact, the new IR Code proposes to change this term to "worker" to make it inclusive). For instance, while workmen enjoy termination rights (notice, retrenchment compensation, etc) under the ID Act, non-workmen will typically only be entitled to contractual rights, or in some cases, rights under the local S&E Acts. Persons in managerial/supervisory positions or occupying positions of management (POMs) are commonly excluded from the applicability of the S&E Acts in most states (and, consequently, are not usually entitled to overtime, statutory termination rights, etc). POMs are also excluded from the operation of other statutes such as the Labour Welfare Fund statute.
The definition of "workman" under the ID Act covers a majority of the workforce except for a few mid-level and senior-level employees who perform mainly supervisory or managerial functions. In order to assess whether or not a given employee can be classified as a "workman", it would be necessary to look at the nature of work undertaken by the employee and their roles and responsibilities.
A few judicially evolved tests to determine if someone is in a supervisory role are as follows:
A few judicially evolved tests to determine if someone is in a managerial role are as follows:
Generally, workmen are protected under the ID Act and in cases of established wrongful termination can also be reinstated with back wages.
Workers engaged through a third-party vendor or contractor by a principal employer can be classified as contract workers. Additionally, specialised statutes have been enacted to recognise and protect certain categories of workers such as inter-state migrant workers, building and construction workers.
Types of Employment Contracts
Indian law permits defined or fixed-term employment contracts as well as indefinite contracts, although there was some ambiguity previously on whether fixed-term contracts could be used in all industries and sectors. With certain recent amendments to the Standing Orders Act, as well as the proposed changes under the Labour Codes, fixed-term contracts are increasingly gaining in popularity and acceptance. As a safeguard against abuse of the fixed-term engagement model, the law prohibits conversion of permanent posts into fixed-term posts and discrimination in terms of benefits and terms of service (such as working hours and wages).
Fixed-term employees are entitled to the same statutory benefits as indefinite-term employees, but it is advisable that their engagement term is tied to a given project or assignment for the employer to be able to demonstrate that the arrangement is not a sham, with artificial breaks in service. This is because certain employment benefits (such as gratuity) are payable at the time of termination of employment and only if the employee has completed five years of continuous service, reckoned as four years and eight months.
Form of Contracts
Under Indian contract law, an employer and employee relationship can exist in the form of an express contract or an implied contract, a written contract or even an oral contract. However, in order to avoid disputes pertaining to the terms of employment, parties usually execute employment contracts in writing. Certain S&E Acts also mandate written employment contracts, in prescribed formats, and their submission to local authorities. Where statutory formats are prescribed, the information required to be included is fairly standard, such as personal details, date of joining, nature of work and designation, wage scale and terms and conditions of his or her employment.
Various statutes also confer rights on employees expressly covering individuals whose terms of employment may be implied. Some examples include the law against sexual harassment, payment of bonus and payment of gratuity, etc.
Payment of the state-specific requisite stamp duty prior to the execution of the employment agreement is necessary for the contract to be admissible as evidence in court. Non-payment of such stamp duty may cause (an avoidable) delay during the dispute resolution process.
Maximum Working Hours per Day/Week
The law on working hours differs based on the nature of the establishment. Usually, the working hours for an adult worker are either governed by the provisions of the S&E Acts (for commercial establishments) or the FA (for factories) and should not exceed more than eight to nine hours a day and 48 hours a week, depending on the location. Any work done over this would count towards overtime.
These statutes also lay down requirements regarding spread-over limits (ie, the total working hours including rest intervals), daily rest intervals, weekly days off, etc. The daily spread-over limit is usually between 10.5 and 12 hours a day, across locations and statutes. Further, most S&E Acts and the FA require the employer to allow its employees to take at least one rest day every week.
Working hour restrictions and overtime requirements do not usually apply to employees occupying positions of management, but such exceptions may vary based on location. There are also certain restrictions on women working at night, usually between 8pm to 6am. However, various state governments are easing such restrictions on women. Further, certain sectors such as the IT/ITES industry are also granted exemptions in certain states against the daily and weekly working hour limits.
Employees who work for more than the number of hours stipulated above in a given day/week are usually entitled to wages equal to twice their current rate of pay for the number of hours they work overtime. The law also typically sets out the limits beyond which employees are not permitted to work overtime. This also generally differs based on location, and can be a daily limit or even a quarterly limit. The FA prescribes a limit of 50 hours per quarter, extendable up to 75 hours under select circumstances in most Indian states, but some states have revised these limits.
There are no prohibitions against flexible work arrangements under the S&E Acts and these may be agreed with employees, although adherence to the daily and weekly working hours' limits, spread-over limits and overtime limits will still be required. Flexible working arrangements could mean flexibility in working hours, or work location. In case of the latter, there has been a sharp and lasting spike in such arrangements in the past year owing to the pandemic-associated lockdowns. While these are necessary and permitted, employers would need to be mindful of the varying employee benefits and restrictions that would apply to employers under the local laws of different locations, particularly if the employee moves out of the state in which the office is located.
Part-time work is permitted in India. There are restrictions in respect of the total number of hours worked by a part-time worker in some states, however. Courts have held that part-time workers are also included within the definition of workmen and will be entitled all safeguards available to workmen as detailed in 7.1 Grounds for Termination, 7.2 Notice Periods/Severance and 7.3 Dismissal for (Serious) Cause (Summary Dismissal). All terms applicable to full-time employees would typically be applicable on a proportionate basis to part-time workers.
