employment law overview india 2019-2020 · at-will. further, in terms of the indian contract act,...

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table of contents.

i. General overview 01II. PRE-EMPLOYMENT CONSIDERATIONS 06III. EMPLOYMENT CONTRACTS 08IV. wORkINg CONDITIONS 10V. ANTI-DISCRIMINATION LAwS 13VI. SOCIAL MEDIA AND DATA PRIVACY 16VII. AuThORISATIONS fOR fOREIgN EMPLOYEES 17 VIII. TERMINATION Of EMPLOYMENT CONTRACTS 19IX. RESTRICTIVE COVENANTS 22X. TRANSfER Of uNDERTAkINgS 24XI. TRADE uNIONS AND EMPLOYERS ASSOCIATIONS 25XII. EMPLOYEE BENEfITS 30


i. general overview

2. Key Points•Labour and employment laws are listed under the ConcurrentListintheConstitution,whichmeansthat the Union Parliament (federal legislature) and State Legislatures have co-equal powers to enactlawsrelatingtoalllabourandemploymentmatters in India.Typically,theUnionParliamentenactsaCentral law,whiletheStatesformulaterules thereunder. Additionally, States enactstandalonelegislationsaswell.

• One of the main principles of Indian labour and employmentlawsisthattheydistinguishbetweenemployees who are defined as ‘workmen’ andthose who are in management/supervisory/administrative roles (‘non-workmen’). Mostlegislations regulate the service conditions ofand protect the rights of only those employees who qualify as workmen under Indian laws.The service conditions of non-workmen is

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typically governed by the terms of the relevant employment contracts and the internal policies of the organization. Determining whether aparticularemployeeisaworkmanornot,hastobeundertakenonacasebycasebasis.

• India does not generally recognize employment-at-will. Further, in terms of the Indian ContractAct,1872(“ContractAct”)(whichistheprincipallegislation governing contracts in India),agreements which restrain trade, business orprofession are void – this could have an impact onemploymentbonds,andonnon-competeandnon-solicit covenants in employment contracts.

•Trade unions are typically restricted to themore traditional forms of business, such asthe manufacturing sector; however, in recenttimes there has been some unionization in theInformationTechnology(“IT”)sectoraswell.TheTrade Unions Act, 1926 (“Trade Unions Act”),providesforregistrationofatradeunionandthe

1. introductionTheConstitutionofIndia(the“Constitution”)isthecornerstoneofindividualrightsandliberties,andalsoprovidesthebasicframeworkwithinwhichalllawsinIndia,includinglawsrelatingtolabourandemployment,mustoperate.TheConstitutionguaranteescertainfundamentalrightstoindividualssuchastherighttolife,privacy,equalitybeforethelawandprohibitionofdiscriminationinpubliceducationandemploymentonthebasisofreligion,sect,genderandcaste.TheConstitutionrecognizes‘righttolivelihood’asanintegralpartofthe fundamental right to life.

Inadditiontofundamentalrights,theConstitutionalsoenvisagescertain‘directiveprinciples’whichserveasaguidetothelegislaturetowardsfulfillingsocialandeconomicgoals.GivenIndia’scolonialandsocialisthistory,socialjusticehasalwaysbeenattheforefrontofseveralIndianlegislations,specificallylabourandemploymentlaws.ItisimportanttonotethatseverallabourlawsinIndiahavebeendesignedfromaworkeremancipation perspective – including those relating to factories, mines, plantations, shops, commercialestablishmentsaswellasthoserelatingtopaymentofwages,regulationoftradeunions,provisionofsocialsecurity,industrialsafetyandhygiene.

However, given changing economic requirements in recent times, the Indian Government has beenincreasinglyconsciousoftheneedsofbusinessaswell.Accordingly,ithasbeenslowlyandsteadilyworkingtowardslabourreforminordertoimprovetheeaseofdoingbusinessinIndia.Thereareseveralbig-ticketreformsinthepipeline,whichwehopewillseethelightofdayinthenextfewyears.


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rightsandliabilitiesofaregisteredtradeunion.Itis also proposed to recognize certain trade unions both at a Central and State Government level whowouldthenparticipateinpolicymaking.

•TheIndustrialDisputesAct,1947(“IDAct”)isthekeylegislationthatgovernsindustrialrelationsinIndia and aims at securing industrial peace and harmonybyprovidingtheprocessforsettlementof disputes between employers and employees.

•There is a specific legislation, the EqualRemunerationAct,1976(“ERA”),whichmandatesthepaymentofequalremunerationtomaleandfemaleworkerswhoundertakesimilartasks.TheContract Labour (Regulation andAbolition) Act,1970 (“CLRA”) is anothermajor legislation thatpertainstoregulatingcontractlabour.

3. legal frameworKGiven that both the Union Parliament (federal legislature) and State Legislatures have co-equal powers regarding labour and employment laws,therearehundredsoflegislationsrelatingtolabourand employment in India, including around 50legislationsenactedbytheUnionParliament.Mostoftheselegislationsconcernblue-collaremployeesorworkmen,owing to thehistoricalemphasisonimprovingworkingconditionsfortheseemployees.On theotherhand, the legal structurerelating tonon–workmen(i.e.employeeshavingmanagerialduties or white-collar employees) is not ascomprehensive,andhasevolvedinrecentdecadesmainlythroughjudicialpronouncements.

A. DIffERENCE BETwEEN wORkMEN AND NON-wORkMEN

Section 2(s) of the ID Act defines a workman asa person who is employed to do any manual,unskilled,skilled,technical,operational,clericalorsupervisoryworkforhireorreward.Thedefinitionhowever excludes the following persons: (i)those who are employed mainly in a managerial or administrative capacity; (ii) those who, beingemployed inasupervisorycapacity,drawasalaryexceeding INR 10,000 (~USD 140) per month or(iii) those who exercise, either by the nature ofthe duties attached to the office or by reason ofthepowersvested in them, functionsmainlyofamanagerial nature.


Having said the above, it is important to notethat the wage ceiling of INR 10,000 (~USD 140)mentioned above is not always the definitivecriterion in respect of ascertaining whether or not a particular employee will be a workman. Therehavebeenmultipleoccasionswhen Indiancourtshaveheldthatwhetheranemployeeisaworkmanor not depends on the exact nature of the jobresponsibilitiesanddutiesandthecontextofhis/herroleintheorganization,ratherthanmerelythecompensationpackage.

Once employees are ascertained to be workmenunder the ID Act, theywould have several rights–for instance,certainchangestotheirconditionsof service and any termination of employmentcanonlybeundertakenasperaspecifiedprocess.Further, theycanapproach labourcommissionersand/or the industrial tribunals in case of any unjustifiedterminationandunfairlabourpractice.

The terms of service of non-workmen (i.e. thosewhomainlyworkinamanagerialoradministrativecapacity) are ordinarily governed by the State -specificshopsandestablishmentslegislation(“S&EAct”), thetermsandconditionsof theircontractsof employment and the internal policies of an organization. These employees will typically falloutside the scope of the ID Act - there are various judicial pronouncements which have held thatnon-workmenarenotentitledtoclaimprotectionunder the ID Act.

B. OThER fACTORS

Apart from the classification of employees intoworkmen and non-workmen, the applicability oflabour legislation also depends on the nature ofactivitythattheemployeesareengagedinaswellastheplaceofwork–for instance,different lawsapplydependingonwhethertheplaceofwork isa factory, plantation, mine, shop or commercialestablishment. Certain legislations also take intoaccount the number of employees engaged at a particularplaceofwork– for instance, thescopeandapplicabilityofsocial securitybenefitsvaries,dependingon thewagesearnedandthepositionoftheemployeeattheworkplace.



C. OVERVIEw Of kEY LABOuR LAwS

Thevarious labourandemployment laws in Indiacan be broadly categorized into two important themes, namely (i) employer-employee relations;and (ii) service or working conditions, suchas wages, social security and working hours.Enactments such as the IDAct, the TradeUnionsAct, the Industrial Employment (StandingOrders)Act, 1946 (the “IESOAct”) and CLRA are focusedprimarilyonemployeremployeerelations,whereasenactmentssuchastheFactoriesAct,1948(the“FAAct”),thevariousS&EActs,thePaymentofWagesAct,1936(the“WagesAct”),theMinimumWagesAct,1948 (“MWAct”)and thePaymentofBonusAct,1965(the“BonusAct”)arefocusedprimarilyonserviceconditionsofemployees.TherearebothCentral and State rules framed under each of the aforementionedenactments.Inaddition,thereareenactments such as the Employees Provident Fund andMiscellaneousProvisionsAct,1952 (the“EPFAct”), the Employees State Insurance Act, 1948(the “ESI Act”) and the Payment of Gratuity Act,1972, (the “PGA Act”) which provide for certainsocialsecuritybenefitstoemployees.

the id act or the industrial disputes act, 1947: The scope of this legislation, strictly speaking,is restricted to workmen alone. However, theprinciples and processes laid down in this legislation have been replicated in other statuteswith wider application. The IDA covers industrialdisputes,industrialaction(i.e.strikesandlockouts),regulation of retrenchment, layoffs, closure,transferofundertakings,envisagestheconstitutionofaworkscommitteesandalsoregulateschangesincertainserviceconditionsofworkmen.

s&e act / shops and commercial establishments act:TheS&EActisStatespecific–almostallStatesinIndiahaveenactedtheirownS&EAct.TheS&EAct regulates service conditions of employeesengagedinshopsandcommercialestablishments,whichincludesmostprivatecompaniesandfirms.It regulates hours of work, payment of wages,overtime, leave, holidays and other conditions ofservice.

ePf act / employees Provident fund and miscellaneous Provisions act, 1952: The EPF Actread with all rules and schemes framed thereunder is one of the major social security legislations

in India. Under the EPF Act, both the employerand employee are required to contribute 12%of an employee’s ‘basicwages’ to the EmployeesProvidentFund/EPF.Theemployer’scontributionisalsodirectedtoapension fund, fromwhichanemployee would be entitled to monthly pensionupon retirement. The EPF and pension schemehasextensiverulesinrelationtocontributionandwithdrawal of funds.

wages act / Payment of wages act, 1936: TheWages Act regulates the mode and method of payment of wages to certain categories of employees, namely, those to whom the payablewages do not exceed INR 24,000 (~USD330) permonth, and to those employed in factories andindustrialestablishments.TheWagesActprovidesthatwagesmustbepaidwithoutdeductionsofanykind except certain authorized deductions, suchastaxesonincome,fines,ordeductionsowingtoabsence from duty.

