Labour Laws for Employees
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This article is written by Sonali Chauhan, a student of Lloyd Law College, Greater Noida and Aditi Pandey, student of Indore Institute of Law. The author, in this article, has discussed the concept of Labour Laws.

Table of Contents

Introduction

Labour law is the area of law which signifies the relationship between a worker, trade union and government at large. It plays a major important role in protecting the rights of labour, their union, their wages, and moreover building a link between government and workers. It is a protective code for laborers, workers, and employees as well, to make them aware of their rights and also, to establish a standard law regarding labour work practice. Labour law is often incorrectly conflated with Employment law. However, Employment law is the area of law that specifically deals with the relationship between an employer and employee.

Labour law is concerned with the establishment of a labour-relations framework that provides peaceful industrial relations between labours and organized workers. It is basically related to the matters of labour-relations, functions of a trade union, an adequate environment of working, conditions under which labours are working, strikes and security of the labour. While Employment law or Employment standards law is concerned with the regulation in statute laws, conditions of the workplace, time of working, wages, and so on, both, Labour law and Employment standard laws are commonly related to workers or employees and their way of working.

Historical Background

Labour law arose parallel to the Industrial Revolution, as a result of conflict between workers and trade union. The relationship between a worker and employer of a small scale production gradually changed to large scale factories. The growth of labour law is an outcome of a constant desire of the worker, to seek better conditions of working to manage an adequate living and the employers need to have a flexible, economic and productive workforce for better production and sales.

The origin of Labour law can be traced back in time around 18th century, where Labour relations had been mentioned in several places by European writers while giving importance to their Guilds and Apprenticeship system, Asian scholars in the Laws of the Hindus by Manu and then several other Latin American authors and writers across the world.

Evolution of Labour Law in India

The labour and employment law in India is also known as Industrial law. In India, the history of labour law is interwoven with the history of British colonialism. The industrial/labour-law enacted by the British was meant primarily to protect the British employers’ interests. Considerations of the British political economy were of course of paramount importance in defining some of these early laws. That’s how the Factories Act came. It is well known that Indian textile products offered stiff competition on the export market to British textiles and, in order to make India labour more expensive, the Factories Act was first enacted in 1883 due to pressure brought on the British parliament from Manchester and Lancashire’s textile magnates. Thus, India received the first stipulation of eight hours of work, the abolition of child labour, and women’s restriction in night work, and the introduction of overtime wages for work beyond eight hours. While the impact of this measure was clearly welfarist, there was no doubt that the real motivation was protectionist.

The Trade Dispute Act, 1929 (Act 7, 1929) was the earliest Indian statute to govern the relationship between an employer and his workmen. Provisions have been made in this Act to limit strike and lockout rights, but no mechanism has been provided to take care of disputes.

In the post-colonial era, the original colonial laws witnessed substantial changes when independent India called for a direct relationship between labour and capital. The content of this partnership was unanimously approved at a tripartite conference in December 1947 in which it was agreed that labour would be provided with a fair wage and fair working conditions and that, in return, capital would receive the fullest cooperation of labour for continuous production and higher productivity as part of the national economic strategy development and that all concerned would observe a truce period of three years free from strikes and lockouts.

Purpose of Labour Legislation

Labour legislation that is adapted to the economic and social challenges of the modern world of work fulfils three crucial roles: 

  • It establishes a legal system that facilitates productive individual and collective employment relationships and hence a productive economy. 
  • By providing a framework within which employers, workers, and their representatives can interact with work-related issues, it serves as an important vehicle for achieving harmonious industrial relations based on workplace democracy.
  • It provides a clear and consistent reminder and the guarantee of fundamental principles and labour rights that have gained broad social recognition and defines the mechanisms through which those principles and rights can be implemented and enforced.

But experience shows that labour laws can only effectively fulfil these functions if they are responsive to the conditions on the labour market and the needs of the involved parties. The most efficient way to ensure that these conditions and needs are completely taken into consideration is when those concerned are closely involved in the legislative formulation by processes of social 6 dialogue. The involvement of stakeholders in this way is of great importance in the development of a broad base of support for labour law and in facilitating its application within and beyond the formal structured economic sectors.

Constitutional Provisions with regard to Labour Laws

Chapters III (Articles 16, 19, 23 & 24) and 7 Chapter IV (Articles 39, 41, 42, 43, 43A & 54) of the Constitution of India have enshrined the relevance of the dignity of human labour and the need to protect and safeguard the interests of labour as human beings by keeping in line with the Fundamental Rights and Directive Principles of State Policy.

Labour is a concurrent subject in the Indian Constitution that means that both the Union and the state government are qualified to legislate and administer labour matters. The Parliament has enacted the majority of important legislative acts.

Concurrent List

Entry no. 55: Regulation of Labour and safety in mines and oil fields.

Entry no. 22: Trade union, industrial and labour disputes.

Entry no. 66: Industrial Disputes concerning union employees.

Entry no. 23: Social security and insurance, employment and unemployment.

Entry no. 65: union agencies and institutions for “Vocational Training”.

Entry no. 24: Welfare of about including conditions of work, provident funds, employers invalidity, and old-age pension and maternity benefit.

Legislation can be categorized as follows: 

1) Labour laws enacted by the Central Government, where it is the sole responsibility of the Central Government to implement them.

2) Labour laws passed by the Central Government and implemented by both Central and State governments.

3) Labour regulations passed by the central government and implemented by the State Governments of the country.

4) Labour laws passed and implemented by the different State Governments which is applicable to the respective States.

The Indian Constitution provides detailed provisions on citizens’ rights and also sets out the Directive Principles of State Policy which set the aim to guide the State’s activities. These Directive Principles stipulate: 

  1. To protect the health and strength of men and women employees. 
  2. That children’s tender age is not being abused. 
  3. That citizens are not forced to enter avocations unfit for their age or strength by economic necessity. 
  4. Fair and humane working and maternity relief conditions are provided.
  5. The Government shall take steps, through appropriate legislation or by any other means, to secure employee participation in the management of undertakings, establishments or other organizations involved in any industry.

Employment

Employment is referred to as a state of having paid for work. Or in other words, it can be termed as ‘a person who is hired for a wage or salary to work for an employer. Employment is one of the basic necessities of a person to earn money and make a living. Hence, there is a whole different war for employment in the world.