Statutory minimum wages in India are set by local governments under the Minimum Wages Act, 1948 (MW Act) and associated rules. Under the MW Act, minimum rates of wages are usually fixed for different skills and occupations and vary between states (and sometimes even between regions within a given state). The minimum wages are revised by the government every six to 12 months, and organisations are expected to ensure that they are paying minimum wages as per the locally notified standards. Pay increments are not mandatory, unless occasioned by revisions in the rate of minimum wage. Most organisations tend to offer periodic increments in keeping with market practices.
The recently introduced Wage Code provides for the fixing of a national minimum wage (ie, "floor wage") to bridge the vast gaps in minimum wages currently seen across states in India. States will still retain the flexibility to stipulate a different minimum wage, so long as it is not lower than the national minimum wage.
There is no concept of a 13th month bonus in India. However, the Payment of Bonus Act, 1965 (POB Act) provides for a statutory annual bonus to all employees earning less than INR21,000 per month in establishments with 20 or more employees (or ten employees in some exceptional circumstances).
Under the POB Act, an employer is required to pay a bonus at a rate between 8.33% and 20%, depending on the profits and allocatable surplus of the company. If the wages of an employee are more than INR7,000 per month, the employer only has to calculate and pay bonus on INR7,000 or the rate of "minimum wage" prescribed for that particular category of employee, whichever is higher. The POB Act therefore assures bonuses to certain categories of employees based on the organisation’s performance.
Vacation and Vacation Pay
The S&E Acts and FA prescribe leave entitlements, usually in the nature of privilege leave or annual leave (for personal time, vacations, etc), casual leave (for personal exigencies or emergencies) and sick leave (for medical reasons). These entitlements are sometimes tied to an employee's duration of service and could vary from state to state. For example, under the FA and a few S&E Acts, employees are entitled to one day of annual leave for every 20 days worked. Typically, employees are permitted to carry forward and accrue unused privilege/annual leave to the next year, subject to statutory limits. However, unused sick leave and casual leave lapses in most Indian states. Privilege leave can then be encashed at the time of cessation of employment.
In addition to this, the state-specific National and Festival Holidays legislations prescribe holidays for events of local significance. Compensatory holidays or double wages will have to be provided for employees asked to work on statutory holidays.
The MB Act provides paid maternity leave and other associated benefits for every female employee who has put in 80 days of service in the past 12 months. Eligible women employees are entitled to be paid maternity leave of 26 weeks (for women with up to one child), or 12 weeks (for women with two or more children).
The MB Act also provides for 12 weeks maternity benefit for women who have adopted children below the age of three months and to commissioning mothers (ie, biological mothers who use their egg to create an embryo implanted in another woman). It also provides for leave on account of a tubectomy operation, medical termination of pregnancy, illness arising out of pregnancy, etc. Under this law, employers also have an obligation to provide creche facilities to care for children (up to six years of age in certain states).
The law does not require private employers to provide paternity leave. However, most employers tend to offer some additional paid paternity leave voluntarily (ranging from a few days to two or three weeks, based on the organisation).
Childcare leave is not provided in private employment and is provided only for female government employees.
Under the ESI Act, employees who suffer temporary or permanent disablement are entitled to periodical payments at prescribed rates for the period of such disability. Disability leave is not granted under the ESI Act.
Separately, under the Rights of Persons with Disabilities Act, 2016, employers are required to formulate equal opportunity policies for persons with disabilities which inter alia stipulate special leaves provided to them. There is not a specific number of leaves that is prescribed.
Confidentiality and Non-disparagement
Usually, employment contracts impose confidentiality obligations on employees during and after the term of employment and such clauses are enforceable. Unauthorised disclosure of confidential information can form the basis for termination of employment, and the organisation can also seek damages and/or an injunction preventing the employee from divulging further confidential information.
With reference to extending non-disclosure obligations post-cessation of employment, courts have generally favoured granting injunctions to protect the confidential information of the employer. However, it is conditioned upon the court ascertaining if the information in question was protected/confidential in nature to start with.
Non-disparagement obligations are used in India, but their enforceability has not been thoroughly tested in courts. However, courts have in some instances ruled in favour of employers and granted injunctions against employees from making defamatory statements against a former employer.
Employees can be held liable for breach of their employment contract and held to pay damages or subjected to injunctive orders. The relief of specific performance is not granted against employees. Further employees can be held liable for criminal acts under the Indian Penal Code, 1860 or other special statutes.
An employee's liability in a given case would usually be based on the actual evidence available and the employer's ability to prove a breach of confidentiality. Generally, in such cases, the employer would have to prove that an employee has acquired substantial knowledge of such information in the course of his or her employment, and that he or she has either used it or is likely to use it subsequently, and the dissemination of such information is likely to cause harm to the employer. Every piece of information or general knowledge of facts acquired by an employee, without any special effort, in the course of employment cannot be labelled a trade secret or considered confidential information.
In India, the validity and enforceability of restrictive covenants in general is usually tested against the Indian Contract Act, 1872 (ICA), and varies depending on the type of restriction. Under the ICA, an agreement that restrains an individual from exercising a lawful profession, trade or business of any kind is, to that extent, void. Varying restrictive covenants may be enforced differently as discussed below. It is common practice to include broad restrictive covenants in employment agreements despite the fact that some may not be enforceable. Even if they are not strictly enforceable, such restrictions can have a deterrent effect on the employee. Careful drafting of such provisions, along with necessary precautions to allow the unenforceable portions to be severed or blue-pencilled, if necessary, can contribute to safeguarding an organisation’s interests.
While non-compete provisions operating during the period of employment are valid, courts have consistently taken a view that non-compete restrictions extending beyond termination of employment are void under the ICA. Neither the test of reasonableness nor the principle that the restraint being partial (as reasonable) would apply.