fa act / factories act, 1948: The FA Act wasenactedtoregulateworkingconditionsinfactorieswheremanufacturingoperationsareundertaken.Ithasextensiveprovisionsinrespectofhealth,safetyandwelfareofpersonswhoworkinfactories.

mw act / minimum wages act, 1948: TheMWAct provides for the payment of minimum rates ofwagestoemployeesworking inspecifiedkindsofemployment, termed ‘ScheduledEmployment’.UndertheMWAct,theGovernmentisrequiredtofix industry-specific daily and monthly minimumwages, depending on the skill of the employee.Onceminimumwageshavebeenfixed,anemployeris required to pay to every employee engaged in ScheduledEmployment,wagesataratethatisnotlessthantheminimumrateofwagesfixedbytheconcerned Government for that class of employees.

ieso act / industrial employment (standing orders) act, 1946: The IESO Act is generally applicableto every industrial establishment wherein 100or more workmen are employed, subject to anyspecific State rules in this regard. The IESO Actrequires employers in industrial establishments to formally define conditions of employment, suchasclassificationofworkmen,mannerofintimatingwage rates, working hours, leave periods,recruitment,shiftworking,attendance,procedureforavailingleave,transferofworkmen,terminationof workmen, and inquiries for misconduct. Such



conditionsarereferredtoasthe‘StandingOrders’.The State specific rules framed under the IESOAct provide for ‘Model Standing Orders’, whichareasetofdefaultconditionsapplicabletothoseindustrial establishments that have not framed their own Standing Orders or to those industrial establishmentsthatareawaitingcertificationfromthe Government on their own Standing Orders. In most cases, the internal employee handbook/serviceregulationsoftheemployersaregenerallycustomizedandfiledastheStandingOrdersofthatestablishment.TheIESOActhoweverprovidesthatwhile the Standing Orders adopted by an employer neednotnecessarilybeaduplicationoftheModelStandingOrders,theyshould,asfaraspracticable,be in conformity with the same.

trade unions act: TheTradeUnionsActprovidesfor registration of a trade union and the rightsand obligations of a registered trade union. Theminimum number of persons required to apply for registration of a trade union is 7; however, atrade union cannot be registered unless at least 10%oftheworkmenor100workmen(whicheverislesser,andsubjecttoaminimumof7workmen),employed in an establishment are its members. While an employer is not legally bound to recognize a trade union or encourage collective bargaining,a registered trade union can enter into collectivebargaining agreements with the employer for betterwagesandserviceconditions.

CLRA/Contact Labour (Regulation and Abolition) act, 1970: The CLRA provides for regulation ofcontract labour in establishments and provides for itsabolitionincertaincircumstances.A‘workman’isdeemedtobe ‘contract labour’ ifhe ishired inconnection with the work of an establishment,by or through a ‘contractor’, with or withoutthe knowledge of the ‘principal employer’. Theterm contractor is defined to mean a personwho undertakes to produce a given result foran establishment through contract labour or whosupplies contract labour foranyworkof theestablishment. The manager or occupier of theestablishment is the principal employer. Under theCLRA,everyprincipalemployer is required tomakeanapplicationintheprescribedform,fortheregistration of the establishmentwith the labourauthorities. Every contractor under the CLRAAct must also be licensed and should undertakework through contract labour only in accordancewith such license. The contractor is required to

pay wages and provide facilities for the welfareandhealthof thecontract labour,which includesproviding rest rooms, canteens, wholesomedrinkingwater, toilets,washing facilities,andfirstaid facilities in every establishment. The abovecompliances vary depending on the number of contract labour engaged in an establishment. It is importanttonotethataspertheCLRA,incasethecontractorfailstopaywagestothecontractlabour,the principal employer will be responsible for the same.

4. new develoPments The Maternity Benefit (Amendment) Act, 2017(that amended the Maternity Benefit Act, 1961(“MBAct”))cameintoforceonApril1,2017.Keychangesinclude:(i)increasedpaidmaternityleavefrom12weeksto26weeksforwomenemployees,forthefirsttwochildren;(ii)recognitionoftherightsof an adopting mother and of a commissioningmother (using a surrogate to bear a child) to claim paidmaternityleaveof12weeks;(iii)a‘workfromhome’ option after the maternity leave expires;(iv) effective July1,2017,mandatory crèche (daycare) facilities for every establishment employing50 ormore employees, and the right ofmotherstovisitthecrèche4timesperday.Employersarealso obligated to educate employees about these benefits.

The Rights of Persons with Disabilities Act, 2016(“RPD”)was notified on April 19, 2017 and rulesnotifiedonJune15,2017.TheActwasenactedinfurtheranceofIndia’sobligationsundertheUnitedNationsConventionontheRightsofPersonswithDisabilities.ThoughtheRPDActdoesnotimposeanykindofcompulsoryreservationofpostsintheprivatesectorforpersonswithdisabilities,itdoesseek to incentivise private sector establishmentsto engage persons with disabilities. The Actrequiresprivateestablishmentstoframean‘equalopportunitypolicy’whichwoulddetailthefacilitiesand amenities to be provided for persons withdisabilities, so as to enable them to effectivelydischarge their duties. Further, the head of theestablishment is required to ensure that persons with disabilities are not unduly discriminatedagainst. The establishments are also required toconform to certain building standards, websiteand document related standards to ensure greater accessibilityforpersonswithdisabilities.



ThePaymentofGratuity(Amendment)Act,2018came into force onMarch 29, 2018, in terms ofwhich the duration of maternity leave has beenextended from 12 weeks to 26 weeks for thepurpose of calculating continuous service in thecontext of gratuity. The maximum limit of thegratuitybenefithasalsobeenincreasedfromINR1,000,000(about$14,000)toINR2,000,000(about$28,000).Further,asperrecentdeclarationsintheUnionBudget2019,itisnowproposedtoincreasethis gratuity benefit to INR 30,00,000 (about$42,000).

As part of a major rationalising and simplifyingexercise,Indiahasbeenattemptingtoconsolidateabout44Centrallawsinto4comprehensivelabourcodes. Drafts of three such codes, the Code ofWagesBill,2017(whichseekstoconsolidate4keylabour laws,namely, theMWAct, theBonusAct,WagesActandtheERA),theDraftLabourCodeonSocial Security (which seeks to consolidatemajorsocial security legislations such as the EPF ActandESIAct)andtheCodeonOccupationalSafety,Health and Working Conditions (which seeks tooverhaulmajorlegislationssuchastheFAActandtheCLRAAct) are in thepublic domain,with theCodeofWagesBill, 2017being introduced in thelegislature. Efforts are also being undertaken tosimplifylabourlawcompliancesbytheintroductionofaunifiedportal‘ShramSuvidhaPortal’,andtheconsolidation of forms under various legislations.The Government is also undertaking efforts toincreaseEPFcontributionsbytheGovernment, incase of certain instances such as women employees andfirst-timeworkers.

In addition, there are certain significantamendmentsunderStatelegislation,includingtheenactmentofanewS&EAct inMaharashtra, theMaharashtraShopsandEstablishments(Regulationof Employment and Conditions of Service) Act,2017aswellasproposedamendmentstotheTheTamil Nadu Shops and Establishments Act, 1947which would require establishments with 10 ormore employees to seek registration with thelabourauthorities.

In another significant move, there have beenmajor judgments relating to the right of privacyof individuals and data protection in India – itis expected that India will soon put in place acomprehensivelegislationondataprotectionthatprotects the individual right to privacy.

ii. PRE-EMPLOYMENT considerations 1. does a foreign emPloyer need to establish or worK through a local entity to hire an emPloyee?Foreign employers may often have requirementswhereintheymightneedtoengageasalesperson,representativeoragentinIndia,eventhoughtheymaynothaveaplaceofbusinessinIndia.Also,theforeign employer may not intend to immediately generateanyrevenueinIndia. Insuchascenario,it may be noted that the foreign employer need notmandatorilysetupalocalentityinIndia.Thereare various methods through which the foreign employer may engage/hire representatives or anagent in India depending on the exact businessrequirements.

A. ENgAgEMENT Of ThE REPRESENTATIVE OR AgENT ThROugh A MANPOwER AgENCY

Thisisamodelwheretheforeignemployerentersinto an arrangement with a manpower agency in India, which would provide certain servicesthrough identified employees. However, themanpoweragencywouldberequiredtosatisfythefollowingobligationsaspartofthearrangement:(i)processingofsalariesfortheidentifiedindividuals;(ii) undertaking all legal compliances for theidentified individuals on account of being theiremployer, including under all Indian employmentlawsandtaxationlaws.

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B. ENgAgEMENT Of ThE REPRESENTATIVE OR SALES PERSON AS AN INDEPENDENT CONTRACTOR

Here,thearrangementbetweentherepresentativeandtheforeignemployerwillbethatofa‘contractfor services’. A contract for services impliesan agreement wherein one party undertakesto provide services to or for another in the performanceofwhichheisnotsubjecttodetaileddirection and control but exercises professionalor technical skill and uses his own knowledgeand discretion whenever appropriate. Suchindependent contractors would typically not be entitledtoanysocialsecuritybenefits(astheywillnot be considered employees) and would have to paytheirowntaxesinIndia.

However, it is importanttonotethat intheeventthe foreign employer engages personnel in India by wayofmethod1or2,thereisariskoftheforeignemployer having a permanent establishment in India – accordingly, this arrangementwould haveto be structured appropriately.

2. limitations on bacKground checKsEmployersareincreasinglyconductingbackgroundchecks to guard against inaccurate resumés,overstated work experience and any employeebehavioral issues. Typically, employers issuean offer letter, conduct background checks andexpresslystatethattheperson’semploymentwiththeorganizationiscontingentuponhis/herclearingthebackgroundchecks,andvettingofeducationaland job qualifications. However, the permissionof the concerned employee would be required to





conductabackgroundverification.IntermsoftheInformationTechnologyAct,2000andInformationTechnology (Reasonable Security practices andprocedures and sensitive personal data andinformation)Rules,2011(“ITRules”),whichisthegoverning legislation on data protection in India,any company collecting, using or disclosing anypersonal informationofanemployee/prospectiveemployee,willrequiresuchperson’sconsent.

