In this blog post, Pritishree Dash, a student, pursuing her fourth year LLB at National University of Advanced Legal Studies, Kochi and a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses the applicability of the Standing Orders Act to Karnataka’s IT Industry.
Introduction
The Industrial Employment (Standing Orders) Act, 1947 is designed to provide service rules to workmen. There are ‘service conditions’ or ‘service rules’ for various employees like Government employees, bank employees, LIC employees, etc. The object of the Act is to require employers in industrial establishments to define with sufficient precision the conditions of employment under them and to make the said conditions known to workmen employed by them. The case of Agra Electric Supply Co. Ltd. v. Aladdin, (1969) 2 SCC 598 provides the object of the Act to have uniform Standing Orders providing for the matters enumerated in the Schedule to the Act, that it was not intended that there should be different conditions of service for those who are employed before and those employed after the Standing Orders came into force and finally, once the Standing Orders come into the force, they bind all those presently in the employment of the concerned establishment as well as those who are appointed thereafter. Under Section 2(e) “ standing orders” mean rules relating to matters set out in the Schedule of the Act.
The Act applies to all ‘industrial establishments’ employing 100 or more workmen [Section 1(3)]. ‘Industrial Establishment’ means (i) an industrial establishment as defined in section 2(i) of Payment of Wages Act (ii) Factory as defined in section 2(m) of Factories Act (iii) Railway (iv) Establishment of contractor who employs workmen for fulfilling contract with owner of an industrial establishment. [Section 2(e)]. ‘Workman’ derives its meaning under section 2(s) of Industrial Disputes Act. [Section 2(i)]. ‘Workman’ includes skilled, unskilled, manual or clerical work. However, ‘workman’ does not include employees engaged in managerial or administrative capacity or supervisory capacity neither does it include workers subject to Army Act, Navy Act or Air Force Act or to police or prison services.
Standing Orders
Every employer covered under the Act has to prepare ‘Standing Orders’, covering the matters required in the ‘Standing Orders’. The draft standing orders submitted under this section shall be accompanied by a statement giving prescribed particulars of the workmen employed in the industrial establishment including the name of the trade union, if any, to which they belong. Five copies of these draft standing orders should be sent to Certifying Officer for approval within six months. [Section 3(1)]. ‘Certifying Officer’ means Labor Commissioner and any officer appointed by Government to be ‘Certifying Officer’. [Section 2(c)]. The Certifying Officer will inform the Trade Union, if any or workmen and hear their side after which, he will certify the ‘Standing Orders’ for the industrial establishment after the necessary modifications and shall within seven days send the certified order to the employer and the workmen. [Section 5]. Till standing orders are certified, ‘Model Standing Order’ prepared by Government will automatically apply. These are automatically applicable till employer prepares his own ‘Standing Orders’, and the same are approved by ‘Certifying Officer’. [Section12A]. Standing order should be displayed in English and local language on special notice boards at or the near entrance of the establishment. [Section 9]. Modifications of Standing Order shall be done by adopting a similar procedure. [Section 10].
As has been held in the case of Eicher Goodearth Ltd. v. R K Soni (1993), Once the ‘Standing Orders’ are certified, they supersede any term and condition of employment, contained in the appointment letter. If there is an inconsistency between ‘Standing Order’ and ‘Appointment Letter’, the provisions of ‘Standing Order’ prevail. In the case of Rajasthan SRTC v. Krishna Kant (1995), it has been held that standing orders are binding on employer and employee. These are statutorily imposed conditions of service. However, they are not statutory provisions themselves. This means that the ‘Standing Orders’ even when approved, do not become ‘law’ in the sense in which Rules and Notifications issued under delegated legislation become after they are published as prescribed.
‘Standing Orders’ become essential in the case of disciplinary action. A workman can be punished only if the act committed by him is a ‘misconduct’ as defined under the ‘Standing Orders’ (Nulla poena sine lege). The ‘Model Standing Orders’ contain such acts like insubordination, disobedience, fraud, dishonesty, damage to employer’s property, taking a bribe, habitual absence or habitual late attendance, riotous behaviour, habitual neglect of work, strike in contravention of rules, etc. as misconducts. The ‘Certified Standing Orders’ may cover other acts as ‘misconduct’, as approved by ‘Certifying Officer’.
IT Policy Of The Government Of Karnataka
The latest IT policy of the Government of Karnataka, the Karnataka I4 Policy – in which the 4 “I”s stand for IT, ITES, Innovation and Incentives, had announced the intention of the Government to exempt IT, ITES, ‘startups’ and ‘knowledge-based’ industries (the Notification has exempted not only IT/ITES establishments from the provisions of the SO Act, but also ‘startups, animation, gaming, computer graphics, telecom, BPO, KPO and other knowledge-based industries’ (Covered Establishments) from the ambit of the SO Act, with the intent of making Karnataka an investor/ industry-friendly destination. Information technology (IT) and IT-enabled Services (ITeS) establishments in Karnataka are exempted from compliance under the Industrial Employment (Standing Orders) Act of 1946, per recent Notification by Government of Karnataka for 5 years from January 25, 2014, subject to the following conditions:
- The establishment shall constitute an Internal Complaints Committee as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules framed thereunder.
- The establishment shall set up a Grievance Redressal Committee to address complaints of employees in a time bound manner.
- The establishment shall intimate the jurisdictional Deputy Labour Commissioner and the Commissioner of Labour, Karnataka about cases of disciplinary action, suspension, discharge, termination, demotion, dismissal, etc., of its employees. However, the Notification does not clarify either the period within which such information should be communicated; or the level of detail it should contain. Companies are required to submit an annual return under the Karnataka Shops & Commercial Establishments Act, 1963 (S&E Act). This includes information about the number of suspended or terminated/ discharged/ retired employees in a year. If the labour authorities make it mandatory that with this annual return, employers must also provide actual facts and details of the event and the disciplinary action taken after the occurrence of every incident, it will impose an obligation on such companies that is extremely onerous and unparalleled as compared to any other industry.
- The employer shall ensure prompt submission of any information regarding the service conditions of the employees sought by the jurisdictional Deputy Labour Commissioner or Commissioner of Labour, Karnataka. (http://www.bangaloreitbt.in/docs/2014/Labour-Notification-dated-25th-jan-2014.pdf)
The Notification does not define terms such as ‘knowledge-based industries’ which can cause confusion as to whether non-IT/ITES businesses such as consultancies, pharmaceutical businesses, financial services and engineering R&D enterprises can also claim an exemption under the Act.
The conditions imposed on exempt establishments might not be novel or unique, yet the wording of the notification is prone to confusion and could possibly expose the industry to even greater regulation and scrutiny than intended. It is important for the government to, therefore immediately clarify the various ambiguities that are inherent in the Notification i.e. the nature of the organisations intended to be exempted and also the intention in clear terms.
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