Accordingly, non-compete clauses are considered void in India. This position remains unchanged irrespective of whether the employee is offered any additional consideration for the same. The ICA permits enforcement of reasonable non-compete provisions in the limited context of the sale of the goodwill of a business. Such exceptions could be relied on while imposing non-compete provisions in M&A deals (eg, on the seller/founder of the target business).
Non-solicit clauses (including those which operate beyond the term of employment) have been viewed as an acceptable restriction by Indian courts, provided they are reasonable in extent and scope. While courts have granted orders prohibiting an ex-employee from violating their non-solicitation provisions, such remedies can hinge on the employer being able to demonstrate that such solicitation has in fact occurred. Evidence can thus play a crucial role in enforcing such provisions against the ex-employee.
For example, some courts have held that merely approaching a customer does not amount to solicitation, but it must be proved that a pertinent action was taken by the customer based on such an approach. The employer may be entitled to damages if the court finds the restraint reasonable.
Employers in India include post termination non-solicitation and non-dealing clauses for durations based on their commercial needs, but typically around six months to two years.
Separately, while reasonable non-solicit provisions can usually be enforced, non-hire provisions are less likely to be enforceable since they may be viewed as anti-competitive, or an indirect non-compete provision since it would prevent employees from joining another entity even in the absence of any solicitation whatsoever.
The Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules 2011 (Data Protection Rules) issued under Information Technology Act, 2000 (IT Act) safeguard "sensitive personal data or information" (SPI) that is collected or stored in an electronic format. If a body corporate is negligent in implementing the security practices and procedures prescribed under the Data Protection Rules, it may be required to pay damages by way of compensation to the affected person. Further, non-compliance with the Data Protection Rules may also attract penalties.
The Data Protection Rules define SPI as any personal information (PI) relating to:
PI is, in turn, defined under the Data Protection Rules to mean any information that relates to a natural person which, directly or indirectly, is capable of identifying such person.
Under these rules, the employer is required to inter alia disclose the purposes for which such information is sought and the details of the third parties with whom such information will be shared, obtain consent of the employee for collection, use and storage of the same, and share the same with third parties only for purposes which the employee has consented.
Additionally, under the Data Protection Rules, the company is required to designate a grievance officer and publish his or her name and contact details on its website. The grievance officer is required to redress any grievances raised by the provider of sensitive personal information with respect to processing of information in a time-bound manner.
Foreign workers will be eligible to work in India by obtaining either a business visa (b-visa) or an employment visa (e-visa). The type of visa to be obtained will depend on the nature and purpose of the foreign workers' travel.
A business visa is usually granted to a person who intends to enter India to establish business ventures, sell/purchase products, have technical discussions, for recruitment, as partners in a business, for consultations/participation in exhibitions, etc. The business cannot be money lending or any "petty" business or trade. Usually, business visas are granted with a multiple entry facility and for a period up to five years or a shorter duration. A b-visa with multiple entry facility can be granted up to five years with a maximum permissible stay stipulation of six months.
An e-visa is granted to foreign nationals wishing to come to India for the purpose of being employed, subject to foreign nationals satisfying the following conditions:
A few illustrations of foreign nationals who can obtain an e-visa include:
An e-visa with multiple entry facility is usually granted up to two years or the term of assignment, whichever is lesser. However, foreign nationals employed in IT software and IT-enabled sectors can be granted e-visas with multiple entry facility up to three years or the term of assignment, whichever is lesser. The e-visa is employer-specific and a change of employer is not permitted during the currency of an employment visa except in certain specified circumstances, such as change of employment between a registered holding company and its subsidiary.
In the wake of the COVID-19 pandemic, additional conditions – such as obtaining a recognised test within the prescribed timeframe, on-arrival testing, proof of vaccination, quarantining and observance of COVID-19-appropriate behaviour – might have to be adhered to. Further, based on the severity of infections, movement of foreign nationals will be subject to travel bans and locally imposed lockdowns.
Foreign nationals holding an e-visa, valid for a period of more than 180 days, should register with the concerned Foreign Regional Registration Office (FFRO) or Foreign Registration Office (FRO) within 14 days of arrival. If the e-visa is issued for a period of 180 days or less, registration is not required. The prescribed supporting documents such as the employment contract, permanent account number (or application for such), forwarding letter by the employer, etc, will have to be produced during registration.
Foreign nationals holding b-visas are required to register themselves with the concerned FRRO/FRO concerned in case the aggregate stay exceeds 180 days during a calendar year.
The primary statute governing trade unions is the TU Act. It empowers employees to form and register trade unions. The TU Act provides the eligibility criteria for registration, registration process, grant of juristic person status, guidelines on constitution and use of funds, protection against criminal conspiracy in trade disputes and immunity against certain civil disputes. The central TU Act does not expressly provide for recognition of a single trade union. Special laws in certain states such as Maharashtra and Kerala expressly provide for the recognition and rights of recognised unions.
Under the ID Act, registered trade unions associated with an industry, through its executives or office bearers are empowered to represent workmen even if they are not members of a trade union.
Traditionally, the manufacturing sector has been the stronghold of unions, but more recently unionisation has picked up in the knowledge-driven IT sector as well, with industry level unions of IT workers being active in several Indian states. Such unions have been quite vocal about safeguarding the interests of employees in the IT industry and have also started supporting employees in matters of termination/reductions in force, or internal policy changes that are perceived as unfavourable.
