This article is written by Ramanuj Mukherjee, CEO, LawSikho.

HR managers can make or break a company. They are custodians of a company’s culture, morale, productivity and its biggest resource – people.

But when HR managers make mistakes, things go for a toss. Especially legal mistakes.

Take the example of Tehelka. Or even more recently Viral Fever. Thriving companies went from rising stars of the industry to obscurity, thanks to HR failures. Sexual harassment and toxic workplace behaviour was not reigned in, which led to total disaster eventually.

Even before that there was the Maruti saga.

In 2012, our favourite car manufacturer Maruti Suzuki Ltd was in news for the dubious working conditions provided to its workers. It was an example meant for textbooks.

HR managers made and implemented misconceived labour policies and ignored complaints. Lack of positive enforcement of ethics and laws led to the unprofessional approach of managerial staff towards labourers. This led to violent protests that led to the murder of an HR manager following by shutting down of Manesar factory of Maruti for a long time.

Being a great HR manager is not just about the human aspect of the business, they are also expected to enforce the black letter of labour, industrial, social security and other employment laws.

If you are not an HR manager, you are welcome to read, but please, please, send this across to at least one HR manager you know and respect. This would be valuable for them.

Lawyers should read it because it would help you to understand some fundamental things about labour and employment law practice so read on.

Here are 20 solid reasons why HR managers with leadership ambitions should seriously consider acquiring practical knowledge of labour, employment and industry laws.

#1

HR managers with labour law qualifications get promoted faster and get paid more

Good HR skills plus knowledge of Industrial laws, labour and employment laws make a very powerful combination. These laws are not just complex obstacles. These laws also represent a unique opportunity.

There are very few HR leaders who understand the rules of the game, and if they do, it makes them indispensable to higher management. Those HR managers also make better decisions, frame better policies and deal with external agencies and regulators much better, helping them to climb the corporate ladder faster than the rest.

#2

HR managers are the first level of defense against potential labour and employment law cases

Who is the first person we go to for a minor disturbance or a significant turmoil at the workplace?

If HR is doing his or her job right, it will be the HR department.

They are the ones who keep an eye on retention failures, nepotism, corruption, high attrition, employment contracts etc. They are also tasked with legal compliance related to employment.

If there are potential legal risks with respect to employees, which can lead to cases later, HR managers can identify, flag, escalate and address them.

Similarly, if there are reasons for labour department or other government bodies to take the wrong kind of interest in the organization, HR managers are in a position to report such things upwards rapidly and the organization can then take necessary steps.

It is the job of HR managers to interact with people all the time. They get to know things that other managers or executives will never know. And there lies their superpower!

HR managers can save the company from falling through hidden legal traps.

But for that they need to be trained enough to spot these clouds of trouble from a distance.

#3

HR managers have to handle raids and labour inspections

Disgruntled employees complain against the company.

Jealous competitors pay off labour inspectors to trouble your company.

An overzealous manager mistreats some employees or forgets to enforce safety mechanisms as the focus is too much on production goals.

Or the labour department sends an emissary for a routine inspection.

Who would be in the front line dealing with such situations? Senior HR managers of course.

Notices under various Labour Laws are issued to the employer on the spot for compliance of irregularities detected during the course of the inspection.

You can refer to this checklist to know how risks of non-compliances are categorized and evaluated by the labour inspector.

Let’s take the example of the Factories Act. If you go through Karnataka State rules supplementing the Act, you will find over 80 compliance obligations are cast on the occupier of the factory.

It is the duty of the HR manager to analyze such rules, prepare action points, comply with the directions and report of the labour inspector within 15 days of submission of the report, otherwise you might invite unwarranted legal risks in the form of penal sanctions and prosecutions.

This is just one law, you may have to comply with another 20 such labour laws. And that is why it is a great thing if you are comfortable with labour laws and India’s legal system.

#4

Managers can stop sexual harassment from happening at the workplace

In a post-me-too world, sexual harassment is a big danger to every organization. It is not enough to just comply with laws, but companies must be seen to be taking a proactive stance if they do not want to face a huge backlash from social media and possible boycott and disruption of work.

Employees are now opening up on social media with their allegations even before taking the formal recourse available to them. Not only does it pose a threat to the company’s perception in the eyes of the public but also causes hindrances in conducting a proper investigation with regard to the allegation too.