3. restrictions on aPPlication/interview QuestionsGiven Constitutional safeguards againstdiscrimination on the grounds of religion, race,caste, sex and place of birth, it is imperativethat employers bear these principles in mind while conducting background verifications andinterviews. Excessively personal questions aregenerally not advisable.

As mentioned above, the IT Rules apply tothe collection of personal information duringbackgroundverificationsandduringthe interviewprocess as well. In terms of the IT Rules, at thetime of application, the employer must informthe concerned person of (i) the fact that his/her personal information is being collected; (ii)the purpose for which the information is beingcollected (i.e. verification of credentials); and (iii)theintendedrecipientsoftheinformation(i.e.theemployer and/or the third-party service provider whoconductsbackgroundchecks).

TheITRulesfurtherstatethatwhereanySensitivePersonalDataorInformation(“SPDI”)issoughttobecollected(suchaspasswords,financialinformation,bank account or payment instrument details,details of health conditions, sexual orientation,medical records and history), the same can becollected only for a lawful purpose connected withafunctionoractivityofthecompany,andthecollection of this information must be necessaryto achieve such purpose. This purpose mustbe notified to the prospective employee in theapplication/background verification form/duringaninterview,andhisconsentmustbeobtained.ItmaybenotedthattheITRulespermitapersontowithdrawconsentatanystage, inwhichcasethecompany would be required to return the SPDI and

notstoreortransferthesameanyfurther.The ITrules prescribe certain additional safeguards forcollecting, storing, processing and transferringSPDI - for instance, the IT Rules state that anySPDI collected by a company cannot be stored/retained longer than required for the purpose of its collection,exceptunderanyapplicablelaw.

Apartfromtheabove,itmaybenotedthatIndianlabour and employment laws are largely silent as to theprocessofselectionandhiringofemployeesintheprivatesector.Inanycase,asmarketpractice,most employers in India conduct at least basic (education,jobhistory)backgroundverificationofprospective employees in accordancewith the ITRulesand/oraskprospectivecandidatestodisclosespecific information as a condition precedent totheemploymentrelationship.

iii. emPloyment contracts1. minimum reQuirementsWhile labour legislations in India do not strictlyrequire thatanemployment contractbe inwriting,it is predominant market practice (with very rareexceptions) to have all terms and conditions ofemployment agreed and signed by both parties.A few states however have specific legislationsthat necessitate a written contract in order toestablish an employer-employee relationship. Fromthe perspective of certainty and enforceability,it is strongly recommended that all employment contracts be in writing, whether as a simpleappointmentletterorafullydetailedcontract,settingoutrelevanttermsandconditionsagreedtobetweenthe employer and employee. Employment contracts are governed by the Contract Act – accordingly,provisions stipulated therein with respect toparties being competent to contract, considerationand validity, would be applicable to employmentcontracts as well. Employment contracts in India are generallyconsideredtobe‘unlimitedterm’contracts,(i.e. contracts that are valid until termination orsuperannuation, unless specifically identified asa ‘fixed term’ contract). Some of the commonprovisions included inanemploymentcontractare:(i) location,descriptionandtitleofthe job;(ii)dateof commencement, duration (whether fixed termor unlimited term) and type (whether part-time orfull-time)ofthejob;(iii)detailsofanyprobationaryperiod; (iv) leave entitlement; (v) salary details andother benefits; (vi) terms governing termination ofemployment; (vii) restrictive covenants; and (viii)governinglawanddisputeresolution.

Asdiscussedabove, it is important tonote that for‘workmen’,someemploymenttermscanbechangedonlywith21days’priorwrittennotice.Ifanyworkmanchallenges the proposed changes before labour courts duringthisperiod,itislikelythatthesaidchangewill

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besuspended,pendingresolutionofthedisputebythe court.

2. FixEd-TERM/OPEN-ended contractsFixed-term employment contracts are permitted inIndia,aslongastheemployerisemployingthepersonfor a short-term requirement. The Governmenthasrecentlystatedthatfixedtermcontractswillbepermittedacrosssectors–earlier,theywereexpresslypermittedonly intheapparelmanufacturingsector.However,itisunlikelythatemployerswillbeabletoconvertexistingpermanentpositionsintofixedtermemploymentpositions.

Inthecontextoffixedtermemploymentcontracts,theIndianjudiciaryhasconsistentlyheldthatsuccessivefixed-termcontractscannotbeusedasasubstituteforemployingthepersonona‘permanent’or‘unlimitedterm’basisandthatfixed-termemploymentisnottobeusedinjobrolesorfunctionsthatarepermanentinnature,asfarastheparticularemployerorindustryisconcerned.Fixed-termemploymentcontractsmaybesigneddirectlybetweentheemployerandemployee,or created through use of a contractor under the provisionsoftheCLRA.Expiryofafixedtermcontractwilltypicallynotbeconsidered‘retrenchment’undertheprovisionsoftheIDAct–thus,thecompliancespertaining to retrenchment (as discussed under para 4below)wouldnothavetobeundertakeninthiscase.

3. trial / Probation PeriodIndian law permits new employees to be placed on a trial or ‘probation’ period. Such period is meantto provide employers the opportunity to assess the abilities and suitability of the employee to the




organisation; and hence, by definition, allow theemployer greater freedom to terminate employment if the employee is found unsuitable during the probationperiod.TheIESOActenvisagesaprobationperiodof3(three)months–this is largelyfollowedby companies that are not subject to the IESO aswell.Thegeneralmarket trend in India is tohaveaprobationperiodbetween3and6months,especiallyin the technology and services sectors.

During the period of probation, the employer willhave the right to terminate employment of the probationaryemployeewithoutprovidinganynotice;however, this would be subject to the stipulationsof the concerned S&E legislation as well. At theendof theprobationperiod, theemployeemaybe‘confirmed’asapermanentemployeeordismissed.

4. notice PeriodIntermsof Indian labour lawlegislation, ‘workmen’whohaveundertakenat least1yearof continuousserviceareentitledtoanoticeperiodof1 month,orequivalentwages in lieuthereof. Inaddition, theemployer would be required to pay ‘retrenchmentcompensation’totheworkman,whichiscalculatedattherateof15days’wagesforeverycompletedyearofservice.However,nonoticeperiod(orpaymentinlieuthereof)orpaymentofretrenchmentcompensationis required in the case of workmen dismissed formisconduct, provided the employer conducts aninternal inquiry prior to such dismissal.

Additionally,anynoticeperiodprescribedundertherelevant S&E Acts, aswell any requirements underthe relevant employment contract in this regard wouldhavetobetakenintoaccount.GiventhatIndiadoesnotrecognizetheemploymentatwilldoctrine,judicial precedents have held that termination ofemployment without providing any prior noticewould render the contract of employment as an ‘unconscionablebargain’,andhenceillegal.


iv. worKing conditions 1. minimum worKing conditionsRequirements in this regard are principally stipulated in theconcernedS&EActs, theFAAct,the IESO Act and the CLRA. The S&E Acts havestipulations relating to working hours, overtime,intervals of rest, provision of basic amenitiessuch as drinking water, toilets, first aid facilities,etc., for employees at shops and commercialestablishments. The Standing Orders also havestipulations with respect to work timings, leave,overtime, holidays, for industrial establishmentsengagingmorethan100workmen.

The FA has extensive provisions in respect ofhealth, safety andwelfare ofworkers engaged inmanufacturing establishments – these compliances vary depending on the number of workmenengaged.Forinstance,inindustrialestablishmentswhere 250 ormoreworkmen are employed, theemployer has to provide for a canteen. Suitable shelters or rest rooms, and lunchrooms withdrinkingwater facilitiesaretobeprovidedwhere150workmenareemployed.Factorieswherein30ormorewomenworkersareordinarilyemployed,aretobeequippedwithcrechefacilities/nurseriesfor children under the age of 6 years. There arealso provisions regarding toilets, washing places,temperature control mechanisms, adequateventilation, lighting in the workrooms, paintingof factory walls, doors and windows, cleaning offloors,effectiveremovalofdirtandrefuse,etc.TheFA Act envisages certain precautions to be takenagainst explosives, inflammable gases, dangerousfumesandgasesandfire.

UndertheCLRAAct,thecontractor isrequiredtoprovidecertainfacilities,whichincluderestrooms,child nursery facilities, canteens, wholesomedrinkingwater, toilets,washing facilities,andfirst

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aid. It is pertinent to note that if the contractordoes not provide these facilities, the onuswouldfall on the principal employer.

2. salaryAlthough the words ‘wages’ and ‘salary’ arecommonly used interchangeably, there is adiscernible difference between the two. Theterm ‘wages’ is used under labour/employmentlaws to refer to any and all remuneration andemoluments earned by an employee (excludingcertain allowances and bonuses) whereas the term ‘salary’ is used under income tax law to denotethetotaltaxableincomereceivedbyanemployee.It is important to note that different labour lawlegislations have a different definition of wages(which the Code of Wages Bill, 2017 is seekingto remedy),whichwould thenhave tobe closelyexamined.

For instance, the EPF Act refers to ‘basic wages’whichisusedasthebaseforcomputingemployeeand employer social security contributions. Basicwagesisdefinedasallpaymentswhichareearnedby an employee in accordance with the terms of the employmentcontract,butdoesnotinclude:(i)thecash value of any food concession; (ii) any dearness allowance (i.e. cash payments paid on account of arise in thecostof living),house-rentallowance,overtime allowance, bonus, commission or anyother similar allowance; and (iii) any presents made by the employer.

The Wages Act on the other hand, has a muchwiderdefinitionofwages–herewagesisdefinedas all remuneration (whether by way of salary,allowances, or otherwise) expressed in terms ofmoney or capable of being so expressed, whichwould, if the terms of employment, express orimplied, were fulfilled, be payable to a personemployed in respect of his employment and



includes: (i) any remunerationpayable under anyawardorsettlementbetweenthepartiesororderof a Court; (ii) any remuneration to which thepersonemployedisentitledinrespectofovertimework or holidays or any leave period; (iii) anyadditional remunerationpayableunder the termsof employment (whether called a bonus or by any other name); (iv) any sum which by reason of termination of employment is payable under anylaw, contract or instrument; and (v) any sum towhich thepersonemployed isentitledunderanyschemeframedunderany law for thetimebeingin force.