Other than trade unions, other employee representative bodies also operate under Indian law, as detailed below
Industrial establishments employing 100 or more workmen may be mandated by the government to constitute a Works Committee (WC) under the ID Act. The Works Committee must be constituted by an equal number of representatives for the employer and the workmen. The chief role of the WC would be to endorse and adopt measures to safeguard harmonious industrial relations between the employer and the workmen and have a say in matters of mutual interest and moderate any disagreements or disharmony.
Grievance Redressal Committee
Industrial Establishments employing 20 or more workmen should constitute at least one Grievance Redressal Committee (GRC) for the purpose of resolving individual grievances, under the ID Act. Akin to the WC, there must an equal strength of members from the employer and the workmen. The chairman of the committee should be appointed on a rotation basis, with a maximum strength of six members. Constitution of this committee is not mandatory if the employer already has set up an alternative grievance redressal mechanism and thus is not a popular option, especially in the private sector. Appeals against the decision of the GRC can be preferred to the employer. The IR Code, once implemented, would exclude the exception allowing employers to stipulate alternate grievance redressal mechanisms, thereby making it mandatory for organisations to establish such GRCs with employee representation.
Sometimes, exemptions offered to the IT sector in some states are conditioned on the employer having formed a grievance redressal committee.
In addition to the above, certain S&E Acts also require the constitution of specialised committees. For instance, in Maharashtra, employers with more than 100 employees are required to constitute a Health, Safety and Welfare Committee consisting of equal representation of the employer and employees.
Collective bargaining agreements in India are typically referred to as Memorandum of Settlement or just "settlements". Settlements arrived at through mutual agreement between the employer and workmen are binding on all parties to agreement including heirs, successors or assignees and in some case future employees as well. A settlement is usually valid from the date on which it was entered into or from an agreed date, and is valid for a minimum of six months or until a mutually agreed future date, unless measures are taken to terminate the settlement. The settlement is enforceable as a decree by a civil court.
Failure to implement a settlement or agreement is also statutorily recognised as an unfair labour practice and a separate punishable offence. Most Indian labour laws additionally have a beneficial provision – ie, they allow for operation of benefits which are more favourable than statutorily entitled benefits and this is applicable in the context of settlements as well.
Settlement agreements can encompass several terms of employment such as salary or wages, promotions, leaves, retiral benefits, soft benefits, transfer of employment and relocations among other subjects. Settlements are common to see in unionised workplaces in the manufacturing sector, banking sector, etc.
Grounds for Termination
Termination of employment in the private sector is principally governed by the ID Act, state-specific S&E Acts, standing orders, and the employment contracts. Indian courts do not recognise "at will" termination and termination of employment would need to be for a reasonable cause.
The procedure to be followed in terminations depends on factors such as (i) whether or not the employee in question can be categorised as a "workman’", and (ii) the reasons for termination – ie, whether it is a "termination simpliciter" or a "stigmatic termination". Termination simpliciter is quite wide in its scope, and has been interpreted to include all types of termination except termination for misconduct. This would typically include termination on the basis of redundancy, poor performance, continued ill-health and loss of faith. A stigmatic termination, on the other hand, is a termination on account of misconduct.
Redundancies arising out of genuine business reasons would be considered a reasonable cause for termination. While there is no statutory definition of a redundancy, it is normally understood as a situation when there is surplus of labour due to various factors, such as cessation of a particular type of business, introduction of new technology, reorganisation of business, etc, because of which an employee’s role is eliminated.
The term "retrenchment" under the ID Act is defined as "the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action". Therefore, retrenchment would cover all types of terminations except terminations on grounds of misconduct, and events of termination specifically excluded by the definition, such as voluntary retirement, retirement, non-renewal of fixed-term employment and termination for continued ill-health. Hence, termination on account of redundancy would be covered by the term "retrenchment".
In order to carry out such a termination for "workman" category employees, there are procedural requirements under the ID Act that an employer would need to comply with for certain workmen (ie, those who have completed 240 days of service). These include:
These requirements are not applicable to "non-workman" employees and their termination is either governed by their contract or under an S&E Act.
In addition to the above, there are other procedural compliances that need to be adhered to. For instance, the employer will need to comply with the "last in, first out" (LIFO) rule while retrenching workmen, with some exceptions. LIFO requires that the most junior employee (based on date of hiring) in a particular category of workmen be terminated first before more senior workmen are retrenched. An employer may deviate from the LIFO rule on reasonable grounds (with the reasons for such deviation furnished in writing to the employee), or if there is a contractually agreed exception.
A seniority list of the "workmen" must be published prior to the retrenchment. Courts have held that a failure to follow the LIFO while terminating employment for a redundancy would invalidate the termination.
The rules around LIFO can have an impact on large scale redundancies, but may not be necessary to follow for individualised retrenchments (eg, for poor performance).
The process discussed above and in 7.2 Notice Periods/Severance will be applicable to collective redundancies of workmen. However, depending on the employee headcount and nature of industry, prior permission of the appropriate government may have to be obtained before the retrenchment exercise can be carried out. Chapter V-B of the ID Act requires that any retrenchment or closure of an industrial establishment (in the nature of a factory, mine or plantation) with 100 or more workmen (300 in some states) be approved by the appropriate government in advance. The concerned labour authorities can inquire as to the genuineness and adequacy of the retrenchment by giving an audience to the employer and the workmen. If the labour authority fails to grant permission within 60 days, the ID Act provides for deemed permission, but this rarely occurs. Any retrenchment is carried out in such industries without prior permission would be deemed illegal.
Statutory Severance and Notice Period
Notice period and notice pay
Notice periods are discussed in 7.1 Grounds for Termination for workmen. The local S&E Acts also lay down notice requirements and this could vary based on location. Statutory notice periods are typically around one month. If certain categories of employees (such as those in positions of management) are exempt from the provisions of the local S&E Acts, their notice period requirements will be governed by contract.