An HR manager has to ensure that not only the provisions of the POSH Act are complied but also mitigate the reputational risks involved for the company. He needs to put in place well defined social media and anti-harassment policies too.

The priority is prevention at all costs. And if it still happens, HR manager has to handle things with a deftness that requires them to understand the law, public policy and media strategy.

#5

HR managers have to ensure compliance with a large number of labour laws

There are more than 41 central labour and employment statutes in India.

If that was not enough, you are also expected to navigate state laws. In some cases, rules to central level legislations have been passed by the state government.

For example, the Factories Act, 1948 is uniform legislation applicable nationwide but state governments have passed rules to the Act.

Sometimes, the state rules of one state are not available in another state. The absence of an online repository makes it difficult to obtain a consolidated set of state rules applicable to different states.

Usually, there are at least 14-16 labour and employment statutes applicable to a particular organization. An HR manager has to ensure compliance through the identification of the applicable labour laws, compliance planning, building reporting structures to discover non-compliance and handle fall outs of non-compliance.

#6

HR managers have to negotiate employment contracts, especially with senior employees

Are you aware of the infamous spat between ex-CEO Vishal Sikka and Infosys? There were major issues with regard to Mr. Sikka’s Employment Agreement.  

In Sikka’s case, there was a provision for severance pay equal to 24 months. The resulting amount was not paid in full which lead to arbitration.

HR managers help in negotiating better contracts to avoid such embarrassments.

Forget better contracts, they have to negotiate the contract. Sometimes lawyers may be brought in to vet a contract, but most of the substantial conditions of employment have to be negotiated.

For example, a release of claims clause, a structured compensation clause with emphasis on performance-based criteria, a well-defined non compete clause are some of the ways in which HR managers ensure better employment contracts.

Likewise, business situations like mergers warrant for special considerations with reference to the top-level executives like drafting a golden handshake clause or a gardening leave clause. Likewise, you may want to insert a clawback clause in some other cases.

#7

HR managers have to come up with and enforcement critical policies

I was speaking to an HR manager of a reputed company while the me-too wave was on. He was considering drafting a dating policy.

Let me put up an interesting question, how will you deal with unused vacation time in case the employee quits? Do you require a vacation payout policy for such a case?

Gone are the days wherein an HR manager’s job was restricted to drafting a standard code of conduct and code of ethics. HR managers need to be proactive in responding to workplace situations that arise and draft policies accordingly. Drafting policies has not remained a mere copy paste job.

Still, most HR managers are not trained to do such work and copy paste is exactly what they resort to.

#8

HR managers have to handle disciplinary proceedings and hand out penalties and punishments

To give you an example, we have laws that classify certain acts as misconduct. In case an enquiry is initiated against an employee, it is the HR manager’s duty to facilitate the long drawn enquiry process from issuing the notice to the employee until the adjudication of the matter.

There are many laws under which different kind of enquiries and hearings have to be held. HR managers also need to understand the principles of natural justice for such proceedings. They need to prepare document trails, preserve records and evidence, hire external experts to investigate or conduct hearings and then enforce decisions.

#9

HR managers have to ensure document keeping and maintenance of records, failing which organization can be at great risk

One reading of the Factories Act along with the supplementary rules will let you know the number of statutory registers from muster rolls to display of notices that an employer has to keep. Failure to perform his obligations can bring about penal consequences in the form of fines, abolishing of licenses and prosecution.

But it’s not just statutory compliance. Even attendance record or an email written by an HR manager or employee can be critical evidence and misplacing the same can lead to grave problems.

There may be a disciplinary hearing, and the minutes of the same not being kept or preserved may lead to very serious repercussions.

HR managers deal with these issues almost every day, whether they realise or not.

#10

HR managers help labour lawyers to build their cases

The HR manager is the best person to know the genesis of an employee related controversy. They also usually have the relevant documents, records and paperwork. He or she would have factual clarity that is very much needed to build either a case or a defence by a lawyer.

External counsels, as well as in-house legal counsel, often relies on the expertise and accuracy of the HR’s work to win their cases.

A good HR manager can be a very effective ally of the lawyers of the organization.

#11

Mistakes by HR manager can be very costly to the organization

Suppose you as an HR manager hire someone aged 55 for a sales position under a 2-year contract subject to removal on the ground of failure to perform duties.