Thefollowingareexcluded:(i)anybonus(whetherunder a scheme of profit sharing or otherwise)which does not form part of the remunerationunder the terms of employment or which is not payable under any award or settlement betweenthe parties or order of a Court; (ii) the value ofany house-accommodation, or of the supply oflight,water,medicalattendanceorotheramenityor of any service excluded from the computationof wages by a general or special order of the State Government; (iii) any contribution made by theemployer to any pension or provident fund, andthe interest accrued thereon; (iv) any travelling allowance or the value of any travelling concession; (v) any sum paid to the employed person to defray specialexpensesentailedonhimbythenatureofhis employment; or (vi) any gratuity payable.

3. maximum worKing weeKThiswouldbe subject to stipulations in the StatespecificS&EActsincasesofshopsandcommercialestablishments and the FA Act for establishments inthemanufacturingsector.Asageneralprinciple,employees cannot be required to work in anyestablishment for more than 9 hours a day or48 hours a week, without attracting overtimepayments.

4. overtimeAs described above, employees working longerthan9hoursadayor48hoursaweekaretypicallyentitled to overtime payments. An employeeworking ‘overtime’ becomes entitled towages atthe rate of twice his/her ordinary rate of wages and

couldalsobeentitledtoacompensatorytimeoff.Thiswouldhoweverhavetobeanalyzedfurther–given that there are some States which also prohibit overtimework,exceptinlimitedcircumstances.

5. health and safety in the worKPlace

A. EMPLOYER’S OBLIgATION TO PROVIDE A hEALThY AND SAfE wORkPLACE

These obligations are far more extensive in themanufacturing sector and in certain other sectors such as mines and building and construction.The various State-specific S&E Acts have specialprovisions with respect to ensuring safety of women who work during night shifts. Employersin such cases are required to ensure that adequate security and transport facilities are provided (attheir own cost) to female employees.

As described above, the FA Act read with Statespecificrulesthereunderhaselaborateprovisionsregarding health and safety of workmen. Thesestipulations include maintaining cleanliness,disposal of wastes and effluents, provision ofdrinkingwaterandtoilets,ensuringatemperaturecontrolmechanismsoas topreventany injury tohealthofworkmen,ensuringadequatelightingandventilation,measurestopreventinhalationofdustand fumes, regulation of artificial humidification,measures to prevent overcrowding on factory premises,constructionandpropermaintenanceoffloors,stairs,passagesandandensuringthattheyareobstructionfreeforthesafetyoftheworkers,fencingofdangerousmachinery,providingsuitablegearor appliances, drivingbelts andother safetydevices.TheFAActalsoenvisagesprecautions tobe taken against explosives, inflammable gases,dangerousfumes,gasesandfire.Non-compliancewith provisions of the FA attracts bothmonetarypenalty and imprisonment.

In addition, the ESI Act and the EmployeesCompensationAct,1923 (the“ECA”)alsoaddresscompensationandotherbenefitsthattheemployermust provide employees in contingencies suchas maternity, temporary or permanent physicaldisablementdueto injuryarising inthecourseof


employment law overview2019-2020 / india | 11



employment that results in loss of wages or earning capacity,deathduetoemploymentinjury,aswellas medical care to workers and their immediatedependents.

B. COMPLAINT PROCEDuRES

In the terms of the ISEO Act, employees arerequired to frame grievance redressal mechanisms to address individual worker complaints. Also,undertheFAwherethereare20ormoreworkmen,agrievancecommittee is tobeconstituted in themannerprescribed.Inanycaseasageneralpractice,most employers do have an internal complaint mechanism that details processes employees must follow,incaseofanyworkplacerelatedissues.Itisalso important to note that India has a standalone legislationpertaining to sexualharassmentat theworkplace– theSexualHarassmentofWomenatWorkplace(Prevention,ProhibitionandRedressal)Act,2013(“SHWAct”)-whichprescribesadetailedcomplaint mechanism for instances of sexualharassment, that all Indian establishments mustadhere to.

C. PROTECTION fROM RETALIATION

India does not have extensive provisionsregarding protection of employee complainants/whistleblowers, that apply to establishmentsin the private sector. However, the SHW Actstipulatesthatduringthependencyofanyinquiry,companiesmusttakeinterimmeasurestoprotectthe complainant from any retaliation at theworkplace.Mostemployersdohavestipulationsintheiremployeehandbooks/ internalpolicies thataddressemployeecomplaintsandprotectionfromanyretaliationinthisregard.

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V. ANTi-diSCRiMiNATiON laws1. brief descriPtion of ANTi-diSCRiMiNATiON laws In the context of private sector employment,India does not have a comprehensive legislationthat addresses workplace discrimination, exceptin relation to sexual harassment and in thecontext of personswith disabilities andwithHIV.Further,thereareprinciplessetoutbytheIndianjudiciary that seeks to protect employees fromdiscriminationandharassmentattheworkplace.Itis also important to note that that most new-age employers in India already cover these subjectscomprehensively as part of their internal policies.

A. BRIEf OVERVIEw Of ThE SEXuAL hARASSMENT Of wOMEN AT wORkPLACE (PREVENTION, PROhIBITION AND REDRESSAL) ACT, 2013 (“Shw ACT”)

As discussed above, the SHW Act provides for adetailed complaint and inquiry mechanism in case ofsexualharassmentcomplaintsattheworkplace.Though it is not an anti-discrimination legislationperse,theSHWActrecognizesthatwomenmaybeespecially vulnerable to workplace discriminationandharassment–thus,thescopeoftheSHWActonly extends to complaints raised by ‘aggrievedwomen’ that pertain to the ‘workplace’ (it isimportant to note that the SHW Act is not a gender-neutral legislation). That said, several companiesdo frame gender neutral policies on both general andsexualharassment.

TheSHWActdefinestheterms‘sexualharassment’broadly to include any of the following unwelcome actsorbehavior:(i)physicalcontactandadvances;

or (ii) demand or request for sexual favors; (iii)making sexually colored remarks; or (iv) showingpornography (v) any other unwelcome physical,verbalornon-verbalconductofasexualnature.

In addition, the SHW Act also identifies certaincircumstances which, if occurring in conjunctionwith sexual harassment (as defined in the SHWAct), would provide strong evidence that anoffence has been committed. Such circumstancesare: (i) implied or explicit promise of preferentialtreatmentinemployment;or(ii)impliedorexplicitthreat of detrimental treatment in employment; (iii) impliedorexplicit threat aboutpresentor futureemploymentstatus;or(iv)interferencewithworkorcreatinganintimidatingoroffensiveorhostileworkenvironment;or(v)humiliatingtreatmentlikelytoaffectone’shealthorsafety.Itispertinenttonotethat theprotectionsprovidedundertheSHWActextend beyond the parameters of the traditionalemployee-employer relationship. For example,the‘aggrievedwoman’neednotnecessarilybeanemployee - she could be any woman who may be subject tosexualharassmentataworkplace.Theterm‘workplace’isalsodefinedbroadlytoincludenotonly theusualplaceofemployment,but anyplace visited during the course of employment,including any transportation provided by anemployer.

B. OThER LEgISLATION

Otherlawsaddressworkplacediscriminationissuesin the private sector by prohibiting acts such as:(i) refusal of / obstructing employment solely onthe grounds of a person belonging to a socially backward community; (ii) deducting salary ordismissing women employees while on maternity leave; (iii) payment of unequal wages to men and women employees performing similar tasks; (iv)discriminating against persons with disability (asprescribed under the RPD); (v) discriminating




againstpersonswithHIV,asfurtherprovidedundertheHumanImmunodeficiencyVirusandAcquiredImmune Deficiency Syndrome (Prevention AndControl) Act, 2017 (“HIV Act”). The recent trendis thatmost companies, irrespectiveof size,havefar more strict internal policies with reference to theworkplacediscrimination issues, thanwhat isrequired under various statutes.

It is also pertinent to note here that the ID Actprohibits commission of certain ‘unfair labourpractices’,which include (i) discriminationagainstanyworkmanforfilingchargesortestifyingagainstanemployerinanyinquiryorproceedingrelatingtoanyindustrialdisputeor(ii)discriminatingagainstworkmenby reasonof their beingmembers of atradeunion(iii)showingfavoritismorpartialitytoonesetofworkersregardlessofmerit.

There have also been attempts by the Centraland State Governments to introduce ‘quotas’/ reservation of posts in the private sector,for members of particular socially backwardcommunities. However, this hasbeen resisted inthepast,anditisunlikelythatsuchmeasureswillbeimplementedinthefutureduetoitssensitivityandother contemporarypolitical and sociologicalcircumstances.

2. extent of Protection As described above, India does not have a singlecomprehensive legislation on discriminatorypractices at the workplace – instead, there arevarious legislations that prohibit certain kinds ofdiscriminatorypractices,andprotecttheinterestsof vulnerable communities such as workmen, women, persons with HIV and AIDS, personswith disabilities and members of certain sociallybackwardclasses.

For instance, with respect to women, the ERAstipulates that male and female employees whoperform similar tasksmust be paid equal wages,and also mandates that employers are prohibited from discriminating against women inmatters ofrecruitment, promotions and transfers. Further,women employed in labour intensive industries such asfactoriesandconstructionsites,canworklessernumber of working hours than male employees.TheMBActalsohasstipulationsprotectingwomenfromdismissal,whileonmaternityleave.

UndertheRPD,theheadoftheestablishmenthasthe responsibility of ensuring that persons with disabilities are not discriminated against. In caseanycomplaint is received inthisregard, theheadof theestablishmentshalleither initiateaction inthemannerspecifiedundertheRPD/ informtheconcernedpersonastohowthe‘impugnedactoromission isaproportionatemeansofachievingalegitimateaim’.

3. Protections against harassment

A. PROCESS uNDER ThE Shw ACT

Every employer is required to constitute anInternal Complaints Committee (“ICC”) that willinquire into sexual harassment complaints. TheICC shall consist of: (i) a presiding officer whowill be a senior women employee; (ii) at least 2employees preferably committed to the cause ofwomenorwhohavehadexperienceinsocialworkorhavelegalknowledge;(iii)anexternalmemberfromamongstnon-governmentalorganizationsorassociationscommittedtothecauseofwomenoranexternalcounselfamiliarwithissuesrelatingtosexualharassment.Thisexternalcounselcaneitherbeasocialworkerwithatleastfiveyears’relevantexperienceorapersonfamiliarwithlabour,service,civil or criminal law. At least half of the ICC members shallatalltimesbewomen,andthetermoftheICCmembersshallnotexceed3years.