Any termination on the basis of misconduct is stigmatic and there is no requirement to provide notice or payment in lieu of notice in such a termination.
As discussed in 7.1 Grounds for Termination, workmen are entitled to retrenchment compensation, unless they are dismissed for misconduct. All eligible workmen with one year or more of service (reckoned as 240 days) must be paid retrenchment compensation at the rate of 15 days' average pay for every year of continuous service or part thereof in excess of six months. Average pay is the average of the monthly wages in the last three calendar months prior to the termination.
Amount due towards accrued but untaken privilege leave, as per employer policy and the local S&E Act, must be paid to employees.
This benefit is payable to all employees (irrespective of category) who have completed at least five years of continuous service (reckoned as four years and eight months) under the PG Act. This is payable at the rate of 15 days' wages for every year of service or part thereof in excess of six months.
Accrued and unpaid wages
An employee will be entitled to all accrued but unpaid wages until the date of termination.
This would include any additional payments that have been contractually agreed to, such as incentive payments or bonus.
As discussed in 7.1 Grounds for Termination, in certain cases prior permission of the labour authorities may be required before termination of workmen.
In the private employment sphere, misconduct is broadly understood to mean any wrong or improper behaviour that is not conducive to the work environment. The various acts and omissions that would constitute misconduct are typically set out in the employment contract or other employment policies applicable to employees. It is important that the list of misconduct is as exhaustive as possible, since there have been instances where courts have held that in order for the termination to be valid, the employee must be aware that a particular conduct constitutes misconduct.
While there is no express law which prescribes the detailed procedure to be followed by employers while dealing with misconduct cases, courts in India have often held that the employer is required to follow principles of natural justice before taking any punitive disciplinary action against the employee. The process to be followed may vary for certain kinds of misconduct, such as instances of sexual harassment or unauthorised absence.
In order to ensure that the principles of natural justice are followed, an employer must follow the proper disciplinary process before taking the decision to terminate services on the ground of misconduct. Broadly speaking, the following procedures will have to be followed.
As a consequence of such an inquiry process, once the misconduct is established the employer can proceed to take disciplinary action. The employer is not obligated to accept the findings in the inquiry report. Principle of proportionality must be observed by the employer before imposing any punishment such as suspension, termination, warnings, reduction in pay, withholding bonus, dismissal from service, etc.
Termination/release agreements are permissible and commonly used in India. Depending on the reasons that have led to the termination, they ordinarily capture clauses on continuing obligations (eg, confidentiality obligations), severance, termination dates, garden leave (if applicable), non-disparagement, etc. The procedure to be followed in executing such agreements are the same as executing an employment (or other) agreement.
There are no additional statutory requirements that need to be adhered to. Please refer to our comments above on the enforceability of restrictive covenants. These can be included in a release agreement, but may not entirely be enforceable – for instance, in the case of a non-compete obligation, irrespective of whether additional consideration has been offered. Further, termination agreements in restraint of legal proceedings may not be enforceable as the enforceability of such agreements has not been thoroughly tested in courts and would depend on the reasonableness of the terms of the agreement. As a general principle, Indian courts do not allow estoppel against statute, so a waiver of statutory rights in a release agreement may not be legally enforceable.
Employees on maternity leave are protected during the tenure of their maternity benefit and their employment cannot be dismissed or terminated during such leave.
If the employee is receiving a sickness benefit, maternity benefit or disablement benefit under the ESI Act, then his or her employment cannot be terminated during such period either. Similarly, if the employee is under medical treatment for sickness under the ESI Act, the employment cannot be terminated until a period of six months under treatment has passed; in case of certain ailments, the period prescribed is longer.
There could also additional protections for affected/concerned employees during the pendency of an industrial dispute. Further, in relation to employee representatives, there is also a concept of "protected workman" in such disputes – ie, a workman who is recognised as a member of the executive or an office-bearer of a registered trade union associated with an establishment.
Therefore, employers are not at liberty to effect any prejudicial alteration of conditions of service immediately prior to the commencement of the proceedings and against dismissal, discharge or punishment – subject to the permission of the adjudicating authority.
If employees are dismissed by not following the procedures discussed in 7.1 Grounds for Termination, 7.2 Notice Periods/Severance and 7.3 Dismissal for (Serious) Cause (Summary Dismissal), a claim for wrongful dismissal can be made against the employer. If an employee can be classified as a workman, the consequence of such a wrongful dismissal can be reinstatement of the employee, with back-wages.
Further wrongful dismissal can be challenged as unfair labour practice (ULP), which covers dismissal by way of victimisation, colourable exercise of employer rights, false implication, patently false reasons, violations of principles of natural justice, imposition of disproportionate punishment. An unfair labour practice could also be punished with imposition of imprisonment and/or fines. Similar penalties can be imposed under the MB Act and ESI Act for wrongful dismissals.
India does not have a unified anti-discrimination legislation and employers are prohibited from negatively discriminating against certain persons under various statutes:
The burden of proof under the PCR Act and the SC-ST Atrocities Act is on the employer, while under the RPD Act, ER Act, HIV Act and Trans Act, is on the employee. Most of the above laws provide for imposition of fines and imprisonment as penalty and some laws have provision for enhanced fines or term of imprisonment in case of repeated offenders.
Separately, the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (SH Act) contains provisions regulating, prohibiting and punishing sexual harassment of women at the workplace. The SH Act requires employers (with ten or more employees) to create an Internal Committee (IC) and seeks to protect not only female employees, but also female visitors, casual workers, contractors, etc.
