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Dear All

Sub: Gratuity payment

Please note that Contract Labour are entitled for gratuity as per the decision of HIGH COURT OF JUDICATURE AT MADRAS DATED: 20.11.2006 The Honourable Mr.Justice P.D.DINAKARAN and The Honourable Mr.Justice P.P.S.JANARTHANA RAJA. in the case of The Management of Cruickshank & Company Ltd.vs The Appellate Authority under Payment of Gratuity Act, 1992and Regional Labour Commissioner (Central), Shastri Bhavan, Chennai.The Court held :

"The entitlement of contract labourers for gratuity cannot be dislodged or denied on account of tussle between the principal employer, who engaged the service of the contract labourers and the contractor, who employed the contract labourers;"

The Court went to further say:

....the gratuity claimed by the claimants herein being a welfare benefit created and payable by operation of law under the provisions of the Payment of Gratuity Act which are included under clause(d) of Section 2(vi) of the Payment of Wages Act within the meaning of wages payable to the contract labourers, it would be the basic responsibility of the petitioner *(ie the Principal Employer ) to make payment of gratuity to the claimants in full or in part as per Section 21(4) of the Contract Labour Act, of course, without prejudice to the right of the petitioner *(ie the Principal Employer ) to recover the same from the third respondent, contractor, even though the initial responsibility to make such payment of gratuity lies with the third respondent, contractor, as the welfare legislations such as

(i) Payment of Wages Act, 1936;
(ii) Contract Labour (Regulation and Abolition) Act, 1970; and
(iii) Payment of Gratuity Act, 1972,

are to be interpreted liberally and in widest possible construction in favour of the labourers, the claimants herein. Therefore, for deciding whether the wages payable to the claimants includes gratuity within the meaning of Contract Labour Act, 1970, whereunder the definition of wages is traceable to the definition of wages in the Payment of Wages Act, 1936 and the centrifugal issue whether the gratuity payable under the Payment of Gratuity Act is protected under Section 2(vi)(d) of the Payment of Wages Act, 1936, in spite of exclusion under sub-clause (6) of Section 2(vi) of the Payment of Wages Act, 1936, we are constrained, as a rule of interpretation, to refer the object and reasons of the legislative intention of all the three statutes, referred to above and the scope and ambit of the provisions contained thereunder and are satisfied that the gratuity being a benefit created and payable by operation of law under the provisions of the Payment of Gratuity Act, 1972, is protected within the definition of wages for having included under clause (d) of Section 2(vi) of the Payment of Wages Act, 1936. Therefore, the Court has to give full effect to the legal/statutory fiction and such fiction has to be carried to its logical conclusions, as any other view would only frustrate the legislative intention of all the enactments."....

*Added by us for explanation

By virtue of this Judgment employees of the Contractor deployed at the place of Principal Employer who become entitled for gratuity as per the Payment of Gratuity Act are to be settled gratuity on their severance.In case the Contractor fails to settle it the Employees can make a claim on the Principal Employer who needs to settle it and becomes liable and thereafter recover it from the Contractor.

Further details of the Judgment can be provided on request.

With Regards

Advocates & Notaries & Legal Consultants for Recruiting & Staffing Industry

E-mail : rajanassociates@eth,net,

-9025792684-9025792634

Dear All

Deduction in Salary

In the Staffing Industry you will have requests from the Client from time to time wanting deduction of certain amounts from the Temporary Employees Salary . The Consultant handling the Client has to ensure that deduction from the Salary falls within Sec 7 of the Payment of Wages Act which provides:

Sec 7. Deductions which may be made from wages

(1) Notwithstanding the provisions of sub-section (2) of section 47 of the Indian Railways Act 1890 (9 of 1890) the wages of an employed person shall be paid to him without deductions of any kind except those authorised by or under this Act.

Explanation I : Every payment made by the employed person to the employer or his agent shall for the purposes of this Act be deemed to be a deduction from wages.

Explanation II : Any loss of wages resulting from the imposition, for good and sufficient cause upon a person employed of any of the following penalties namely :-

(i) the withholding of increment or promotion (including the stoppage of increment at an efficiency bar);

(ii) the reduction to a lower post or time scale or to a lower stage in a time scale; or

(iii) suspension;

shall not be deemed to be a deduction from wages in any case where the rules framed by the employer for the imposition of any such penalty are in conformity with the requirements if any which may be specified in this behalf by the State Government by notification in the Official Gazette.