Employment Act

The Employment Act is enforced for several uniform purposes: it protects employee’s rights and set forth the employer’s obligations and responsibilities. Hence, the significance of this act is to regulate uniformity in all aspects of working and Labour strategies in the country.

Labour Law Basic Conditions of Employment Act

The Basic Conditions of Employment Act (BCEA) is an act that is regulated by the parliament and government for the protection of employees being exploited from their employers. For the same, there are certain regulations that are to be followed by employers.

The act also prohibits the Employment of a person under the age of 15 years and puts an obligation on the employer to verify the age of the worker or employee by requesting a copy of the birth certificate.

It includes matters relating to terms of employment, working hours, transport allowances, bonuses, methods of wage payment, overtime, meal intervals, public holidays, medical leaves, maternity leaves, terms of termination of employment, the procedure for termination, etc.

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Department of Labour

Department of labour is a federation of the US government which regulates rules and guidelines in order to promote and protect the rights of labour, condition of working, employment opportunities for labourers, wages and security.

DOL works for the ultimate advancement of labour-relations across the world through certain assertions made by the government for its progress and development.

Similarly, in India, this area of action is dealt with the Ministry of Labour and Employment.

Ministry of Labour and Employment

The Ministry of Labour and Employment is known to be one of the oldest and important ministries of the Government of India. The role of the Ministry is to protect and provide necessary safeguards to the interest of the workers in general and to promote a healthy working environment at the workplace for better production or productivity of an organization. Furthermore, its focus is on the promotion of welfare and providing social security to the workers in both organized and unorganized sectors, by the process of liberalization.

At present, there are 44 labour related statutes enacted by the Central Government which deals with minimum wages, accidental and social security benefits, occupational safety and health, conditions of employment, disciplinary action, the formation of trade unions, industrial relations, etc.

Labour Law Working Hours

As per Factories Act 1948, the number of hours of work for a person (who has attained the age of 18years) shall not be more than 48hours a week and 9hours a day.

The Minimum Wages Act, 1948 also specifies working hours a day shall not exceed from 9hours for an adult.

Overtime

Provisions under the Act

Factories Act, 1948

Details on working hours, spread over, and overtime is set out in Sections 51, 54 to 56 & 59 of the Act:

According to Sec. 59, where a worker works in a factory for more than 9 hours in a day or more than 48 hours in a week, he/she shall be entitled to earn wages at the rate of twice his/her ordinary rate of wages in respect of overtime work.

Mines Act, 1952

According to Sections 28 to 30 of the Act, no person working in a mine is allowed or permitted to work in a mine for more than 10 hours in any day, including overtime.

Minimum Wages Act, 1948

  •  According to Sec. 33, overtime wages are to be paid at the rate of twice the worker’s ordinary wage rates. This states that the employer could take up to 9 hours of actual work in a 12-hour shift on any day. But he must pay double the rates for an hour or part of an hour of actual work in excess of nine hours or more than 48 hours in any week.
  • Section 14 of the Act specifies that any worker whose minimum wage rate is set with wage periods of time, such as hour, day or week, and if a worker works more than that number of hours, is deemed to be overtime. If the number of hours that constitute a normal working day exceeds the specified limit, then the employer will have to pay him at the overtime rate for every hour or part of an hour for which he has worked in excess.

Beedi and Cigar Workers (Conditions of Employment) Act, 1966

According to Sections 17 & 18 of the Act related to working hours, it is specified that working hours, including overtime work, should not exceed 10 hours per day and 54 hours per week.

Contract Labour (Regulation & Abolition) Act, 1970

Under Rule 79 of the Act, it is mandatory for each contractor to maintain a Form XXIII Register of Overtime containing all information relating to the calculation of overtime, hours of extra work, the name of the employee, etc.

Building and Other Construction Workers (Regulation of Employment Service) Act, 1996

According to Sections 28 & 29 of the Act, workers who work overtime will be paid overtime wages at the rate of twice the ordinary wage rate.

Working Journalist (Conditions of Service) and Miscellaneous Provisions Act, 1955

According to Rule 10 of the Act, a working journalist who works in the day shift for more than 6 hours on any day and more than 5 1/2 hours in night shift shall be paid with rest hours equal to the hours he/she has worked overtime.

Plantation Labour Act, 1951

In accordance with section 19 of the Act, where an adult worker works in any plantation on any day beyond the number of hours that constitute a normal working day or for more than 48 hours in any week, he / she shall be entitled to twice the rate of ordinary wages in respect of such overtime work. Provided no such worker is permitted to work in any day for more than 9 hours and in any week for more than 54 hours.

Women and Work Hours

Section 66 of the Factories Act, 1948 places a limit on women’s employment from 7 p.m. to 6 a.m. However the Chief Inspector is empowered to grant relief, but women are not allowed to work from 10.00 pm to 5.00 am in that situation.

Workdays and Break Period

Law says about Working days 

Factories Act, 1948 stipulates that weekly holiday on the first day of the week, which is Sunday or maybe any other day, as may be approved in writing by the Chief Inspector of Factories, is necessary for a particular area.

Section 52 provides for the substitution of a weekly holiday so that by meeting the requirements of this section, workers may be allowed to work on the day of the weekly holiday. The provision also states that compensatory holiday is allowed instead of an unveiled weekly holiday.

Law says about Breaks

In accordance with the provisions of the Factories Act, 1948, a rest period of at least half an hour should be given in such a way that no working time exceeds 5-1/2 hours.

Under the Minimum Wages Act, an adult worker’s working day shall be calculated in such a way that it shall not exceed 12 hours on any day, including the interval of rest.

Work hours of young workers

According to the Factories Act, 1948, the young person is defined as “child” or “adolescent” (a person who has reached the age of 15 but has not reached the age of 18). This states that child working hours are restricted to 4-1/2 hours per day. It also stipulates that the spread-over should not exceed five hours. However, the provisions of the Act states that female child workers are prohibited from working between 7.00 p.m. to 8.00 am as per section 71.

According to the Minimum Wages Act, 1948, the number of working hours for adolescents is set by the medical practitioner as approved by the government, which chooses to consider adolescents as adults or children. Nevertheless, the child should not be allowed to work on any day for more than 4-1/2 hours.