The Industrial Disputes Act, 1947 makes bias, victimisation and/or discrimination against "workmen"-level employees an unfair labour practice.
The Constitution of India also prohibits discrimination on the grounds of religion, race, caste, sex, descent, place of birth or residence with respect to any employment or office under the state. Though such obligations bind only the state, it is common in India for private employers to also abide by this constitutional mandate.
Labour courts and industrial tribunals (which are separate from the traditional civil courts) have been constituted under the ID Act to deal with labour/industrial disputes between the employer and a workman or group of workmen.
Broadly, the ID Act provides for specialised fora such as:
Various other employment statutes also provide for separate dispute resolution mechanisms. For example, the S&E Acts in various states also contain provisions allowing employees to appeal a decision to terminate their employment, and seek redressal from the relevant authority (usually the jurisdictional labour commissioner).
Please note that senior employees who fall outside the ambit of various labour laws such as the ID Act or the state-specific S&E Act would not normally be eligible to approach these labour courts or labour commissioners for redressal of grievances. In senior management contracts, the parties may agree on the mode of dispute resolution (which may include arbitration or traditional litigation), the jurisdiction for dispute resolution, etc.
Specialised departments also exist under social security legislations such as the Employees' Insurance Act, 1948, Employee's Provident Fund and Miscellaneous Provisions Act, 1952. These fora can impose penalty, damages and interest for statutory non-compliances and can even attach employer properties under certain circumstances.
Although the phrase "class action claims" is not prevalent in India, under the new Labour Codes, the claim-handling procedures permit a single application to be filed “on behalf or in respect of any number of employees employed in an establishment”. This is indicative of a move towards class-action disputes.
The ID Act expressly provides for voluntary reference of industrial disputes to arbitration. Industrial disputes include disputes between employers, employer and workmen, and also between workmen in relation to terms and conditions of employment. This reference to arbitration can be made when a dispute exists, during the adjudication process, or even if it is apprehended (ie, pre-dispute), and must be through a written agreement. The form and terms of the arbitration agreement is statutorily prescribed, and the agreement will have to be forwarded to government labour authorities. The arbitration agreement is binding on the parties to the agreement. Due to these peculiarities, it is uncommon to see arbitration between employers and workmen. Any private arbitration outside the ID Act is not permitted in relation to workmen.
As mentioned above, the ID Act is not applicable to senior/management level employees. If their employment contracts provide for arbitration in the dispute resolution clause, the same will govern any disputes that may arise. Such arbitrations are normally conducted in accordance with the Indian Arbitration Act.
Prevailing employees may be awarded damages or compensation on an overall basis. Attorney's fees are not commonly awarded by courts in India.
During the 18 months since the start of the global pandemic, the Indian employment sector, like its global counterparts, has witnessed several measures aimed at alleviating the hardships of its stakeholders. As the country continues its fight against the catastrophic effect of the pandemic, the central government and multiple state governments in India have fortified their efforts towards facilitating ease of doing business, besides ensuring protection to the workforce.
Work from Home
The rampant COVID-19 cases and multiple lockdowns and transportation restrictions across several states have made continued functioning from traditional workplaces extremely difficult for most employers. Given that incumbent labour legislations generally envisage the existence of a fixed and common workplace, several legal concerns have become apparent with the adoption of the work from home arrangement.
For instance, keeping track of working hours, overtime and leaves, the onus of ensuring safety of workers and the applicability of workplace sexual harassment and other labour laws, has added to the complexities of a work from home scenario for employers. By way of example, a number of employers experimented with various monitoring structures, with some asking their employees to work with their laptop cameras switched on during working hours. One can very well argue that this amounts to an invasion of the employee’s personal space, although the law does not explicitly qualify this practice as an infringement of the employee’s legal privacy rights.
Indian labour laws, unfortunately, have not yet made any significant statutory progress in recognising the rights of persons working from home. However, traces of potential statutory recognition of work from home may be found in the recently released Draft Model Standing Order for the Service Sector, 2020. Applying to industrial establishments having more than 300 workers, it will permit employers to allow workers to work from home, although the draft order does not yet define "work from home" and neither does it confer any enforceable right to work from home.
Work from home policies
Multiple surveys suggest that an overwhelming majority of employers in India have adopted the work from home model. In this regard, employers have been increasingly introducing various work from home policies that clearly define the rights and liabilities of both parties.
Given that the current statutory regime does not contemplate a work from home arrangement, it is imperative for employers to have robust provisions as a part of their policies. Such policies should expressly set out the reporting office of the employees along with its location, even though these employees are working from their home states. This would aid in determining the applicable state laws. Separately, HR policies such as those concerning annual leave, return of company property, code of conduct and prevention of sexual harassment should also expressly contemplate the work from home arrangement.
The issue of data protection has also been heavily featured in work from home arrangements. The contractual terms generally aim (as they should) at positing the distinction between personal and work-related data, regulating modes in which official communications may be made, access and usage of confidential information/trade secrets, etc. Furthermore, most employers also require their employees to only work on company-issued devices and, consequently, various terms and conditions regulating the usage of such devices are now very common.
Investigations and standard operating procedures
Conducting workplace investigations in a work from home arrangement appears to be fraught with difficulties. Gathering relevant data or evidence in a physical form appears to be increasingly difficult and procurement of digital evidence has often become onerous, given that it can be easily tampered with. There have also been several instances of employees illegally downloading confidential information onto their personal devices; in such instances, employers are compelled to require access to personal devices/digital accounts of employees, which has its own set of legal challenges.