(2) Deductions from the wages of an employed person shall be made only in accordance with the provisions of this Act and may be of the following kinds only namely :

(a) fines;

(b) deductions for absence from duty;

(c) deductions for damage to or loss of goods expressly entrusted to the employed person for custody or for loss of money for which he is required to account where such damage or loss is directly attributable to his neglect or default;

(d) deductions for house-accommodation supplied by the employer or by government or any housing board set up under any law for the time being in force (whether the government or the board is the employer or not) or any other authority engaged in the business of subsidising house-accommodation which may be specified in this behalf by the State Government by notification in the Official Gazette;

(e) deductions for such amenities services supplied by the employer as the State Government or any officer specified by it in this behalf may by general or special order authorise.

Explanation : The word "services" in this clause does not include the supply of tools and raw materials required for the purposes of employment;

(f) deductions for recovery of advances of whatever nature (including advances for travelling allowance or conveyance allowance) and the interest due in respect thereof or for adjustment of over-payments of wages;

(ff) deductions for recovery of loans made from any fund constituted for the welfare of labour in accordance with the rules approved by the State Government and the interest due in respect thereof;

(fff) deductions for recovery of loans granted for house-building or other purposes approved by the State Government and the interest due in respect thereof;

(g) deductions of income-tax payable by the employed person;

(h) deductions required to be made by order of a court or other authority competent to make such order;

(i) deductions for subscriptions to and for repayment of advances from any provident fund to which the Provident Funds Act 1952 (19 of 1952) applies or any recognised provident funds as defined in section 58A of the Indian Income Tax Act 1922 (11 of 1922) or any provident fund approved in this behalf by the State Government during the continuance of such approval;

(j) deductions for payments to co-operative societies approved by the State Government or any officer specified by it in this behalf or to a scheme of insurance maintained by the Indian Post Office and

(k) deductions made with the written authorisation of the person employed for payment of any premium on his life insurance policy to the Life Insurance Corporation Act of India established under the Life Insurance Corporation 1956 (31 of 1956) or for the purchase of securities of the Government of India or of any State Government or for being deposited in any Post Office Saving Bank in furtherance of any savings scheme of any such government.

(kk) deductions made with the written authorisation of the employed person for the payment of his contribution to any fund constituted by the employer or a trade union registered under the Trade Union act 1926 (16 of 1926) for the welfare of the employed persons or the members of their families or both and approved by the State Government or any officer specified by it in this behalf during the continuance of such approval;

(kkk) deductions made with the written authorisation of the employed person for payment of the fees payable by him for the membership of any trade union registered under the Trade Union Act 1926 (16 of 1926);

(l) deductions for payment of insurance premia on Fidelity Guarantee Bonds;

(m) deductions for recovery of losses sustained by a railway administration on account of acceptance by the employed person of counterfeit or base coins or mutilated or forged currency notes;

(n) deductions for recovery of losses sustained by a railway administration on account of the failure of the employed person to invoice to bill to collect or to account for the appropriate charges due to that administration whether in respect of fares freight demurrage wharfage and cranage or in respect of sale of food in catering establishments or in respect of sale of commodities in grain shops or otherwise;

(o) deductions for recovery of losses sustained by a railway administration on account of any rebates or refunds incorrectly granted by the employed person where such loss is directly attributable to his neglect or default;

(p) deductions made with the written authorisation of the employed person for contribution to the Prime Minister's National Relief Fund or to such other Fund as the Central Government may by notification in the Official Gazette specify;

(q) deductions for contributions to any insurance scheme framed by the Central Government for the benefit of its employees.

(3) Notwithstanding anything contained in this Act the total amount of deductions which may be made under sub-section (2) in any wage-period from the wages of any employed person shall not exceed -

(i) in cases where such deductions are wholly or partly made for payments to co-operative societies under clause (j) of sub-section (2) seventy-five per cent of such wages and

(ii) in any other case fifty per cent of such wages :

Provided that where the total deductions authorised under sub-section (2) exceed seventy five per cent or as the case may be, fifty per cent of the wages the excess may be recovered in such manner as may be prescribed.