In the first year, you notice unsatisfactory performance on the part of the employee but stay lenient on him.

His boss goes to the extent of giving favourable feedback to the employee in the company’s annual performance review to encourage him to do better. Everyone knows that criticism does not inspire people, after all.

Now, after one month the sales department is suddenly forced to fire the employee. The next thing you know that there is a lawsuit filed against the company for breach of terms of the contract, unfair treatment and discrimination.

How would you show that the dismissal was not arbitrary and vindictive?

The HR cannot let such things pass. A mistake by the HR can be very destructive, especially because such mistakes become part of an organization’s DNA over time, exposing it to tremendous risk.

#12

Even a letter or email written by HR manager can be used against the organization

In July 2016, A Microsoft HR team member had sent an invitation to the interns for the company’s annual party event. In an attempt to look hip and grab the attention of the youth,

The email included slangs and a phrase like “HELL YES TO GETTING LIT ON A MONDAY NIGHT.”

The company became a subject of ridicule and trolling on social media. It caused reputational damage to the company so much so that the company had to issue an apology saying the email was “poorly worded and not in keeping with our values as a company.”

Therefore HR managers not only need to be careful with addressing issues that might arise out of their written word but also take care of the brand message and corporate culture their company represents.

Do you think this was bad? Worse things happen when HRs don’t draft their mails carefully. Companies have paid millions in fines and compensations to employees and government for such mistakes.

What if a mail sent to prospective employees was found to be a violation of a non-solicitation agreement?

What if there was inaccurate legal jargon in a mail for dismissal that the lawyer of the employee latches on to and exploits?

What if there was a mail trail that indicated a policy was being relaxed when that was not actually intended but the HR manager forgot to add that disclaimer?

Such things have happened time and again, which is why it is a great idea to spend time honing your drafting and make it precise. This is another benefit of learning the law.

#13

HR managers will now play a critical role in data protection as laws are becoming stringent

A Virginia based company that bills itself as “the choice provider of cybersecurity services to the federal government” — reported a breach of employee tax data which was handed directly to fraudsters after someone inside the company got caught in a phisher’s net.

It’s alarming to see a cybersecurity company facing data privacy issues. You may say that, data security is an IT issue but hang on. It’s mostly a people issue. It’s far easier to get data from people than from behind the proverbial firewall.

HR managers have a role to play in data privacy. Their role is not limited to defining a data privacy policy alone. In the wake of GDPR, HR managers have to understand data laws and become a partner in enforcing them. Compliance is an ongoing process and employees are also required to be trained in this regard on a continuous basis.

#14

HR managers go on to become directors at the board level, and for that knowledge of corporate governance is essential

What’s common between Mr Shrinivas Kandula, the chairman of Capegemini India and Nigel Travis, the CEO of Dunkin’ Donuts? What about Mary Barra, CEO of General Motors and Anne Mulcahy who was CEO of Xerox for 10 years?

Well, they have started in HR roles before moving up the ladder.

Leadership is about transforming an institution, and if you want to have a sustainable transformation, you need to develop leaders who will continue the journey after you. HR is an essential part of that kind of generative leadership.

Surely all HR managers have the secret desire to move up the chain and become board members or even CEO. You know what could help in that journey? Apart from everything else, a solid knowledge of the law will be a great aid. Start with labour law but move towards learning corporate governance laws eventually.

It’s not easy, but adding such disparately different skills can actually increase your chance of moving upstairs.

#15

HR managers have to prevent malpractices such as employees running away with equipment, data or confidential information or misuse the same

Suppose an employee working under the supervision of a chief marketing officer is quitting.

Now he may have the company’s laptop, client list, confidential trade information.

How do you ensure that such equipment or information is not misused?

Well, many companies just write an email to the employee at the time of quitting that they are barred from sharing confidential information.

However, in today’s day and age, that might not be enough. It is the HR manager’s responsibility put in place exit memos covering for situations that not only reaffirm the terms of employment that were agreed upon but also instructs the employee to deposit equipment,  frame non-compete and non-solicitation terms, delete information representing engagement with the company on social media etc.

And then if such rules are broken, HR managers have to take leadership in enforcing those rules through legal routes.

#16

HR managers have to know local laws and keep themselves updated with amendments

The Modi government has an agenda of simplifying labour laws. While no sweeping reforms have been made, some of the recent amendments have changed the nature of the game.