The broad process followed by an ICC will be asfollows: (i) Upon receipt of a complaint, if thecomplainant is agreeable, the ICC may attemptto settle the matter by way of conciliation. If asettlementisarrivedat,theICCneednotconductan inquiry; (ii) If the ICC conducts an inquiry, itshould be conducted as per the general rules of theorganisationandinaccordancewithprinciplesofnatural justice.Aquorumof3 ICCmembers isrequired for conducting the inquiry, which hasto be completed within 90 days. In the courseof conducting the inquiry, the ICC is vested withthe powers of a civil court under Indian laws. Accordingly, the ICC can summon and enforcethe attendance of any person and examine him/her on oath, and also require the discovery andproduction of documents. The parties cannot, atanystage,bringinalegalpractitionertorepresent




thembeforethe ICC; (iii)Uponcompletionoftheinquiry, the ICC shall prepare a report with itsrecommendations, and submit the same to theemployer within a period of 10 (ten) days. It isimperative that the ICC records detailed reasonsforarrivingatitsconclusionandrecommendations.Themanagement is required toactupon the ICCrecommendationswithin 60 days from receipt ofthe inquiry report.

The SHWAct also prescribes other obligations ofanemployer,includingconductingperiodictrainingand ensuring that the workplace has adequatesafety arrangements.

B. gENERAL hARASSMENT

Cases of general harassment (provided they are not criminal officesunder the IndianPenalCode,1860)aretypicallygovernedbytheestablishment’sinternal policies, provisions of the IESO Act, andstipulationsundertheFAthatmandatethesettingup of a grievance redressal committee. Typically,the internal policies clearly stipulate the conductthat would amount to harassment, the mannerof conducting an internal inquiry and nature ofdisciplinary action that would be undertaken,depending on the seriousness of the conduct.

4. emPloyer’s obligation to Provide reasonable accommodations This is again governed mainly by the internalpoliciesofanorganisation–however,theSHWAct,theRPDandHIVActhavecertainstipulationsinthisregard.IntermsoftheRPD,employersarerequiredto ensure compliance with certain accessibility standards,suchas:(i)standardsforpublicbuildingsas specified in the ‘Harmonised Guidelines andSpace Standards for Barrier Free Built Environment forPersonsWithDisabilitiesandElderlyPersons’asissued by the Government of India; (ii) standards for Bus Body Code for transportation system asspecified in the relevant Government of Indianotification; (iii)website standardsas specified intheguidelinesforIndianGovernmentwebsites,asadoptedbyDepartmentofAdministrativeReforms

and Public Grievances, Government of India; (iv)ensuring that the documents to be placed on websitesareintheElectronicPublication(ePUB)orOpticalCharacterReader(OCR)basedpdfformat.

UndertheHIVAct,everyestablishmentengagedinthe healthcare services and those where there is a significant riskofoccupationalexposure toHIV,isrequiredtoensureasafeworkingenvironment.In terms of the SHW Act, employers have theobligation toprovidea safeworkingenvironmentwhich shall include safety from persons coming intocontactattheworkplace.

5. remediesEachof the statutes listedabovehaveadifferentmechanism, and also penalties in case of non-compliances by employers – these penaltiesextendtomonetaryfines,imprisonmentandevencancellation of any Government registration forcarrying on business.

For instance, if an employer commits any ‘unfairlabour practice’ as defined under the ID Act,workmenhavetherighttoapproachtheconcernedlabour court / industrial tribunal. In terms of the SHWAct,womenemployeescanapproachtheICC/fileacomplaintonaportal(www.shebox.nic.in).In termsof theRPD,personswithdisabilities canalso approach the Central / State Commissioner for Disabilities.

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vi. social media and data Privacy 1. restrictions in the worKPlace

A. CAN ThE EMPLOYER MONITOR, ACCESS, REVIEw ThE EMPLOYEE’S ELECTRONIC COMMuNICATIONS?

IntermsoftheITRules,employerscanaccess,reviewandmonitoranemployee’sofficialelectronicdata(i.e. work-related data) subject to obtaining his/herconsent,asclearlystipulatedintheconcernedemployment contract / appointment letter. Inaddition,employerswouldalsohavetoformulatea privacy policy and upload the same on its website and the intranet. This privacy policywould detailall its obligations regarding collecting, storing,processingofpersonal informationofemployees.AdditionalobligationsareprescribedundertheITRules,incasetheemployercollects/hasaccessto‘sensitivepersonalinformation’ofemployeessuchascredit card information,biometric information,passwords andmedical records. Additionally, it isimportant to note that there has been a couple of landmark judgments in Indiaon the fundamentalrighttoprivacy.Further,Indiaisalsointheprocessof framing a comprehensive legislation on dataprotection,whichwouldcertainlyhavean impacton the employer’s right to monitor and reviewemployees’electroniccommunications.

2. emPloyee’s use of social media to disParage the emPloyer or divulge confidential information

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While there are no specific laws that governemployees’useofsocialmedia,anydisparagementofemployersand/oranydivulgingof confidentialinformation would attract consequences underexisting civil and criminal laws that governdefamation, breach of contract, divulging tradesecretsandinfringingintellectualproperty.Further,keeping in mind the rapidly evolving regulatoryframeworkinrelationtotechnologylawsanddataprotection, employers are also defining policiesthat would affect their employees’ participationon social media during work hours. Severalcompanies,especiallytechnologyandoutsourcingcompanies, have installed firewalls that preventemployees from accessing social media sites at theworkplace, whereas several other companieshave defined social media usage policies thateducateemployeeson the implicationsofmisuseof social media (especially given that employers couldbeheld vicariously liable for anyactionsofemployeesinthisregard). Inaddition,employerscan include strong provisions in their employment contracts / appointment letters for protection ofconfidentialinformation,tradesecrets,intellectualpropertyandotherproprietaryinformation.Indiancourts, typically, take claims of confidentialitybreaches and disclosure of sensitive informationvery seriously – it is an established principle under Indianjurisprudencethatanemployerhasfullandexclusive ownership of the information that theemployee comes in contact with during the course ofemployment, includinganyandall informationcontainedintheemployee’sofficialemailaccounts.Also,employerscan,subjecttoobtainingemployeeconsent, monitor employees’ activities on socialmediaduringworkhoursforthereasonsoutlinedabove.



vii. authorisations for foreign emPloyees 1. reQuirement for foreign emPloyees to worK Onceforeigncompaniessetupanentity in India,they very often prefer to appoint employeesfrom their home country or headquarters for the management and control of the Indian business. This is done mainly for the convenience of co-ordination with the parent company in terms ofdecision-making,financialmanagementandotherbusiness matters. This movement of employeescould be undertaken by way of secondment ortransfer.Therearethreebroadconsiderationsthatmustbekeptinmind,ineitheroftheapproaches:(i)incometaxissues;(ii)socialsecuritycontributions;(iii)visaconsiderations.

2. income tax issuesIt is imperative that any secondment/transfer ofemployees be structured appropriately, so as tominimize any permanent establishment risks fortheforeignentityinIndia.Also,thetaxtreatmentofanyservicefeepaid/reimbursementofexpensesbytheIndianentitytotheforeigncompanymustbeanalyzedwell inadvance,giventhatthisareahasoftenbeenthesubjectofscrutinybytaxauthorities.Further, the taxpositionof the individual in Indiamustalsobeexamined–thiswoulddependonhis/her tax residential status, as specified under theIncometaxAct,1961(“ITA”).IntermsoftheITA,anindividual is said to be resident in India if he/she has beenphysicallypresentinIndiaforaperiodof182daysormoreintherelevantfinancialyear. Indiantax residents are subject to tax in India on theirglobal income,whilenon-residentsare subject totax only on income that is received/deemed tobereceived in India,or incomeaccruesorarises/deemedtoaccrueorarisetotheminIndia.There

arecertainothertaxexemptionsprescribedundertherelevantDoubleTaxationAvoidanceAgreementexecuted between India and the concerned hostcountry.

3. social security contributionsItisimportanttonotethattheEPFActalsoextendsto a category of employees called ‘internationalworkers’ (“IWs”). An IW is defined both in aninbound (i.e. in the contextof foreignemployeescomingtoIndia)andoutboundcontext(i.e.Indianemployees going abroad). An IW (inbound) is a person who holds a passport other than an Indianpassport and comes towork for an Indianestablishment that is covered under the EPF Act. It is importanttonotethattheEPFActmakesnodistinctionbetweenaforeignworkerondeputationtoIndiaandaforeignworkerwhoistransferredtoIndia. All IWs (inbound) are required to contribute to the EPF, unless they are ‘excluded employees’.ExclusionfromEPFcontributionsisonlygrantedifthe IW contributes to a social security program in his/her host countrywhich has executed a socialsecurityagreement(“SSA”)withIndia.

There are certain significant differences betweenEPFcontributionsinrespectofIWs(inbound)anddomestic employees. For instance, such IWs arerequired to contribute to the EPF on their ‘fullsalary’andnotmerely‘basicwages’.Therearealsodifferences incaseoftimingofwithdrawalofEPFcontributions.