Labour Laws for Employees

Labour and Employment Laws in India are governed by the Constitution of India; specific laws are given by Central and State governments, Municipal laws, individual agreements, and so on.

  • Legislations and Acts based on Remuneration:
  • Legislations and Acts based on Social Security Benefits of the Employees: 

Hence, there are many other Acts, Legislations and Central Labour laws under the Ministry of Labour and Employment.

There are many other International Acts and Legislations, which are regulated for the purpose of protection and promotion of the workforce for their rights and interests at the workplace. Employment Equity Act is one of the most efficient Acts which regulates the rights of the workers and employees and ensures social security to them.

Employment Equity Act

The Employment Equity Act is an act laid down by the government to ensure “Equity at the workplace” and to promote Equal opportunity and fair treatment in employment by eliminating discrimination and unfair monopolies. Also, it looks forward to implementing necessary measures to redress and resolve the disadvantages of employment experienced by a delegated group and to ensure their equitable representation in the workplace.

The basic aim of the Act is to regulate uniformity within an organization or workplace where people are delegated as per their skills and remuneration in a fair and non-discriminatory manner. Furthermore, the act deals with the process of recruitments and advancement within the business and manages it for its function.

Employee Representation

Employee Representation is referred to as the Right of employees to form a union or choose an individual representative of their group, who can represent them for the purpose of negotiating with the management in the matters of wages, working hours, overtime, facilities, working conditions, and security.

In the workplace, workers may be represented by trade unions or other representatives:

  •  On disciplinary and grievance matters
  •  On works councils or other consultative bodies
  •  For the collective bargaining of terms and conditions
  •  For making workforce agreements
  •  On joint working groups.

Trade Union

Trade Union is defined as a union formed by the workers or employees to represent a specific group of workers for the purpose of protection of their common interests. They help workers in matters like Fair pay, good working environment, working hours and benefits. Trade Unions are also called Labour Unions.

Labour Unions are formed to protect the interest of workers, financially and otherwise. They bargain and negotiate form the employers on behalf of the Employees for the welfare of the latter. 

Employee Representation on the Board of Directors

Employee Representation on the board of directors refers to the Right of the Employees to choose their representative for the purpose of representing them before the employer.

Work Council

Work Council refers to an organization that represents the employees on a local level. It also provides a useful collective bargaining tool for representation.

Employee Board

Employee board is the board of directors that governs over individual employees based on their work, skills, and performance. It is a link between employer and employee and also the government. Its function is to bridge the gap between employer and employee and their dissatisfaction.

Labour Relations Act

Labour Relations Act is an act that regulates Labour relations and collective bargaining in private sectors. The main feature of this Act is to provide an outline of the labour relations rights and responsibilities of employers, trade unions and employees.

The Labour Relations Act confers several authorities to labour relations board such as: to certify the unions for representing their employees, revocation of certification of the union, and so on.

Industrial Relations

Industrial Relations stand for the relationship between management and workers in the industry. Good industrial relations results in a healthy and positive working environment which further results in better productivity and sales of goods.

Industrial Relations play a very important role in shaping an organization and its working. It develops better unions, and the collection efficiency of the workers is enhanced.

Objectives of Industrial Relations

  •  Some of the major objectives of Industrial Relations are:
  •  Enhances production
  •  Reduces Industrial disputes
  •  Minimize Wastage
  •  Better working environment
  •  Utility of resources
  •  Also, Industrial Relations benefit the employees in many different ways, such as:
  •  Collective bargaining
  •  Employee welfare
  •  Enhance the level of working 

Importance of Labour Relations in Human Resource Management

Human Resource is termed as the individuals or the other workforce of an organization that works for the management, recruitment, reward, on loading, training, performance, motivation, and so on. The main function of the Human Resource Management of an organization is of selecting, providing orientation, maintaining proper relations with workers and trade unions, compensation, look over the safety, security and working mechanics of the employees.

Labour Relations play a very significant role in Human Resource Management. It enhances the productivity of the organization over time just by in building good Labour Relations. Since, good Labour relations provide better synchronization among workers or employees and develop a better working environment, ensuring adequate facilities, security, health and sanitation to the Labours which ultimately turns out into quality production and sale.

Purpose of Labour Relations

The purpose of Labour Relations is to maintain healthy relations between the employees, management and the employer in every aspect to promote the productivity of an organization and develop its working. It also promotes marketing and globalization at a certain level of work, which is beneficial for a company or organization.

Discrimination

Discrimination among workers or employees is quite commonly encountered in the workplace. Such discrimination can be based on skills, target, achievements, majority, race and even between specific groups of the worker. Discrimination is one of the biggest loopholes behind an average production or slow-growing organization. It can turn out to be admissible unhealthy among the Labours to have poor relations which affect their unity and integrity at the workplace.

Are employees protected against discrimination? If so, on what grounds is discrimination prohibited?

The Indian Constitution grants Indian people several constitutional rights, such as the right to equality, the State’s prohibition against discrimination on the grounds of religion, ethnicity, caste, sex or place of birth, and allows the State to frame laws that favour the underprivileged. Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act,1995 forbids all forms of discrimination against persons with disabilities during the recruitment, pay promotion, etc. The ER Act has been introduced to eradicate gender bias and ensure an equal salary to men and women for the same work. Likewise, the Maternity Benefit Act of 1961 and the Sexual Harassment of Women at Work (Prevention, Prohibition and Redressal) Act of 2013 protects the rights may include women workers in India. The applicability of these laws may differ between public and private entities. While certain forms of discrimination in all sectors are universally illegal, certain types of caste-based discrimination, ethnicity, and religion are still prevalent in private sectors.

What type of discrimination are unlawful and in what circumstances?

The Indian Constitution prohibits discrimination on the grounds of religion, ethnicity, caste, gender, and place of birth. Therefore, it is unlawful to contravene any clause of the ER Act that leads to discrimination between men and women. Therefore, any discrimination that is not based on ability or merit and that is not exercised to uplift any category or class but merely to inflict bias to one of the parties is deemed to be unlawful.

Are there any defences to a discrimination claim?

A claim of discrimination does not have standard defences. On the basis of facts and circumstances, however, a defence of disparity in the nature of work, workplace, health and safety standards, and the need for affirmative action can be regarded as legitimate grounds for defence.