The process of interviewing relevant employees has also been testing for the investigator. Persons attending an online interview may record such interview without consent and it is likely that remote interviews will undermine most interviewers’ ability to make apt credibility assessments. Furthermore, remote interviews are vulnerable to repeated (technical or social) disruptions, adding to the overall problem of conducting seamless interviews.
Employers now have no option other than to devise an appropriate standard operating procedure which governs online interviews, presentation of evidence and other communications, and establish safeguards for preventing leakage of sensitive information.
"Offboarding" an employee from a remote working arrangement is a novel concept for most employers. It is not an exaggeration to state that handing over of company property such as laptops, mobile phones, documents containing confidential information, etc, are proving to be a test for existing employer systems.
In order to ensure the smooth completion of exit formalities, a significant degree of vigilance is often required from an employer. Care must be taken to ensure that the employee has not misappropriated confidential information and that her or his access to digital resources has been removed. The employer must further remind the employee of her or his confidentiality and other post-employment obligations, ensure that all relevant exit documents are executed, and efficiently carry out the full and final settlement of the employee’s accounts.
The federal Ministry of Health and Family Welfare (MoHFW) has clarified that receiving the COVID-19 vaccine must be entirely voluntary. Consequently, employers would have a negligible legal basis for making vaccinations mandatory, or for taking adverse action in case an employee refuses to get vaccinated. However, this must also be balanced with an employer’s obligation to provide safe working conditions for employed individuals. Employers therefore do have a right to refuse access to physical premises to any employees who are not vaccinated as long as the denial of access does not impede the discharge of the employee’s formal duties and obligations. In that context, employers are also entitled to ask for proof of vaccination subject to protection obligations under extant data protection laws in India.
However, it must be said that significant ambiguities remain as to whether an employer can deny recruitment to a prospective employee, based on whether he or she has taken the vaccine. The jury is still out on whether the employer’s obligation to provide a safe working environment would vindicate the rejection of an otherwise eligible candidate. Clarifications from the government in this regard are awaited.
Under incumbent laws, employers are not mandated to grant a paid leave in order to allow employees to get vaccinated and neither are they required to cover the costs of such vaccination. However, a large majority of employers have continued to explore multiple ways in which employees can be incentivised to receive the vaccine. These include granting additional leaves, covering costs of vaccinations, on-campus drives featuring stringent safety protocols and measures, return to workplaces in a phased manner or even the possibility of geographical mobility in the near future.
The MoHFW has recently issued a notification allowing for COVID-19 vaccinations to be administered in workplaces. The benefits of this measure has been extended to every employee of the workplace, their family members and dependants, as defined by the respective employers. Several employers in both the government and private sectors have already undertaken mass vaccinations drives for their employees and their dependants.
Multiple organisations are now also coming up with new schemes and policies to support their employees who have been impacted by COVID-19. These include providing long-term financial aid to the families of employees that have succumbed to COVID-19, arranging access to mental health care support for employees, reducing working hours or granting “time off” to employees for dealing with anxiety and stress induced by COVID-19, setting up COVID-19 care facilities for its employees and family members, etc.
The Labour Codes
The multiplicity of Indian labour legislations enacted largely in the industrial era resulted in the development of diversified views on the same subject matter. The complex compliance requirements under each of the Indian labour legislations have often been touted as major hurdles for ease of doing business in India. In a major move to tackle these concerns and for the purpose of ensuring ease of doing business in India, as well as protecting rights of all stakeholders, several extant labour legislations have been consolidated and codified, which culminated in the drafting of four distinct labour codes.
Subsuming around 29 federal legislations within their ambit, these codes are:
The codes will take effect on a federal level, ensuring uniformity in its application. Each of the codes will have corresponding rules. Additionally, the state governments are likely to notify separate rules, as is their right under the Constitution of India. Consequently, the real test is to ensure that the state rules are aligned so that the objective of uniformity is not diluted. While the codes were originally set to be enforced from April 2021, supervening circumstances such as the ongoing pandemic have led to the postponement of the effective date. However, based on public statements released by government officials, the codes can be reasonably expected to come into force before the end of this year.
Within its respective sphere, each of the codes endeavours to strike a balance between the interests of the employer and the employee. While the primary objective was to ensure a seamless amalgamation of the subsumed legislations, the codes also introduce several new provisions, setting new trends within the employment sector.
Definition of "wages"
In a significant development, the Code of Wages, 2019, has introduced a definition of "wages". Under the existing regime, the definition of "wages" is distinct under each labour legislation, often leading to ambiguity for all stakeholders. The definition of wages has now been made uniform. Currently, employers often engage in the practice of splitting an employee’s remuneration into various "allowances", instead of paying a lump sum amount as basic wages.
The new definition, however, stipulates that the basic wage component must constitute at least 50% of the gross remuneration payable to an employee. Hence, once the Code of Wages is brought into force, employers would be required to restructure their compensation models accordingly. While there is a possibility that the employer’s liabilities towards social security may increase, the employee’s take-home pay can reduce unless the new compensation structure is modelled for both sides’ benefit. It is also imperative to note that the definition of wages will have a direct impact on the calculations relating to provident fund, gratuity, retrenchment compensation and maternity.
Setting floor wage rates
Currently, India does not have a federal minimum wages standard. The responsibility of setting minimum wage levels generally rests with the state governments who in turn specify various minimum wage rates based on the employee’s industry, skill levels, nature of employment, etc. Furthermore, these rates vary with each state as well. As a result, for entities that engage in pan-India operations or are involved in multiple industries, keeping track of the different applicable statutory wage rates can be an exceedingly daunting task.