4. visas Business visas to India are given strictly only for ‘business purposes’, such as sales or establishingcontact on behalf of the foreign company in India.

employment law overview2019-2020 / india | 17an alliance of employers’ counsel worldwide

employment law overview2019-2020 / india | 18an alliance of employers’ counsel worldwide

Likemostotherjurisdictions,businessvisasinIndiacannotbeusedforanydirectrevenuegeneratingwork or employment. There is a separateemployment visa category for employees coming toworkatanIndianestablishment,whichisusuallygrantedfor1year,orthetermofthecontract.Therearecertainadditionalconditionsprescribedinthisregard, including that the foreign national mustdrawasalaryinexcessofUSD25,000perannum.Foreignnationals,includingtheirfamilymembers,whointendtostayinIndiaformorethan180days,must generally register with the Foreign Regional RegistrationOffice(the“FRRO”)within2weeksofarrivalinIndia.Forthepurposesofregistration,theindividualisrequiredtomakeanapplicationintheprescribed form and be present in person at the timeofregistration.

viii. termination of emPloyment contracts 1. grounds for termination There are various modes of termination ofemploymentthatarerecognizedinIndia,including:(i)expiryofafixedtermcontract/mutualseparation;(ii) resignationbyanemployee; (iii) retirementorsuperannuation; (vi) layoffs, termination due totransfer of business/closure of an undertaking/organizationalrestructuring;(v)terminationbyanemployer for ‘cause’. Termination for ‘cause’mayinvolveoneormoreofthefollowing:

• Established breach of employment contract and/or internal policies

•Employeehavingcommittedanycriminaloffence/authoritieshavinginitiatedcriminalproceedings

•Employee’sinabilitytofulfillmaterialobligationsofhisjob

• Misconduct•Inefficiency/poorperformance,afterundertakingsufficient processes such as a performanceimprovement plan

•Lossofconfidencebymanagement•Abandonment of employment / continuous

absenteeism

2. collective dismissals‘Collective dismissal’ of employees is permittedunder Indian labour laws, only in certaincircumstances and upon satisfaction of specifiedconditions. In this context, the ID Act describesthefollowingprocesseswithrespecttoworkmen:(i)‘retrenchment’,whichisdefinedasterminationofworkmen’sservicesforanyreasonwhatsoever,otherwisethanaspunishment inflictedbywayofdisciplinary action; (ii) ‘lay-offs’, which is definedas failure, refusal or inability of an employer, onaccount of shortage of power, raw materials,

break-downofmachinery,naturalcalamityoranyother reason beyond the employer’s control, togive employment to aworkman. The ID Act alsoprescribes conditions for transfer / closure of anundertakingthatwouldresultinredundancies.

Incaseofretrenchment,dependingonthenumberof workmen engaged, employers are required toeithernotify/seekpriorapprovalof,theconcernedlabourdepartment.Also,employersarerequiredtoprovide employees who have been in service for at least1year,noticeof1or3months(orequivalentpay) and also ‘retrenchment compensation’calculated at 15 dayswages for every completedyear of service. It is important to note that in case of retrenchment, employers follow the “last in,first out” principle, wherein the shortest-servingemployeeswillbethefirsttobeterminated.

Inalayoffsituation,priorapprovaloftheconcernedGovernmentmaybe required, and compensationwouldhavetobepaid, inthemannerprescribed.Laid off workmen can also be retrenched in themanner prescribed under the IDA.

The above stipulations are all in the context ofworkmen–incaseofmanagerialemployees,thereare no specific requirements under statute, andany dismissal would be as per the terms of their contract.

3. individual dismissalsAs per the IDA, any dismissal of an individualworkmanwouldalsobeconsidered‘retrenchment’asdescribedabove.Accordingly,(dependingonthenumberofworkmenengagedattheestablishment),the employerwould have to provide prior noticeof termination of either 1 month or 3 months,or equivalent wages in lieu thereof. In addition,‘retrenchment compensation’ would have to




be paid, at the rate of 15 days wages for everycompleted year of service.

However,incaseofemployeeswhoaredismissedfor misconduct (provided the employer conducts an internal inquiry prior to such dismissal) no prior notice of termination or retrenchmentcompensationwouldberequired.

Inthecaseofemployeesotherthanworkmen(i.e.managerial cadre), provisions of the employmentcontract and the relevant S&E Acts would have to be considered. Since India does not recognize at-will employment,terminationofemploymentwithoutprovidinganypriornoticeatall(orequivalentpay)would typically render the contract of employment asan‘unconscionablebargain’,andhence,illegal.

A. IS SEVERANCE PAY REquIRED?

Yes,aseverancepaymentwouldhavetobemadeby the employer. However, the quantum of theamount and the processes followed would be different,dependingonspecificcircumstances.Forinstance:

Voluntary resignation: If theemployeevoluntarilyresigns, the employermust accept the same andcommunicate whether the employee has to serve the notice period / the notice period has beenwaived.Insuchaninstance,theemployerwouldberequired to pay the following as part of severance pay:

• All accrued and unpaid wages; • Wages in lieu of accrued earned leave; •GratuityinaccordancewithPGAAct(i.e.15dayswagesforeverycompletedyearofservice,subjecttoamaximumofINR30,00,000(proposedintheUnionBudget2019));and

•Anyothercontractualdues,suchasvariablepay,performancebonus,etc.

Termination initiated by employer: In case oftermination for misconduct (which is establishedas per the clear processes set out in the employee handbook,policiesandemploymentcontract),theemployerwouldberequiredtomakethefollowingpayouts:

• All accrued and unpaid wages; • Wages in lieu of accrued earned leave;

•Gratuity in accordance with PGA Act, exceptwhere(i)anywillfulact,omissionornegligenceof the employee has caused damage to employer property; (ii) the employee has been terminated for riotous or disorderly conduct or any other act of violence, or (iii) the employeehas been terminated for an offence involvingmoral turpitude committed in the course ofemployment;

• Any other contractual dues

4. seParation agreements

A. IS A SEPARATION AgREEMENT REquIRED OR CONSIDERED BEST PRACTICE?

While a separation agreement is not mandatoryunderIndianlaws,itisincreasinglybeingfollowedby Indian companies, especially in cases ofcontentious separations / separation of seniorexecutives.

B. whAT ARE ThE STANDARD PROVISIONS Of A SEPARATION AgREEMENT?

Thekeyclausesinaseparationagreementpertainto the employee releasing the company from all present and future liabilities with reference tothe employment relationship, assignment by theemployee of any and all IP created in the course of employment to the employer, the employeeagreeing to adhere to confidentiality obligationsand the employee returning all company property in his/her possession or control. The reasonsfor separation and the terms and conditions ofseverance, includingany separationconsiderationpaid out and any benefits provided, should beaccurately captured.

C. DOES ThE AgE Of ThE EMPLOYEE MAkE A DIffERENCE?

No, there are no restrictions regarding age.However, the employee must have attainedmajority(18years)asrequiredundertheContractAct.



D. ARE ThERE ADDITIONAL PROVISIONS TO CONSIDER?

Yes.Separationagreementsshouldbecustomizedbasedonspecificcircumstancesandshouldcloselyreflect the terms of the employment contract /employee handbook and internal policies. Suchcustomization may be undertaken basis thefollowingconsiderations:

•Istheterminationpartofaworkforcereduction?•Is the termination part of a transfer ofundertaking? If so, is there any change to theemployment terms?Areanyemployeebenefitsbeingcarriedover?

•Is the termination part of a disciplinaryproceeding?

•Istherecompanyinformationorequipmentthattheemployeeneedstoreturn?

•Arethereanystockoptionrelatedqueriestobeaddressed?

•Does the employee have any specificconfidentialityobligations?

• Is there a possibility of the employee disparaging theemployeranditsotheremployees?

•Shouldtheemployeebeoffered‘gardenleave’?

Dependingontheresponsestotheabovequestions,corresponding provisions should be added to the separationagreement.

5. remedies for emPloyee seeKing to challenge wrongful terminationThe remedies available for employees seeking tochallengewrongfulterminationinclude:

• Reinstatement of employment;•Backpay;• Loss of wages and earning capacity;•Allotherexpenses

As discussed above, workmen can approach thelabour department and the industrial tribunal in this regard.

6. whistleblower laws Currently, legislation in India concerningwhistleblowers mainly pertains to listed companies and the public sector. In terms of regulationsprescribed by the Securities and Exchange Boardof India (SEBI), companies listed on a recognizedstock exchange in India have to devise aneffectivewhistleblowingmechanism that enablesstakeholders, including individual employees andtheirrepresentativebodies,tofreelycommunicatetheir concernsabout illegalorunethicalpracticesin such companies. Under the (Indian) Companies Act,2013,certaincategoriesofcompaniesarealsorequiredtoconstitutea‘vigilmechanism’fortheirdirectors and employees to report their genuine concerns or grievances.

TheWhistleBlowersProtectionAct,2014(whichhasnotyetseenlightofday,withfurthercontroversialamendments being proposed) governs mainly allegedcorruptionandmisuseofpowerbypublicservantsandseekstoprotectpersonswhoexposealleged wrongdoings in government bodies,projects and offices. It is also important to notethat IndiahasrecentlyamendeditsPreventionofCorruptionAct,1988,wherein thegivingofbribeby any person (including the private sector) to a public servant for improper performance of public duty or to improperly perform a public duty, hasspecificallybeenmadeanoffence(penaltiesextendto fine and imprisonment). Previously, only thereceipt of a bribe by a public servant was covered.


ix. restrictive covenants 1. definition of restrictive covenantsCompanies in the ‘knowledge industry’ place highvalue on their intellectual and human capital. Keyemployees who develop the intellectual property of thecompany,andthosewhohavecloseinteractionswith customers and suppliers (such as sales staff),are critical to the growthanddevelopmentof thecompany,andonmanyoccasions,thecompanymaybe reliant on the personal attributes and marketknowledgeofsuchemployeesinordertoimproveitsmarketbase.Therefore,companies looktoprotecttheir business interests by prescribing certain restrictions for their employees – these clauses inemployment contracts which place restrictions oncertain activities of employees, either during oraftertheiremployment,areordinarilyreferredtoas‘restrictivecovenants’.

2. tyPes of restrictive covenants

A. NON-COMPETE CLAuSES

A non-compete clause is typically a restrictionplacedbytheemployeronanemployee,pursuanttowhichtheemployeecannotindulgeinanyactivitythatwouldbe incompetitionwith thebusinessofthe employer. In nearly all employment contracts,such restrictions are stipulated for as long as theemployee is employed by the company; however,some employment contracts may also contain clauseswhichwillpreventtheemployeefromjoininga competitor company, or starting a competingbusinessforacertainperiod,aftertheemploymentwiththecompanycomestoanend.Theseclausesattaingreatersignificanceincaseofpromoterand/orfounder’sseparationfromthecompany.

B. NON-SOLICITATION Of CuSTOMERS / SuPPLIERS

Anon-solicitationclauseisintendedtoensurethatanemployeedoesnotinducetheemployercompany’scustomers, suppliers or clients away from thecompany, typicallyaftersuchemployee leaveshis/heremployment. Further, anon-solicitationclausemayalsopreventanex-employeefrominducinganycurrent employees to resign from employment with thecompanyandjointhecompanywheresuchex-employee is currently employed / any other company athis/herdirection(includinganycompetitorofthecompany).