How do employees enforce their discrimination rights? Can employees settle claims before or after they are initiated?

Employees may approach courts or tribunals on the basis of the nature of discrimination and file lawsuits to enforce their rights of discrimination. In some situations, the concerned organization/workplace may have labour/HR policies in place that allow these discriminated workers to contact a grievance redressal committee or a helpline to address discrimination-related grievances. In most cases, the employer can settle disputes before or after a lawsuit has been filed.

What remedies are available to employees in successful discrimination claims?

An employee has access to the remedies depending on the nature of the claim and the statute that gives the employees the right to claim. Most laws provide for pecuniary fines and terms of imprisonment if any of its provisions are infringed. In cases where discrimination has resulted in job termination, a successful claim of discrimination will entitle the aggrieved person to restore his/her job.

Do “atypical” workers (such as those working part-time, on a fixed-term contract or as a temporary agency worker) have any additional protection?

No, “atypical” employees are not given any additional protection. Such employees are safeguarded by the same set of laws as any typical worker or employee in the organization. Nevertheless, the organizational policies and regulations that apply to such employees may vary. There are certain state-specific or region-specific laws covering even vulnerable employees who do not fall into any of the categories of workers identified in question, such as the Maharashtra Mathadi, Hamal, and Other Manual Workers (Employment and Welfare Regulation) Act, 1969 or the Pimpri-Chinchwad District, Hamai, and Other Manual Workers (Regulation of Employment and Welfare) Scheme, 1992.

Maternity Leave

Maternity leaves are basically paid leave provided to women during pregnancy, childbirth or even after childbirth for the protection of their interest in employment and health at the same time. The concept of Maternity Leave has made to be mandatorily applied to women employees in India. Maternity leaves are mainly governed by the Maternity Benefits Act, 1961 that applies to all shops and establishments having 10 or more than 10 female workers.

Under this Act, it is required to inform the women in writing and digitally about their rights to avail such leaves during maternal phases, at their joining at the workplace.

How long does maternity leave last? 

Recently, the Ministry of Labour and Employment revised the Maternity Benefit Act, 1961 (“Maternity Act”) to extend the length of paid maternity leave available for female employees from 12 to 26 weeks. Any female employee who has been in the employer’s employment for 80 days in the past 12 months is eligible to take the benefit. That advantage can be used as soon as eight weeks before the expected date of delivery. Maternity leave has also been extended to adoptive mothers where every woman who adopts a child has the right to a maternity leave of 12 weeks from the date of adoption.

Who can take maternity leave?

Maternity Leave can be taken by pregnant women and women at the phase of childbirth or even pre and post phase to delivery. The only obligation for availing this benefit is to work at least for the duration of 12 months prior to that.

What rights, including the rights to pay and benefits, does a woman have during maternity leave?

In accordance with the provisions of the Maternity Act, for the time of her actual absence, a female employee is entitled to the average daily wage. If the nature of the work is such that the employee may work from home, the employer may extend this comfort to female employees on the basis of the mutual agreement between the employer and the employee. Therefore, female employees are also entitled to a medical bonus in case of prenatal or post-natal benefits that are not provided by the employer. The Maternity Act bars the employer from (i) discharging or firing a female employee, or (ii) changing the terms of employment to her disadvantage during the maternity leave period.

What right does a woman have upon her return to work from maternity leave?

A female employee is entitled to two nursing breaks in a day after rejoining the job, an addition to the rest period allowed by the employer during her daily work. The female employee will earn this benefit until the baby reaches the age of 15 months. Apart from this benefit, each establishment with 50 or more employees shall have a creche facility either separately or together with common facilities within a prescribed distance. The employer will allow the employee to visit the creche for four times a day, which will also include the rest period. Every such establishment shall, at the time of the female employee’s initial appointment, intimate in writing the benefits and facilities provided by the employer in this regard.

Do fathers have the right to take paternity leave?

No, in Indian employment laws the concept of paternity leave does not exist. However, the All India and Central Civil Rules, allow 15 days of paternity leave for central government employees. Various corporate offices in India may extend paternity leave to their employees in accordance with internal leave policies. The Paternity Benefit Bill, 2017, presented to Parliament, pushes both the mother and the father for equal “parental” benefits.

Are there any other parental leave rights that employers have to observe?

In addition to the benefits and leaves offered under the Maternity Act, no other legislation is required to be observed by the employers.

Are employees entitled to work flexibly if they have responsibility for caring for dependants?

There is no statutory law requiring employers to provide their employees with flexible working hours. Nevertheless, employer organizations may offer a range of benefits to their employees as a matter of internal policy and based on performance and employees’ requirements.

Maternity Leave in the Private Sector

Maternity benefits in the private sector are regulated by the Employees State Insurance Act, 1948 and Maternity Benefits Act, 1961. Under which there are provisions for taking maternity leave for the longest of 26 weeks, which are laid down for the protection of working women and women workers who have more than two living children.

Maternity Leave for Government Employees

Maternity leave for government employees consists of similar provisions to that of any other female employees at the workplace. The government of India has regulated several Acts for the protection and promotion of women at the workplace. The government has also enhanced the duration of paid maternity leave from 12 weeks to 26 weeks for up to two surviving children under the ESI Act, 1948. 

Termination of Employment

The termination of employment relates to the termination of a contract between an employee and a corporation. An employee may be terminated from a job of his own free will or by the employer’s decision. An employee who is not working actively due to illness, absence leave or temporary layoff is still considered to be working unless the relationship with the employer has been officially terminated with a termination notice. There are mainly two types of job termination:

  •  Voluntary Termination
  •  Involuntary Termination

Voluntary Termination

Employment can be terminated voluntarily by an employee. Generally, a worker who takes a voluntary decision to terminate employment status with a company does so if they find a better job with another company, retire from the workplace, resign to start their own business, take a break from work, etc.

Constructive dismissal could also result in the voluntary termination of employment. It indicates the employee left the company because there was no other option for them. Under the employer, they could have worked under considerable duress and unpleasant working conditions. Cited challenging conditions include lower salary, harassment, a new workplace that is farther than the employee can fairly drive to every day, extended working hours, etc. The employee’s forced discharge by which an ultimatum is issued to them to resign or be fired is also subject to constructive dismissal. In such situations, if the employee could show that the conduct of the employer during the period with the company are unlawful, they might be entitled to some form of compensation and benefits.

