INDIAN EMPLOYMENT / LABOUR LAWS : AN INTRODUCTION By

Prince Hemraj Verma Manager(Trg.Coord.) Institute of Food Security Food Corporation of India Gurgaon
1

SOME IMPORTANT LABOUR LAWS APPLICABLE TO WORKMEN

In India several labour laws regulate various conditions of work, wages, service, labour relations and other such related matters and for the present presentation we will discuss the complex labour laws in the Organized sector in India. Some of the relevant laws which are discussed here are as follows: The Industrial Disputes Act, 1947; The Factories Act, 1948; (Shifts ) Shops and Establishment Acts of various states; (Time Maximum 9 Hours.) The Contract Labour (Regulation and Abolition) Act, 1970; The Trade Unions Act, 1926; The Workmens Compensation Act, 1923; The Employees Provident Funds and Miscellaneous Provisions Act, 1952;(NWNP & Contract Labour)

1. THE INDUSTRIAL DISPUTES ACT, 1947 (IDA)

IDA - is an Act to make provision and settlement of Industrial Disputes with the objective to maintain industrial peace and economic justice. IDA categories employees into workman and non-workman. Section 2 (s) of IDA defines workman.

Workman means any person employed in any industry to carry out manual, skilled and unskilled, technical, operational, clerical or supervisory work for hire or reward.
The definition specifically excludes persons employed in managerial or administrative capacity and also those persons (otherwise falling within the definition of workman) who are employed in supervisory capacity at wages more than Rs.1,600/- per month (US $ 37) and sales promotion employees.

1. THE INDUSTRIAL DISPUTES ACT, 1947 (IDA)

What is "industry" Industry means any systematic activity carried on by co-operation between an employer and his workmen (whether such workmen are employed by such employer directly or by or through manpower agency, including a contractor) for the production, supply or distribution of goods or services with a view to satisfy human wants or wishes (not being wants or wishes which are merely spiritual or religious in nature) What is lay-off" Lay-off means the failure, refusal or inability of an employer on account of shortage of coal, power or raw materials or the accumulation of stocks or the break-down of machinery or natural calamity or for any other connected reason to give employment to a workman whose name is borne on the muster-rolls of his industrial establishment and who has not been retrenched;
4

1. THE INDUSTRIAL DISPUTES ACT, 1947 (IDA)

What is "retrenchment It means 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, but does not include - (a) voluntary retirement of the workman; or retirement of the workman on reaching the age of superannuating termination of the service of a workman on the ground of continued illhealth; What is strike Sec 2q of ID Act combination of persons indulging in concerted action in stoppage of work or making hindrance to the normalcy of the organization. Illegal strikes and lockouts strikes as weapons in the hands of trade union/work force and lockouts in the hands of employers / management Strikes without due notice to the employer (with in 14 days of the notice) or during the pendancy of proceedings before labour dept - same is applicable to lockouts
5

2. FACTORIES ACT , 1948

Employers are required to follow stringent licensing and safety measures. Factory is defined as a place where manufacturing process is carried out using 10 workers using electrical power or 20 workers without power. Manufacturing process also includes petrol pumps, retail workshops, handicraft industries etc. Post Bhopal tragedy (Union Carbide case) special chapter (IVA) has been added making disclosures mandatory for hazardous processes. The working hours, leave , weekly days off and wages are similar to Shop and Establishment Acts- this is discussed later herein. Under the Act the occupier is responsible for all compliances and in the case of an incorporated company the Director on the board of the company must be designated for the purpose of an occupier. Failing which all directors could become liable.

3. SHOPS AND ESTABLISHMENT

In India most States have a legislation (Shop and Establishments Act) in place which regulate aspects such as working hours, leave with pay, overtime etc. Shop and Establishments Act apply to shops, commercial establishments, banks, insurance companies, hotels, restaurants, software companies and other service providers. However, they do not apply to factories as Factories Act, 1948 governs that conditions. The establishment are required to register in each city under the Act. Some of the salient features is discussed herein of Bombay Shop and Establishment Act, 1948 (BSA) which are akin to the enactment of other States. Working hours for 48 hours per week spread over 6 days is permitted. Overtime payment is made at the double normal hourly rate. Employee who has worked minimum 240 days will become eligible for 21 days paid leave and employee is not allowed to accumulate more than 42 days leave. BSA also has provisions regarding toilets, hygiene etc. and makes provisions for maternity benefits etc.

4. THE CONTRACT LABOUR (REGULATION AND ABOLITION) ACT, 1970

An Act to regulate employment of contract labour in certain establishments and to provide for its abolition in certain circumstances and for matters connected therewith Allows Employers (principal Employers) to use Contractors for supply of labour. It applies to establishments employing twenty or more persons. It does not apply to establishments where nature of work is intermittent or casual. Principal Employer as well as the Contractor have to register themselves. The Contractor has to provide amenities and facilities which include canteens, rest-rooms, first-aid facilities etc. In case the Contractor fails to provide the facilities the Principal Employer will have to provide the same and adjust and recover the expense from the Contractor. Both the Principal Employer and the Contractor have to maintain Registers and Records of the Contract Labour employed. The appropriate Government in consultation with the Central and State Board can prohibit employment of contract labour in any process, operation and establishment- if it is of the view that it is perennial in nature, the work can be carried out by regular workmen.