The Code on Wages has reduced the list of minimum wage rates that may be specified, while also introducing a new concept of "floor wage", which will be stipulated by the federal government, based on geographical areas. This will form the basis for fixation of the minimum wages by the state government for areas under their jurisdiction, which now need to be equal to or greater than the floor wages. No individual state would be allowed to set minimum wages below the national floor wage. In a case where a higher minimum wage has been already set by a particular state government, it cannot be reduced thereafter.
While this development may be indicative of an increased cost of labour in certain regions, in our opinion it should also bring in long-term benefits such as improving the living standards of labourers, avoiding space crunches and underemployment in major cities, and boosting a uniform growth of industries throughout the country. Once the Code is notified, employers would do well to revise the wages for a section of their workers who are paid wage rates approaching the statutory minimum threshold.
Non-discrimination in the workplace
Currently, the Equal Remuneration Act, 1976 serves as the anti-discrimination law in the country, prohibiting employment discrimination against women on the ground of sex. The Code on Wages has extended the benefits of these provisions to individuals of any gender, thereby eliminating the gender-binary-centric approach taken in the previous legislation.
This is in line with a recent judgment of a state High Court that has provided detailed directions for employers to generate inclusivity and eliminate all forms of discrimination against the LGBT+ community in the workplace. The directions include setting up and enforcing human resource policies that are LGBT+ community-friendly, adopting suitable policies that address non-discrimination on grounds of sexual orientation, including sexual harassment of the LGBT+ community in the workplace, making suitable changes in hiring policies for inclusivity, creating awareness and sensitising individuals on the prohibition of discrimination as provided for in the Transgender Persons (Protection of Rights) Act, 2019, etc.
Recognising gig and platform workers
In recent years, the idea of freelance working has gained extensive popularity in India and is currently considered as an intrinsic part of the nation's labour markets. The industry has been growing rapidly, with reports suggesting an exponential increase in its worth in the next five years. As in the USA and the UK, India is witnessing its fair share of challenges with protests regarding minimum wages, working conditions and claims of employment being raised by gig workers. Recognising the same and with the objective of protecting the rights of gig workers and ensuring that they are adequately taken care of, the Code on Social Security has now extended certain employment benefits to the gig economy in India, a measure that has been unprecedented.
A gig worker has been defined as any person that participates in a work arrangement and earns money from activities that fall outside the ambit of a traditional employer-employee relationship. By virtue of the Code on Social Security, gig workers would be able to avail themselves of various social security benefits relating to health, advanced age assistance, disability, maternity benefits, education, etc. The provisions have also been similarly extended to platform workers that engage in work arrangements outside of a traditional employer-employee relationship, via online platforms. By virtue of the definition provided for "gig workers", there is a possibility that even independent consultants would be considered as gig workers since they also function outside the traditional employer-employee relationship. However, this is a grey area and appropriate statutory clarifications are awaited.
While the Code on Social Security sets out a broad framework for social security benefits for gig and platform workers, the government is expected to formulate detailed schemes for these benefits. These schemes would typically provide for the manner of administration, agencies for implementation, role of aggregators and sources of funding. Since there is a possibility that the employer may be required to make certain contributions to such schemes depending upon their revenue, this would lead to a possible additional financial burden on employers engaging such gig or platform workers.
Mitigating trade union conflicts
Trade unions play an important role in ensuring that the rights of the workers are well protected. However, a loud complaint by several employers appears to be that unions can also be a hurdle against the smooth functioning of industrial establishments, especially in instances of conflicts and strikes. The issue often arises from the fact that it is common for employees of large industrial establishments to be associated with multiple trade unions. These trade unions may frequently develop ideological differences, leading to the creation of factions within the workforce. Furthermore, it is a significant challenge for the employer to negotiate with the different trade unions.
In order to address these concerns, the Industrial Relations Code now allows for the designation of a particular union as the sole negotiating union in an industrial establishment, subject to the achievement of certain thresholds.
Relaxation in threshold for retrenchment, lay-offs and closure
The extant labour law legislations have often been criticised for being skewed against the employer in certain aspects. For instance, currently, mines, plantations and factories employing more than 100 workers are required to obtain government permission for temporarily refusing work or retrenching its workers. Further, stringent compliance requirements are also stipulated for the aforesaid establishments seeking to close their businesses.
The Industrial Relations Code brings in a much-needed relief for employers by stipulating that only industrial establishments employing 300 or more workers are required to undertake the specified compliance obligations, in case they seek to retrench or lay-off their workers or close their businesses. Having said that, the government is expectedly receiving a significant push back from trade unions representing the workers.
Transition to the new labour codes
In terms of transition from the existing regime to the new law, although the codes do not prescribe any transition period, some amount of time can be expected to be given to organisations for adopting the necessary compliances. That said, the Social Security Code provides that the schemes and regulations framed under the Employees’ Provident Fund Act, 1952 and the Employees’ State Insurance Act, 1948 would remain in force for a period of one year to the extent they are not consistent with the provisions of the Code. Also, taking a cue from all the four codes which introduce an "inspector-cum-facilitator" who would be expected to assist the employers with ensuring compliance with the laws, one would assume that guidance and assistance would be offered by these government bodies to help with the transition rather than imposing penalties.
It has been seen in the past that at the time of implementation of the amendments in the Maternity Benefit Act, particularly the creche facilities, the government authorities had taken a practical approach and there was no prosecution of the employer in the first instance. The same approach can perhaps be expected to be taken for the codes as well. That said, employers must nevertheless demonstrate that effective steps have been taken at the organisational level to move towards the new regime.