An employee who leaves an employer on a voluntary basis may be required to give the employer advance notice either verbally or in writing. In most industries, two-week advance notice is generally required. In some situations, at the time of termination notice is given to the employer or no notice is given at all, such as when an employee leaves the job or does not return to work.

Involuntary Termination

Involuntary employment termination happens when an employer lays off, dismisses or fires an employee A layoff or organization downsize is a decision taken by a company to reduce its workforce to reduce its operating costs, restructure its organization, or because the skill set of the employee is no longer required. Normally, employees are laid off because of no fault of their own, unlike fired employees.

Generally an employee is fired from a job due to unsatisfactory work performance, poor behavior or attitude that does not suit the culture of the corporation or unethical behavior that violates the policies of the company Under At-Will employment laws accepted in some states an employee performs poorly or may be dismissed without notice in violation of some form of the company’s rules. In reality, the company does not have to give a reason for the termination of the job of the employee.

While employment-at-will contracts do not allow an employer to alert or give an excuse for termination, for certain reasons, an employer can not fire an employee. For these purposes, an employee who refuses to work more than the hours specified in the contract takes a leave of absence, report an incident or an individual to the Department of Human Resources, or fire whistle blows to industry regulators can not get fired for these reasons. An employer who removes an employee for the exercise of their legal rights has done so unlawfully and may be liable in court for wrongful termination.

There is also an illegal dismissal when an employee allows an employee to leave for discriminatory reasons such as religion, race, age, gender, disability or nationality. An employer found guilty of wrongful termination can compensate and/or restore the wronged employee to the company.

In some cases, an employer could, without prejudice to dismiss an employee. It suggests that the worker was let go for reasons other than negligence, insubordination, or occupational harassment. The employee may be rehired in the future for a similar job in such cases.

Dismissal from Employment

Dismissal from employment can be termed as ‘being fired’ or ‘to let go’ from a job against the consent or will of the employee.

Termination of Employment Reasons

Dismissal may be due to problems with the performance of the employee, but it may also be due to factors beyond the control of the employee, such as downsizing, restructuring of the company or eliminating a position.

Some common grounds for termination include poor performance or negligence, problems of attendance, and insubordination or other problems of conduct. Another common reason for a dismissal is misconduct or termination due to cause. This is when employees are dismissed in the workplace due to ethical issues like lying, falsifying data, stealing, or other significant misconduct in the workplace.

Data Protection

India has not yet enacted any specific legislation regarding the data protection of employees working at different organizations or at the workplace. However, the Indian legislature does amend the Information Technology Act, 2000 in which under Section 43A and 72A, it provides for compensation improper disclosure of personal information.

The government of India has subsequently issued the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011.

Data Protection Meaning

Data Protection refers to legal control over access and use of personal data of any person. It is very much necessary to have a data protection system in order to promote the safety and security of the person concerned and also, to prevent identity theft and phishing scams. An assertion is made by the government of India through passing a Data Protection Bill, 2018 in the parliament.

Employee Privacy

The Draft Personal Data Protection Bill, 2018 (the “PDP BILL”) was released on 27 July 2018 by the Ministry of Information Technology, Government of India, along with a report from the Committee of Experts under Justice B.N. Srikrishna’s chairmanship. Currently, the privacy of employees working in corporate institutions is regulated by the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Knowledge) Rules, 2011 (“SPDI Rules”), established under the Information Technology Act, 2000 (“IT Act”), which has become progressively inadequate.

The PDP Bill is a keystone development for the evolution of India’s protection law development. The PDP Bill states that the right to privacy is a fundamental right and the key to data sharing is the consent of individuals. Under the PDP Act, an exemption has been provided to obtain consent from employees by the employer to process their information for certain employment-related matters such as hiring, dismissal, performance evaluation, etc. Nevertheless, this ground for the processing of personal data without the consent of the workers can only be invoked if the processing of personal data on the basis of consent is not sufficient in view of the employer-employee relationship and requires a disproportionate effort on the part of the employer due to the nature of the processing activities.

Labour and Employment Laws of India

Throughout India, labour laws are divided into five broad categories, i.e. Working Conditions, Industrial Relations, Wage, Welfare and Social Securities.

The actions are all based on the Indian Constitution and the resolutions taken from time to time in the ILO conventions.

Indian labour law applies to employment regulatory laws. There are more than 50 national laws and many more laws at the state level. Traditionally Indian governments at the federal and state level have tried to provide employees with a high degree of protection by implementing labour laws.

Thus dealing with the requirements of contract law, an employment contract must also comply with the provisions of applicable labour laws and rules contained in the establishment’s Standing Orders. 

Indian labour laws divide the industry into two broad categories:

Factory

Factories are governed by the provisions of the Factories Act, 1948 (the said Act). All industrial establishments that employ 10 or more people and carry out manufacturing activities with the help of power come within the definition of Factory. The said Act makes provision for factory workers ‘ health, safety, welfare, working hours, and leave. The said Act is enforced by the government of the state through its inspectorates of the factory. The said legislation empowers state governments to frame laws so that the compliance properly reflects the local conditions prevailing in the state. The said Act puts special emphasis on workers ‘ welfare, health, and safety. The said Act is instrumental in improving workplace safety and health regulations, providing for statutory health surveys, requiring the recruitment of safety officers, the establishment of the canteen, crèches, and welfare committees, etc. in large factories.

The said Act also provides specific safeguards against the use and handling of hazardous substances by factory occupants and establishes emergency standards and measures.

The Shops and Establishment Act

The Shops and Establishment Act is an act of state legislation, and each state has established its own rules for the Act. The aim of this Act is to provide employees with statutory obligations and rights and employers with the unauthorized employment sector, i.e. shops and establishments. This Act applies to all persons employed with or without wages in an establishment, except for the family members of the employers.

This Act sets out the following rules: 

  • Working hours per day and week.
  • Guidelines for Spread-over, rest interval, opening and closing hours, closed days, national and religious holidays, work overtime.
  • Children, young people, and women’s employment.
  • Rules for annual leave, maternity leave, sickness, and casual leave, etc. 
  • Rules for employment and termination.