3. enforcement of restrictive COVENANTS—PROCESS and remediesAsdescribedintheearliersections,theConstitutionguarantees every Indian citizen, a fundamentalright to practice a trade or profession. Further, asper the Contract Act, any contractwhich restrainstrade, business or profession of any kind will bevoid. In light of this, any restrictive covenant thatextendsbeyondthetenureofemploymentwillnotbelookeduponfavourablybyIndiancourts(butare,inanycase, incorporated inemploymentcontractsas a deterrentmeasure). The courts are generallyguidedbythepresumptionthattheemployeris inastrongerbargainingpositionincomparisontotheemployee,andtheemployeehasnochoicebuttotypicallyaccepttheemployer’sterms. Havingsaidtheabove,therearecertainprincipleslaiddownbytheIndianjudiciarythatenableemployerstoprotecttheirlegitimatebusinessinterests:




• Employers can contractually restrict their employees from misusing or disclosing the employer’stradesecretsorconfidentialbusinessinformationandpractices(andtheenforceabilityconcernswithrespecttorestrictivecovenantsasoutlinedabove,will typicallynotapply in theseinstances). Similarly,where theemployeehasamotivetocheatorcauseirreparableharmtotheemployer,arestrictivecovenantbeyondthetermof employment would be enforceable.

•Non-solicitationclausesmaybevalidifreasonablerestrictions (such as distance, time limit andlocation) regarding non-usage of trade secretsandgoodwillareimposedonformeremployees,depending on their designation and access toconfidential information. Courts have also heldthat merely approaching customers of a previous employerwouldnotamountto‘solicitation’untilorders are placed by customers based on such approach.

4. use and limitations of garden leave Theconceptof‘gardenleave’isbecomingcommoninIndia–typically‘gardenleave’involvesasituationwhereinanemployeegivesnoticeorisgivennoticeof termination and during such notice period, isdirected to stayaway fromworkand/or theofficepremises whilst continuing to receive his normalremuneration.Indiancourtshaveheldwhileitisnotpossibletostopanemployeefromleaving,hecanbe restricted from joininga competitorduring thetermofemployment(i.e.duringthe‘gardenleave’periodasdescribedabove).Theaimofgardenleaveis to keep the employee out of the market longenough for any confidential information that theyhavetogooutofdate,ortoenablethatemployee’ssuccessor toestablish themselvesparticularlywithcustomers,soastoprotectthecompany’sgoodwill.However,thegardenleaveprovisionshouldnotbeunreasonableand should typicallynotextend toaperiodaftertheemploymentcomestoanend–i.e.,iftheeffectofthe‘gardenleaveclause’istoprohibitthe employee from taking up any employmentduring a certain period after the cessation of theemployment,thenitisunlikelythatsuchclauseswillbe upheld by Indian courts.


x. transfer of undertaKings There are specific provisions under ID Act, thatprotect ‘workman’ in cases of transfer of businessundertakings.Thesehoweverdonotextendtonon-workmen–thus,incaseofnon-workmen,thetermsof the employment contract and/or the internal policiesofthecompanywouldhavetobeexamined.

1. overview of aPPlicable law In termsof Section25FFof the IDAct,where theownership or management of an undertaking istransferred,whetherbyagreementorbyoperationoflaw,everyworkmanwhohasbeenincontinuousservicefornotlessthan1yearinthatundertakingwouldbeentitledto1monthnoticeorpaymentinlieuthereofandtocompensationcalculatedattherateof15days’wagesforeverycompletedyearofservice.

However, Section 25 FF of the ID Act, would notapplytoworkmen,if:

•The service of the workmen has not beeninterrupted by such transfer;

•Thetermsandconditionsofserviceapplicabletotheworkmenafterthetransferarenotinanywayless ‘favourable’ than those applicable to themimmediately before the transfer; and

•The new employer is, under the terms of suchtransferorotherwise,legallyliabletopaytotheworkmen, in the event of their retrenchment,compensationonthebasisthattheirservicehasbeencontinuousandhasnotbeeninterruptedbythe transfer.

2. reQuirements for Predecessor and successor PartiesThe requirements mentioned above relate tothe obligations of the old employer (i.e. onewhose business undertaking is being transferred).However, if Section 25FF of the ID Act does notapplytothetransferoftheundertakinginquestion(i.e. for instance, the services of the employeeare not ‘interrupted’ on account of the transferor alternatively, employees resign and join thenew employer), then the successor entity wouldhave to ensure that the salary and benefits thatthe employees were entitled to under the oldemployer (suchasprovident fund,employee stateinsurance,gratuity)arecontinuedtobepaid. TheEPFActandESIActspecificallyprovide for liabilityofthesuccessorentity,wherethepredecessorhasdefaulted in remitting provident fund and stateinsurance contributions, prior to the date of thetransferoftheundertaking.



xi. trade unions and emPloyers associations 1. brief descriPtion of emPloyees’ and emPloyers’ associations TheIDActandtheTradeUnionsActhaveprovisionsrelatingtoemployerandemployeeassociationsatan industrial establishment.

A. TRADE uNIONS ACT

TheTradeUnionsActdefinesatradeunionas‘anycombination, whether temporary or permanent,formed primarily for the purpose of regulatingthe relations between workmen and employersor betweenworkmen andworkmen, or betweenemployersandemployers,orforimposingrestrictiveconditionsontheconductofanytradeorbusiness’.AsdescribedunderSection1herein,atleast10%oftheworkmenor100workmenattheestablishment(whicheverislesser,subjecthowevertoaminimumof7)mustbemembersof thetradeunionat thetime of making an application for registration.Theregistrationofa tradeunionunder theTradeUnionsActmustbedistinguishedfromtheprocessof ‘recognition’ of a trade union. Recognition isthe process through which an employer agrees to negotiatewithrepresentativesofatradeuniononaspectssuchasworkingconditions,wagesetc.,onbehalf of particular group of workers. There arecertainStatelevelruleswithrespecttorecognitionoftradeunions,howevertheTradeUnionsActitselfdoesnothaveextensiveprovisions in this regard.Refusal by an employer to collectively bargain ingood faith, with a recognised trade union (andvice versa) qualifies as an ‘unfair labour practice’asdefinedundertheIDA,attractingconsequencesthat includes imprisonment.

B. kEY ASSOCIATIONS uNDER ThE ID ACT

•In termsof the IDAct,establishmentswith100or more workmen have to constitute a ‘workscommittee’. The works committee shouldpromote measures for securing and preserving amityandgoodrelationsbetweentheemployerand workmen and, to this end, can commentuponmattersofcommoninterest/concernandcomposeanymaterialdifferencesofopinionthatarisebetweenemployersandworkmen.

•Establishmentswith20ormoreworkmenhaveto set up a grievance redressal committee toaddress individual employee grievances. Thesetting up of this committeewill not affect theright of workmen to raise industrial disputesundertheIDAct.Anyworkmanwhoisaggrievedbythedecisionofthiscommitteecanappealtothe employer, and the employer shall,within 1month fromthedateof receiptof suchappeal,dispose of the same and send a copy of the decisiontotheworkmanconcerned.

•There are other committees have to be set upas per State rules framed under the ID Act. For instance,inGujarat,a‘jointmanagementcouncil’has to be formed in industrial establishments that employ500ormoreworkmen.

2. rights and imPortance of trade unionsThe Constitution of India guarantees thefundamentalrightofallcitizenstoformassociationsorunions,includingtherighttoformorjointradeunions. Some of the rights of registered trade unionsareasbelow:



•Immunity is granted to office bearers andmembers from proceedings relating to criminalconspiracy, in instances where the trade unionhasbeenengagedinfurtheringitsobjects;

•Trade unions can maintain a separate fund forpolitical purposes from which payments maybemadeforthepromotionofcivicandpoliticalinterests of its members.

•Trade unions can amalgamatewith other tradeunions in the manner prescribed.

• Agreements between members of a registered trade union shall not be void or voidable merely onaccountofthefactthatanyofitsobjectsarein restraint of trade.

• No suit or other legal proceeding can be maintained in any civil court against any registered trade union or any office-bearer ormember inrespect of any act done in contemplation of atradedispute towhichamember isaparty,onthe ground that such act induces some other person to break a contract of employment, orthat it interferes with the trade, business oremployment of some other person or interferes with the right of some other person to dispose of his capital or labour as he wills.

Trade unions have immense significance both forthe wellbeing of the industrial establishment and for thesocietyat largeaswell.Tradeunionsplayamajorroleinnegotiatingbetterworkconditionsforemployees,settlementofexistingdisputesandin reducing instances of industrial disputes. Theycan also assist in the recruitment and selectionof workers and help them adjust better to theorganizationalstructureandhierarchy.

3. tyPes of rePresentation

A. NuMBER Of REPRESENTATIVES

The rules pertaining to each of the associationslisted above, have detailed provisions regardingtheir roles and responsibilities as well as theappointment of members. For instance, in caseof aworks committee, the IDAct prescribes thatit shall have an equal number of both employer andemployeerepresentativesandshallnotexceed20 members. Further, if the establishment hasregistered tradeunions, then theywouldhave tobe consulted by the employer before finalizing

representatives from the workmen fraternity. Agrievanceredressalcommitteeontheotherhand,shall also consist of an equal number of employer andworkmen representatives; however, the totalnumber of members constituting the grievanceredressalcommitteeshallnotexceed6.

B. APPOINTMENT Of REPRESENTATIVES

In relation to a works committee, the employerrepresentatives shall be nominated by theemployerandshall,as faraspossible,beofficialswho are in direct touch with the working of theestablishment.Employeerepresentativesmustbechosenbywayofvotinginthemannerprescribed.In case the establishment has registered trade unions workmen representatives on the workscommittee should be divided into thosewho aretradeunionmembersandthosewhoarenot.Theworks committee should have a chairman, vicechairman and two joint secretaries, who term ofofficeshallbe2years.Thecommitteeshouldmeetat least once every quarter.

The chairperson of the Grievance RedressalCommittee shall be selected from among theemployer representatives and from theworkmenrepresentatives alternatively, on rotation basisevery year. There shall, as far as practicable, beone female member on the grievance redressal committee, and depending on the total numberof members on the grievance committee, thenumber of female members may be increased proportionately.

4. tasKs and obligations of rePresentativesThough trade unions, works committees andgrievance redressal committees are all envisagedto ensure greater participation of workmen intherunningofanestablishment, therearesubtledifferences in relation to each of their terms ofreference.TradeUnionsaretheprincipalcollectivebargaining agents and can enter into settlementagreements with employers. A works committeeontheotherhand,aimsatpre-emptingindustrialdisputes, smoothening working relationships





and addressing any differences by way of directnegotiations between employer and workmenrepresentatives. A works committee functionsas a recommendatory body that addresses, atthe first instance, problems arising in the day today functioning of the industrial establishment.A grievance committee looks into into individualemployee grievances - unlike the other twocommitteeswhich are concernedwith employer-employeerelationsasawhole.