5. TRADE UNIONS ACT, 1926

Seven or more persons can get together to form a Trade Union. In order for the Trade Union to register it has to have at least ten percent or one hundred of the workmen which ever is less as its members. Section 9 - On registration the Registrar will issue a Certificate of Registration.

Section 19 agreement between members will not be void or voidable merely by reason that the object of the agreement amounts to restraint of trade.

6. THE WORKMENS COMPENSATION ACT, 1923

Employer is liable to pay compensation to the employee in case of injury arising out of and in the course of his employment.
The liability to pay compensation is independent of any neglect or wrongful act of the employee. This liability springs out of relationship of master and servant. It is not a liability which arises out of tort(wrong doing).

However, employer shall not be liable if injury does not exceed 3 days or the workmen was under influence of drugs/alcohol, willful disobedience of rules and safety guards. However, these limitations not applicable in case of death of the employee.
Workmen shall be deemed to have been injured in case of contracting occupational disease in the course of his employment. The Schedules under the Act detail the amount of compensation for different type of injuries. Provides for one-time payments in case of death and in case of permanent disablement, compensation is made depending on the percentage of loss of earning capacity. Once an employee elects to file proceedings under this Act he cannot file civil suit for damages thus the Employer is protected from double proceedings.

10

II. WORKMAN V/S NONWORKMAN

The Labour can be broadly classified in two main categories i.e. unorganized sector and organized sector. Unorganized sector includes small establishments and employment relationships of irregular duration and not regulated by any of the labour laws. For e.g. Artisans, petty shopkeepers, hawkers etc. Organized sector is identified by specified/fixed operating conditions laid down by various labour law. Workman derives certain rights and benefits from the various labour and industrial laws in India. Non-workman is defined as employees carrying out managerial and administrative work and their terms of employment is essentially derived from the contract drawn up between the Company.

11

III. NON-WORKMAN IN PRIVATE SECTOR

Primarily, none of the Labour Laws apply to nonworkmen and service condition of such employees are governed by the respective contracts and general service conditions (if existing).

In case of termination, courts cannot reinstate the Employee.

7. SOCIAL SECURITY LEGISLATIONS

EPFA applies to establishments and factory employing 20 or more persons. Employee drawing salary upto Rs.6,500/- per month has to become member of the provident fund. EPFA in provident fund scheme provides wherein 12% is contributed by both the employee and the employer with administration charge of 1.5%. In Pension/Superannuation fund scheme a part of the contribution to the provident fund (8.33%) is diverted to this scheme. The Deposit Linked Insurance Fund Scheme is for providing Life Insurance benefits. The employer contributes 0.5% and 0.01% towards administrative cost of the basic wages.

13

CONTD
The Payment of Gratuity Act, 1972

It applies to factories, mine, oilfield, plantation, port , railway, Shops and Establishments employing ten or more persons.
Applicable to employees who have rendered continuous service for five years. Employees with less than five years will be entitled in case of death or disablement.

Employer has to pay within 30 days from the date it becomes payable to the employee.
Total amount of gratuity payable shall not exceed Rs.3,50,000/- unless there is a contract to the contrary. Formula is - Last Wages *15*No. of services/26

Compulsory insurance is necessary towards gratuity from Life Insurance Corporation, unless employer exempted from the Government.
Gratuity is calculated at the rate of 15 days wages for every completed year of service or a part thereof exceeding six months.

14

WHEN TERMINATION OF EMPLOYMENT IS ILLEGAL IN LAW

Workmen get protected under various legislations in India. Under section 9A of IDA it becomes difficult to vary the terms and conditions of the workman. It will be illegal to retrench and lay off if statutory conditions are not fulfilled and prescribed compensation is not paid to the workmen. In certain cases Appropriate Governments prior permission is also required. Termination of employees not workmen will be governed by the terms of their appointment letter / employment contract and follows, any termination not as per their contract may be construed to be illegal.

15

Some precautions
Identify the long term requirement of employees.

Identifying the workmen and employees not covered under definition of workmen, respectively.
Local laws of the State should be borne in mind while drawing up the contracts

Issue appointment letters which clearly define the employment terms and conditions.
Employment contracts, where necessary, should be put in place with clauses for wages, benefits, non-compete, confidentiality, term, termination etc. Depending on the requirement, use fixed term contracts for workmen. The terms and conditions of the employment should be clearly explained to employees before execution and should be drafted without any ambiguity.

16

THANK YOU -

17