The main central labour laws which deal with the labour issues are listed below:

  1. Minimum Wages Act, 1948 
  2. Industrial Employment (Standing Orders) Act, 1946 
  3. Payment of Wages Act, 1936 
  4. Workmen’s Compensation Act, 1923 
  5. Industrial Disputes Act, 1947 
  6. Employees Provident Fund and Miscellaneous Provisions Act, 1952 
  7. Payment of Bonus Act, 1965 
  8. Payment of Gratuity Act, 1972 
  9. Maternity Benefit Act, 1961 

1. Minimum Wages Act, 1948 

The Minimum Wages Act stipulates minimum wages for all employees in all establishments or working at home in certain employment specified in the Act’s schedule. Governments of Central and State review the minimum wages specified in the schedule. The Minimum Wages Act, 1948 categorized workers as unskilled, semi-skilled, skilled and highly skilled.

2. Industrial Employment (Standing Orders) Act, 1946 

The Industrial Employment Act requires employers in industrial establishments to clearly define employment conditions by issuing duly certified standing orders. Model standing orders issued under the Act address worker classification, holidays, shifts, payment of wages, leaves, termination, etc. The workers are generally classified as:

  • Apprentice/trainee; 
  • Casual; 
  • Temporary; 
  • Substitute; 
  • Probationer; 
  • Permanent; and 
  • Fixed period employees.

3. Payment of Wages Act, 1936 

The following are the employer’s general duties under the Payment of Wages Act, 1936: 

  • Every employer is solely responsible for paying wages to employees. The employer must set the wage period (which may be daily, weekly or monthly) but in no case should exceed one month; 
  • Every employer must make timely payment of wages. If any person’s employment is terminated, such wages should be paid within two days of termination date; and
  • The employer must pay the wages in cash, i.e. in current coins or currency notes. However, after obtaining written consent, wages may also be paid either by cheque or by credit in the bank account of the employee.

4. Workmen’s Compensation Act, 1923

The employer should pay compensation in compliance with the Act for an injury sustained by an employee during the course of employment The employer must submit a statement to the Commissioner (within 30 days of receiving the notice) indicating the circumstances of a worker’s death as a result of an accident and whether the employer is liable to pay any compensation for the accident. It should also provide the Commissioner with an accident report within seven days of the accident.

5. Industrial Disputes Act, 1947

The Industrial Disputes Act, 1947 provides for the investigation and settlement of industrial disputes involving lockouts, layoffs, retrenchment, etc. in an industrial establishment. It provides the machinery to reconcile and adjudicate disputes or differences between employees and employers. The industrial undertaking involves an undertaking which carries any business trade, manufacture, etc.

The Act sets out the conditions to be met before termination/retrenchment or layoff of an employee who has been in continuous service for at least one year under an employer. The workman shall receive a written notice of one month, indicating the reasons for retrenchment and the period of notice expired or wages paid to the worker for the period of the notice instead of such notice. The employee shall also receive compensation equal to the average pay of 15 days for each year of continuous service completed. Notice shall also be issued to the appropriate government.

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6. Employees Provident Fund and Miscellaneous Provisions Act, 1952 

This Act aims to ensure the financial security of the employees in an establishment by providing a system of compulsory savings. The Act provides for the establishment of a contributory Provident Fund where the contribution of employees is at least equal to that of the employer’s contribution. The employees’ minimum contribution shall be 10-12% of the wages. After retirement, this amount is payable to the employee and could also be partly withdrawn for certain specified purposes.

7. Payment of Bonus Act, 1965

The payment of the Bonus Act provides for the payment of bonus on the basis of profits or on the basis of production or productivity to persons employed in certain establishments.

The Act applies to establishments where 20 or more people are employed. The minimum bonus to be paid by an employer even if he suffers losses in the accounting year is 8.33% of the salary.

8. Payment of Gratuity Act, 1972 

The Payment of Gratuity Act provides for a gratuity payment scheme for all employees in all establishments employing ten or more employees to all types of workers. Gratuity is payable to an employee on his retirement/resignation at the rate of employee’s 15-day salary for each completed year of service subject to a maximum of Rs. 350,000.

9. Maternity Benefit Act 1961

The Maternity Benefit Act governs women’s employment in certain establishments for a specified period of time before and after childbirth and offers certain other benefits. The Act does not extend to any factory or other establishments that are protected by the Employee State Insurance Act, 1948. Any female employee who has served in an establishment for a period of at least 80 days during the 12 months immediately following the date of her expected delivery shall be entitled to maternity benefits under the Act. The employer is therefore required to pay maternity benefits and/or medical bonus and provide maternity leave and nursing breaks.

