Software companies are covered under Shops and Establishments Act. This act slightly varies from state to state.
For Example, A software company in Bangalore will be covered under Shops and Establishments Act, Karnataka. Another software co. in UP will be covered under Shops and Establishments Act, Uttar Pradesh.
Industry has a wider meaning to cover all activities which are not otherwise covered by Shops and Establishments Act. Under Industrial Disputes Act, 1947, industry means any systematic activity resulting in the production or distribution of goods and services. Even the capital investment and profit motive are irrelevant in deciding whether an activity shall be considered as industry or not.
IT/Software companies are also engaged in an activity of production and distribution of goods/ services. As such there is no ground to say that IT companies do not come under Industrial Disputes Act.
In fact, if a thorough interpretation of term 'factory' in the Factories Act is done, IT companies shall also come under the Factories Act. But since the definition is narrow and many provisions made in the Act are relevant only to manufacturing units, IT companies came under 'other establishments'.
Like Factories Act, Shops and Establishments Act also does not provide any thing for settlement of disputes. All these Acts, such as Factories Act, Shops and Establishments Act, Plantations Labour Act or Mines Act, are meant for providing for health, welfare and security of employees employed therein. These Acts speak about hours of work, overtime, weekly off, welfare steps to be taken by the employer, measures to ensure safety and security of employees etc. In case of disputes, whether in any manufacturing or factory unit or shop or establishment, the same is redressed by authorities under the Industrial Disputes Act. Since in IT companies also employee - employer relationship is present there is no meaning in saying that the IT sector is free from coverage of ID Act. If it is so where should the employees seek justice?
I think the amendment to the Factories Act permitting women employees to work during night shift was made with a view to benefiting the IT sector. Similarly a verdict in the closure issue of Cholamandalam Software Company which did not intimate the appropriate government of its intention to close down the company was in favour of the employees. Right now I don't have supporting details but I shall post it soon.
The above views substantiate that IT company will also come under the coverage of Industrial Disputes Act.
Cholamandalam Software Company case has gone through labour court, single judge and division bench of Chennai high court and also Supreme court, where it was reffered to larger bench. Can you give us the final verdict of the case?
In another case of Tata Consultancy Services v. State of Andhra Pradesh, software is considered as 'goods'.
Considering these verdicts can a software industry of not less than 100 employees be exempted from section V B of Industrial Disputes Act?
Section VB says that prior permission is required from appropriate government for retrenchment of employees and also three months notice period or equivalent salary plus compensation at the rate of 15 days/ year of service, if the no of employees is not less than 100. Is this applicable in software companies?
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