Take the Payment of Wages Act, for instance. The ceiling of salary, with respect to which employees it apply to, has been raised recently to INR 24,000, bringing a large number of employees under its umbrella and companies for whom it has suddenly become very relevant.

Similarly, a very interesting situation has presented itself after the recent amendments of the Maternity Benefits Act as women have to be given 6 months of paid holiday when they get pregnant while they are employed.

Given that churn of employees leaving is high in the private sector, and employees often leave within 1 or 2 years of joining a job, it has very cumbersome for employers who don’t expect employees to stay beyond a year or two, to hire married women. Legal claims of maternity benefits being denied as well as companies looking to defend themselves against such claims are suddenly on the rise.

In a recent landmark ruling, the Supreme Court has decided on the question of allowances to be included in the salary for the purpose of PF calculation which will have a significant bearing on the take-home salary of the employees.

HR managers need to keep abreast with such amendments and developments all the time.

#17

HR managers may even have to hold senior management level people accountable, a very risky proposition

In 2016, there was a lawsuit filed by an employee of Yahoo Inc. against the CEO of the company Marissa Mayer alleging arbitrary use of the performance review process. Now, the question arises that to what extent can the HR manager hold the senior management accountable in such cases?

What if there is a sexual harassment complaint against top-level executive in your organization? What if an employee blows the whistle against a senior level official in case of major accounting fraud?

What if the HR managers had the guts to guide the senior management better in the famous Maruti labour controversy at the Manesar plant?

HR managers who are well trained in labour and employment laws can confidently and assertively deal with such tricky situations.

#18

HR managers have to ensure social security benefits actually reach the employees and ensure that the social security laws are implemented

Employees are unaware of the social security benefits accruing to them.

There are over 64,000 crore rupees unclaimed provident fund dues lying with the government.

The people to whom that money is owed do not know how to do the necessary paperwork.

It is a similar thing with gratuity, accident benefits, compensation under different statutes. We have an article on gratuity related laws in India on iPleaders blog, which is read by over 1000 people a day.

Such facts and figures tell us that somewhere there is an anomaly in following the procedure in either depositing or collection of the amount in the name of social security.

What if basic paperwork is missing, in such a case how will you enforce your claim? Social security welfare forms the crux of labour laws and employment laws.

HR managers need to ensure social security laws applicable to your organization are not driven for the sake of compliance but the employee benefits accruing under them actually reach the employees without any hassle.

And what can I say about the number of directors who have seen the insides of jail due to PF frauds and HR managers who have lost jobs and face over the same!

#19

HR can mitigate risks of litigation through diligence and precautions

Do you know when Steve Wozniak had quit Apple, he was barred from working with the Company’s design agencies under a clause in the employment agreement?

For a company like Apple which leverages on its brand image, a non solicit and non compete clause is extremely important.

However, under section 27 of the Indian Contract Act, 1872, agreements in unreasonable restraint of trade is violative of the Constitution.

In this light, an HR manager’s role in drafting an employment agreement which effectively protects the Company’s interests without going outside the contours of law is extremely important.

Everything the HR does can reduce or increase legal risks for a company.

The question is whether the HR understands the full spectrum of consequences or not. And to have the right kind of understanding, knowledge of law is critical.

#20

As they shift industries, laws applicable can drastically change, requiring HR managers to rapidly adopt

Imagine, you are the HR head of a large MNC conglomerate with diverse operations across multiple locations.

At one moment you might be dealing with employee issues sitting in your Corporate office in Mumbai. At another instance, you might get a sudden phone call that there have been issues with contract labourers, strike at the Jamshedpur factory of the Company.

It’s not easy.

What is worse is when you have worked in manufacturing for 15 years and kind of got familiar with all the laws, and then have to shift to a software company or media company. Or even a conglomerate that deals with 15 different industries. But the packages are far better in such places!

HR managers need to be versatile and learn new laws and regulations quickly. That is the demand of the time.

Where do you learn all these things?

Of course, we have a solution for you. There is only one course in the world that addresses each of these concerns, and that is available on this link. The batch closes soon, so hurry up. You can do the course from the comfort of your home/ or even during commute.

If you are a lawyer or non-HR person and read it till here, do me a favour and forward this mail to an HR manager.

Thanks and all the best!