Important case laws

  1. Whereby some club not only sporting facilities are maintained, but also a kitchen where a large number of members come, it is not necessary that they only participate in sporting activities, they also entertain themselves and their guests by partaking drinks and tea served by the club. Kitchen work is directly connected to the activities carried out in the rest of the club premises. The club must be registered under the ESI Act with regard to all the club employees, regardless of the department in which they work. India’s Cricket Club satisfies the definition of the term “factory” under s. 2(12) of the Act to which it relates.– Cricket Club of India v. ESI Corporation 1994 (69) FLR 19
  2. Wherever activities are taking place in an establishment such as clearing and forwarding, they would fall within the expression “shop,” even though the clearing of documents is carried out in the customs house intended for export and import. Persons involved in such businesses are catering to the needs of exporters and importers and others who want to carry the goods further. AIR 1993 SC 252.
  3. Anyone with a product could approach an advertising agency. An advertising campaign will be prepared for him by the advertising agency using the services of the experts it employs in this behalf. It sells the campaign to the client and receives the price. The price will undoubtedly depend on the nature of the campaign, but that doesn’t make a big difference. The advertising agency effectively offers its expert services to a client to allow the client to launch an effective campaign of its goods without straining the language, the premises of an advertising agency can be said to be a “shop”- ESI Corporation v. R.K. Swamy 1993 (67) FLR 1145: 1993 (2) CLR 1068.
  4. Where a laid-off employee came out of the factory premises after signing the lay-off register, and a scooter hit him when he was crossing the road, injuries sustained by him were considered as covered during the course of employment on the basis of notional extension theory.— Satya Sharma v. ESI Corporation 1991 (63) FLR 339.
  5. If the job of the employee is conducted under the immediate gaze or control of the principal employer or his agent, subject to other conditions as envisaged he would be an employee for the purpose of s. 2(9).—CES Corporation Ltd. v. Subash Chandra Bose 1992 (1) LLJ 475.
  6. A work that is conducive to the work of the factory or establishment or which is necessary for the augmentation of work of the factory or establishment will be incidental or preliminary to the work of the factory or establishment or connected with it. It also brings in the casual employees and is entitled to the benefits that the Act provides. The casual labour employed to build additional buildings are employees under the Act.— Regional Director, ESIC v. South India Flour Mills Ltd. 1986 (53) FLR 178.
  7. Employees engaged in the principal employer’s repairs, site clearing, building construction, etc. are employees within the meaning of s. 2(9) of the Act. —Kirloskar Pneumatic Co. Ltd. v. ESI Corporation 1987 (70) FJR 199.
  8.  The term ‘employed for wages or in connection with the work of a factory or establishment’ has a very wide range and its generality is not prejudiced in any way by its expression and includes any person employed for wages or any work connected with the administration of the factory or establishment or in connection with the selling or distribution of the factory or establishment’s products In the legal definition of the term “includes” is usually used to extend the meaning of the preceding terms and is used by extension rather than restriction. To order to determine whether the company’s employees working in its branch sales offices and carrying out acts of sale and distribution of goods produced by the company as well as the goods produced by the foreign company are ’employees’, what is important is not whether they are ‘principally’ engaged in the sale and distribution of the company’s products, but whether the business of sale and distribution either “principally” or “marginally” of the products of the foreign company is being done on behalf of the company. If the company’s main business in the branch sales offices itself is to sell and distribute foreign company goods, and the company’s employees are working solely in connection with this job, it would be difficult to argue that the employees in branch sales offices are not “employees” within the meaning of the term specified in s. 2(9) of the Act, despite the fact that the selling and distribution of the company’s products at 42 these offices are marginal only.— Director-General, ESI Corporation v. Scientific Instrument Co. Ltd. 1995 Lab. IC 651.
  9. Where a marble manufacturing company extends the work of fixing the marble to a contractor, the contractor’s duty is only to complete the work while the manufacturing company supplies marble, cement etc., workers employed by the contractor would be the factory’s employees as under s. 2(9) Act.— 1992(2) CLR 881.
  10. For the term “employee,” as described under s. 2(9) of the Act, there is no such distinction as that of a casual or temporary or permanent employee. It is so broad that even a casual worker who is only working for a day’s wages can be included. The test is whether the individual is working for wages on any work related to the work of a factory or establishment that bears the application of the Act except those excluded by the definition.— ESI Corporation v. Suvarna Saw Mills 1980 (57) FJR 154.
  11. Where a publishing and press department run by the university concerned is engaged in the printing of textbooks, journals, records, forms etc.that would lead to the manufacturing process.— Osmania University v. ESI Corporation 1986 (1) LLN 72
  12. Where there was no manufacture of articles nor the hotel used power to manufacture any article except to maintain one refrigerator to preserve milk and curd, and since there was no use of power in the kitchen to manufacture the eatables and the refrigerator was held only to preserve milk and curd, there was no manufacturing process.— Ritz Hotel v. ESI Corpn. 1995 (1) Mah. LJ 63.
  13. Wages paid for the holidays are classified as wages.— R.D., ESI Corporation v. Raj Kershaw Co. 1991 Lab. IC 1991 Lab. IC 1989.
  14. For the purposes of contribution under the Act, overtime wages could not be regarded as “wages.”- Hind Art Press v. ESI Corporation 1990 (1) LLJ 195.
  15. The ESI Corporation is given the power to recover the employer’s contributions arrears along with damages/interest on the contribution that remained due. It is therefore under an obligation to pay the arrears of benefits to the insured employees or their dependants with interest.— ESI Corporation v. Bhag Singh 1989 (2) LLJ 126.
  16. Section 53 of the ESI Act (Bar against receiving or recovering compensation or damages under any other legislation) does not bar the remedy under s. 110A of the Motor Vehicles Act, 1939.— Deputy General Manager of KSRTC v. Gopal Mudaliar, 1983 (46) FLR 194.

Checklist for Labour Law compliance

Establishments need to ensure statutory compliance with various labour laws. It is not only limited to the legal deposits, returns and records to be kept by the employer under various labour laws, but also to represent them under various statutes in case of the prosecution. Therefore, it is difficult to emphasize that the labour laws place a duty on the employer for meticulous impeccable and timely compliances. In the event of violation or delay in compliance with the statutory requirements, consequences in terms of levy of damages, the prosecution is inevitable.

A comprehensive checklist is given below to ensure compliance with labour laws.

  • Legislation
  • Objective & Applicability
  • Compliance Requirement

Apprentices Act, 1961

This Act provides for the regulation and control of apprenticeship training and increases the availability for the industry of trained technical employees. The Act requires employers to hire apprentices in certain specified trades as informed by the government.

  • Appointing apprentices if the company falls within the notified sector. 
  • Returns submission as stipulated by the Act. 
  • Maintaining registers as provided by the Act. 

Contract Labour (Regulation & Abolition) Act, 1970 and Rules 

This Act governs the recruitment of contract labour in certain establishments and, under certain conditions, provides for its elimination. This refers to any organization or contractor in which 20 or more employees are or have been working as contract labour on any day of the preceding 12 months.

  • Employees’ working conditions. 
  • Suitable facilities for employees such as drinking water, canteen etc. 
  • Suitable facilities for female workers as well. 
  • Maintaining registers as provided by the Act. 
  • Submission of returns.

Employee State Insurance Act, 1948

This Act provides for benefits for employees in the event of sickness, maternity and employment injury. All employees, including casual, temporary or contract employees, are covered with wages of less than Rs 10000 per month.

  • Contribution remittance each month. 
  • Maintenance of the documents. 
  • Provide returns according to the provisions of the Act.

Employee’s Provident Fund and Miscellaneous Provisions Act, 1952

The PF Act provides workers with the compulsory institution of contributory provident funds, pension funds and deposit-related insurance funds. This Act applies to industries listed in Schedule I that employ 20 or more people and any other category of enterprises that employ 20 or more people notified by the Government.