5. emPloyees’ rePresentation in managementThenatureandextentofemployees’representationeventuallydependsonthekindofestablishmentinquestion and the number of employees engagedat such establishment. It may be noted that the works and grievance redressal committees areonly required where the requisite employee threshold is satisfied, as described above. Also,tradeunionizationis India isentrenchedprimarilyin the traditional manufacturing sectors, thoughtheITsectorhasrecentlyseensomeunionizationaswell.Inaddition,certainothercommitteesmayalso be required depending on the nature of the industryandanyStatespecificrequirements(someexamplesgivenbelow).

6. other tyPes of emPloyee rePresentative bodies AspertheFAAct,ineveryfactorywhereahazardousprocesstakesplaceorwherehazardoussubstancesare used or handled, the occupier shall set up a‘safety committee’ consisting of equal number ofrepresentativesofworkersandthemanagementtopromoteco-operationinmaintainingpropersafetyandhealthatwork,andtoreviewperiodicallythemeasures taken in that behalf. Also, in factorieswherethereare250ormoreemployees,acanteenis required to be provided by the employer which is thentobemanagedbyacommitteewhichwouldalso have representatives of workmen. Safetycommitteesarealsorequiredtobesetupinmineswherethereare100ormorepersonsemployed.

xii. emPloyee benefits 1. social securityWhile India does not have a robust social security regime, there are certain key legislations thatgovernemployeebenefitsinIndia:

esi act / employees’ state insurance act, 1948: BenefitsofthisActextendtoestablishmentswhere10 or more employees are engaged (subject toanyStaterules),andtoallemployeesearninglessthanINR21,000(~USD300)permonth.Employersare required to contribute an amount equivalent to4.75%of theemployees’wagesmonthly toanEmployees’ State Insurance Fund (the “InsuranceFund”),whiletheemployeeisrequiredtocontribute1.75%ofhis/herwagestotheInsuranceFund.Theemployees are then entitled to certain medicalbenefits (includingmedical care, sicknessbenefit,disablement benefit, etc.) from accumulations inthe Insurance Fund.

ePf act / employees’ Provident fund and miscellaneous Provisions act, 1952: Benefitsunder this Act typically extend to establishmentswherethereare20ormoreemployees.Employeesearning less than INR 15,000 per month (~ USD211) have to compulsorily contribute to schemesunder the EPFAct,whereas those earning abovethislimitmayoptout,subjecttocertainconditions.Further,incaseswheremonthlywagesexceedsINR15,000permonth,employersandemployeesmayeitheragreeto(i)makecontributionsontheentiremonthly wages in the manner prescribed or (ii) capwagesforthepurposesofcontributiontoINR15,000permonth.

There are threemain schemes framedunder theEPFAct,namely:

•The Employees’ Provident Fund Scheme, 1952(the“ProvidentFundScheme”).

•The Employees’ Pension Scheme, 1995 (the“PensionScheme”);and

•The Employees’ Deposit Linked InsuranceScheme, 1976 (the “Deposit Linked InsuranceScheme”).

Employeesarerequiredtocontribute12%oftheirbasic wages, dearness allowance and retainingallowance to the Provident Fund Scheme - this is undertaken by the employer (on behalf of theemployee)asamonthlydeductionfromwagesanddeposited into the provident fund. An employer is thenrequiredtomatchthisemployeecontribution– however, out of the 12% of the employercontribution: (i) 8.33% is directed to the pensionfundsetupunderthePensionScheme,(ii)0.5%isdirectedtothedepositlinkedinsurancefundsetupundertheDepositLinkedInsuranceScheme(iii)theremaining 3.17% is deposited into the providentfund.

Pga act / Payment of gratuity act, 1972: the PGA Act contemplates payment of gratuity to all employees (whether workmen or not) engagedin establishments (including factories, shops andother commercial establishments) in which 10or more persons are employed. An employee is entitled to gratuity if he/she has renderedcontinuousservicefornotlessthan5years(exceptinthecaseofdeathordisability),underanyofthefollowingcircumstances,namely:Superannuation,Retirementorresignation,orDeathordisablementduetoaccidentordisease.Thegratuitypayabletoanemployeeiscalculatedat15days’wagespayablemultipliedbythenumberofyearsofservice(apartofayearinexcessof6monthscountedas1year).Aformulaforcomputationhasbeenprescribedinthis regard.

2. healthcare and insurancesThe main legislation applicable to the privatesector,theESIAct,contemplatesmedicalbenefitsfor employees in contingencies such as sickness,maternity, disablement and death due toemployment injury and providesmedical care toinsured persons and their families. Additionally,the Employees’ CompensationAct, 1923 requiresemployerstopaycompensation(computedinthemanner prescribed) in cases of death/disablement



of employees owing to injuries sustained at theworkplace. There is also an ambitious universalhealth scheme launched by the Government (the ‘PradhanMantriJanArogyaYojana’)toensurethatthe poor and vulnerable population is providedhealth cover. This schemeprovides an insurancecoveruptoINR5lakh(~USD7000)perfamily,peryear for secondary and tertiary hospitalization.Other than the above, most large employers inthe private sector do provide medical insurance benefits to their employees and their immediatedependents,andbearthecostsinthisregard.

3. reQuired leave

A. hOLIDAYS AND ANNuAL LEAVE

ProvisionsrelatingtoholidaysandleavearemainlyprescribedintheStatespecificS&EActs(forshopsand commercial establishments) and under the FA Act (for factories).

• WeeklyHoliday

The FA Act and some of the S&E Acts state thatestablishmentshallremainclosedonatleast1dayofeveryweek (this is typicallySunday).However,the S&E Acts of certain States (for instance,Maharashtra) also contemplate that establishments maybeopenforalldays inayear,subject to theemployees being given a weekly off and certainotherconditionsbeingsatisfied.

• NationalandPublicHolidays

Across India, there are certain national holidaysnamely: (i) Republic Day (26th January); (ii)Independence Day (15th August); and (iii) birthanniversary of Mahatma Gandhi (2nd October).In addition to these, every employee would beentitled to other holidays, as may be declaredby the concerned State Governments. In case anemployee is required toworkonanyof theseholidays,he/shewillbeentitledtotwicethewagesandalsoacompensatoryoffday.

• PrivilegedLeaveorEarnedLeave

The S&E Acts prescribe different privilege leave/earned leave requirements, and in some Statesemployeesmayavailprivilegeleaveonlyafterbeinginserviceforacertainperiod(suchas3monthsor1

year).TheS&EActsalsoallowunutilizedprivilege/earned leave to be carried forward at the end of theyear(subjecttoalimit),andalsocontemplatethatanyunutilized leavemaybeencashedat thetimeofseparationfromemployment.

B. MATERNITY / PATERNITY LEAVE

There is no separate category of paternity leaverecognizedunderIndianlaw,thoughabillhasbeenintroduced in this regard seeking paternity leaveof 15 days across all sectors. Currently however,some corporates and public sector departments doprovidepaternity leave to theiremployees,asprescribed in the concerned leave policy/rules. Withrespecttomaternityleave,Indiahasrecentlyamended its MB Act (as described in the earlier sections), in terms of which women employeeswhohavebeeninservicefor80daysareentitledtopaidmaternity leaveof26weeks. In caseofamiscarriage ormedical termination of pregnancy,womenemployeesareentitledtoleavewithwagesforaperiodof6weeksimmediatelyfollowingtheday of the miscarriage or medical terminationof pregnancy. Leave requirements are also specifiedforwomenhavingundergonetubectomyoperations,or incaseofany illnessarisingoutofpregnancy,prematurebirth,delivery,miscarriage,ormedicalterminationofpregnancy.

C. SICkNESS LEAVE

Typically, sick leave cannot be carried forwardor encashed and is not subject to any minimumservice requirements.

D. DISABILITY LEAVE

Nospecificcategoryofdisabilityleaveisrecognizedin India.

E. ANY OThER REquIRED OR TYPICALLY PROVIDED LEAVE(S)

a.CasuaLLEavE

Some of the S&E Acts also recognize casual leave, which can be availed by employees inunforeseen situations, subject to the approval ofanorganization.Thiscategoryofleaveisalsonottypically carried forward or encashed.





4. Pensions: mandatory and tyPically Provided Employees who fall within the purview of the EPF Act will be entitled to monthly pension, as pertherulesofthePensionScheme.Otherthanthis,employees in thepublic sectorwillbeentitled topension as prescribed in their service rules.

5. any other reQuired or tyPically Provided benefitsIn addition to the above, various employersprovide other benefits to employees (which alsohave certain tax benefits) such as food coupons,conveyance allowance, reimbursement of mobilephone and internet expenses. There are alsospecific benefit programs / labour welfare fundsprescribed for certain sectors.

Avik Biswas, [email protected]:+918040726686

mailto:avik.biswas%40induslaw.com%20?subject=

IndusLaw isamultispecialty Indian lawfirm,withofficesinBangalore,Delhi,HyderabadandMumbai.TheEmployment Lawpracticegroupof IndusLawadvises employers on all aspects of employment lawincludinglitigation,transactionalandadvisorymatters. Clients approach the Firm for assistanceinmanagementofemploymentrisksatalllevelsinadditiontoprovidingstrategic,board-leveladviceoncrucialemploymentandcomplianceissues,aswellas day-to-day support for their human resources department and in-house counsel teams. What setsIndusLawapartfromotherfirmsinIndiaisthediversityoftheattorneys,intermsofbackground,experience,andinternationaleducation,inadditionto the fact that IndusLaw has a partner to associate ratiosignificantlybelowthatofotherIndianfirms.Furthermore, IndusLaw advises a wide range ofinternationalanddomesticclientsacrossavarietyof sectors including e-commerce, education,energy, infrastructure,natural resources,financialservices, healthcare, hospitality, manufacturing,realestate,socialenterprisesandtechnology.

This memorandum has been provided by:

IndusLaw#1011stFloor“EmbassyClassic”#11VittalMallyaRoad560001,Bangalore,IndiaP+918040726600www.induslaw.com

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