  • Contribution fee each month. 
  • Maintaining documents. 
  • Returns in accordance with the provisions of the Act

Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959

The Employment Exchange Act was meant to provide for compulsory notification of employment exchange vacancies. This refers to all public sector establishments and private sector establishments which usually hire more than 25 employees.

  • Vacancy intimation to the local employment exchange when a vacancy occurs. 
  • Submissions of returns.

Equal Remuneration Act, 1976 

This Act provides for payment of equal remuneration to men and women employees for the same job and forbids discrimination on the grounds of sex against women in employment, recruitment and matters related to it or incidental to it. The Act applies to nearly all kinds of establishments.

  • No disparity in terms of payment by men and women employees for the same job. 
  • Maintaining the register.

Factories Act, 1948

The Factories Act provides for factory workers ‘ health, safety, welfare, conditions of service and other aspects. It applies to all factories that employ more than 10 people and work with the help of power or that employ 20 people and work without the help of power. It covers all workers employed directly or through an agency, including a contractor in the factory premises or precincts involved in any manufacturing. Certain provisions of the Act may vary depending on the establishment’s nature of work.

  • Licensing and license renewal under the Act.
  • A provision in the factory premises for adequate safety measures.
  • To provide adequate welfare measures for workers such as creche, canteen, washroom, etc.
  • Payment of wages in accordance with the provisions of the Act.
  • Payment of overtime wages.
  • Maintenance of records.
  • Submission of returns.

Industrial Disputes Act, 1947

The Industrial Disputes Act aims to secure industrial peace and harmony through negotiation by providing machinery and procedure for investigating and settling industrial disputes.

This Act extends to any industrial establishment that carries on any business trade, manufacture or distribution of goods and services regardless of the number of workers employed in it. The Act includes any person employed in a hire or reward institution, including contract labour, apprentices and part-time employees, to do any manual, clerical, skilled unskilled, technological, operational or supervisory work.

  • Prevention of unfair labour practices. 
  • Prior permission of the appropriate government.

Concerned labour authority for lay off or withdraw workers or to shut down the industrial establishment. 

  • Payment of workers ‘ compensation for closure, lay-off or withdrawal.

Industrial Employment and Standing Orders Act, 1946

The Standing Orders Act requires employers to identify and publish standing orders (service rules) explicitly, and to make them available to the employees they hire. This refers to any industrial establishment where, on any day of the previous 12 months, 100 or more employees are/were employed.

  • Formulating the rules of operation and receiving approval from the concerned Labour Authority. 
  • Display of standing orders for employee knowledge in a prominent place.

Maternity Benefit Act, 1961

The Maternity Benefit Act is aimed at restricting women’s employment in certain establishments for certain periods before and after pregnancy and offering maternity benefits like maternity leave, wages, bonuses, nursing breaks for breastfeeding, etc.

This refers to any factory, mine or plantation, including those belonging to the Government regardless of the number of workers, and to any shop or establishment in which 10 or more people are employed or were employed on any day of the preceding 12 months.

  • Grant of leave with payment of wages after birth or any other problems related to maternity, such as abortion, etc. 
  • Submission of returns.

Minimum Wages Act, 1948

The aim of this Act was to provide for fixing minimum wage rates in certain jobs. This refers to all establishments that hire one or more employees and are engaged in any of the scheduled employment.

  • Provide the minimum wage rate set by the government.  
  • Preservation of records as prescribed by the Act. 
  • Submission of returns.

Payment of Bonus Act, 1965

The aim of the Payment of Bonus Act is to provide for bonus payments (linked to profit or productivity) to persons working in certain establishments and related matters. This Act extends to every factory or establishment in which 20 or more workers are working during an accounting year on any day.

  • Payment of bonus in accordance with the provisions of the Act. 
  • Submission of returns.

Payment of Gratuity Act, 1972

The Act provides for a gratuity payment scheme for workers working in factories, mines, oilfields, plantations, ports, railway companies, stores, or other establishments.

The Act enforces payment of ‘gratuity’ as a statutory retirement benefit, which is a reward for long service. All employees, regardless of their wages, are entitled to receive gratuity if they have rendered continuous service of 5 years or more than 5 years.

  • Payment of gratuity for workers leaving the company after the completion of 5 years. 
  • Notice of opening to the labour authority in question. 
  • Displays required by Act. 
  • Management of register of allocable surplus, rewards, etc. 
  • Submission of annual returns.

Payment of Wages Act, 1936

The Act guarantees payment of wages in a particular form without unauthorized deductions at regular intervals. It refers to any factory, railway establishment and any industrial or other establishment, such as tramway services, motor transport services, land, oil fields, plantations, workshops or other establishments that develop, adapt or manufacture any article establishment engaged in development, construction and maintenance of buildings, roads, bridges, canals, navigation, irrigation or water supply, distribution of electricity/power and any other establishment notified by the central or the state government.

  • Payment of wages without deductions that are not authorized. 
  • Maintenance of fines, deductions, bonuses, salaries, etc. registers. 
  • Displays in accordance with the provisions of the Act. 
  • Submissions of annual returns as given under the Act.

The Indian Boilers Act, 1923 

The Act aims to regulate the licensing and use of boilers in the Industry. It is applicable to all establishments that use a boiler.

  • Boiler licensing. 
  • Appropriate safety precautions. 
  • Appointment of trained staff to handle the boilers. 
  • Maintaining records in accordance with the provisions of the Act.

Trade Unions Act, 1926

This Act provides for the registration of trade unions (including employers’ associations) to permit collective bargaining in order to make lawful labour organization possible. The act also confers a registered trade union with certain protection and privileges. This refers to all kinds of workers’ unions and employers’ associations which aim at regularizing labour-management relations.

  •  Registration of trade unions in accordance with the provisions of the Act.

Workmen’s Compensation Act, 1923 

The object of the act is to provide compensatory payment to employees and their dependents in the event of injuries arising from and in the course of employment and causing either worker death or disability.

The Act extends to factories, mines, ports, buildings, plantations, oilfields and other establishments mentioned in Schedule II and III of the Act, which excludes establishments covered by the ESI Act.

  • Provision of compensation in case of accident. 
  • Submission of returns. 

Conclusion

India’s constitution is the basis of all laws in our country. The labour laws are also rendered in compliance with the constitution, and the abolition of that particular law results in any violation of constitutional law. The Directive Principles of State policy play a major role in the development of new labour laws in India.


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