(4) Nothing contained in this section shall be construed as precluding the employer from recovering from the wages of the employed person or otherwise any amount payable by such person under any law for the time being in force other than the Indian Railways Act 1890 (9 of 1890).

In case the deduction falls within the above the Consultant can authorise deduction and simultaneously obtain a Salary Adjustment Letter from the Temporary Employee .Thereafter the deduction can be done or else the penal provisions of the Payment of Wages Act can operate if the deduction is done arbitrarily.

With Regards

Advocates & Notaries & Legal Consultants

E-mail : rajanassociates@eth,net,

-9025792684.

Subject - Unpaid Salaries & Gratuity Payment - Statutory Compliance

In the Staffing Industry all unpaid Salaries/Dues and Gratuity ( in accordance with the Payment of Gratuity Act ) are payable even without demand. It is the Temporary Employee’s legal entitlement and not gratis which all may note.

Unpaid Salaries ie dues and Gratuity is covered by Sec 2 (10) of THE BOMBAY LABOUR WELFARE FUND ACT,1953 by way of illustration:

"unpaid accumulation" means all payments due to the employees but not made to them within a period of three years from the date on which they became due whether before or after the commencement of this Act including the wages, and gratuity legally payable but not including the amount of contribution, if any, paid by an employer to a provident fund established under the Employees' Provident Funds Act, 1952 (XIV of 1952);

In accordance with Sec 3 constituting Welfare Fund

(1)The Administrator shall constitute a fund called the Labour Welfare Fund, and notwithstanding anything contained in any other law for the time being in force or in any contract or instrument; all unpaid accumulations shall be paid at such intervals as may be prescribed to the Board, which shall keep a separate account therefor until claims thereto have been decided in the manner provided in section 6A, and the other sums specified in sub-section (2) shall be paid into the Fund.

(2)The Fund shall consist of-

(a)all fines realized from the employees;

(b)unpaid accumulations transferred to the Fund under section 6A;

Sec 7 A deals with Unpaid accumulations and claims thereto:

(1)All unpaid accumulations shall be deemed to be abandoned property.

(2) Any unpaid accumulations paid to the Board in accordance with the provision of section 3 shall on such payment, discharge an employer of the liability to make payment to an employee in respect thereof but to the extent only or the amount paid to the Board, and the liability to make payment to the employee to the extent aforesaid shall subject to the succeeding provisions of this section be deemed to be transferred to the Board

Similarly each State have their own Welfare Fund which would be relevant for that particular Staffing Company .

The impression that when a person is terminated, resigns or absconds or severance taking place or does not claim his dues the Employer can appropriate the amounts due the Employee is not the correct approach. These are in the nature of their entitlement. What the Employer in the maximum deducts is notice pay if proper notice is not given. That too in the Staffing Industry enforcing the Notice period is an issue.

Just because the Employment market is vibrant and volatile as the Temporary Employees easily find an alternate job they may appear not to be bothered of their past entitlements. Staffing Companies by way of ethics cannot be expected to take advantage of the situation.

Please note it is the Temporary Employees money which is in the Staffing Companies hands. Such amounts must be immediately transferred to unpaid Salaries Account and after three years deposited with the Welfare Fund.

The above is an essence of statutory compliance and what is not the Staffing Companies money but the Temps cannot be retained or sought to be illegally enriched. Compliance Team /Auditors need to monitor this closely.

With Regards

Advocates & Notaries & Legal Consultants for Staffing & Recruiting Industry

-9025792684-9025792634

Subject - Andhra Pradesh contract labour act 2003 amendment

The State amendment of Andhra Pradesh in 2003 which introduced a clause restraining the employment of Contract Labour in core activities of any establishment if the same was prohibited by Notification .But it introduced the following exemptions.

[a]. The normal functioning of the establishments is such that the activity is ordinarily done through contractors; or
[b]. The activities are such that they do not require full time workers for the major portion of the working hours in a day or for longer periods, as the case may be;
[c] Any sudden increase of volume of work in the core activity which needs to be accomplished in a specified time"

Also the Andhra Pradesh Amendment introduced a definition clause for "core activities" of an establishment meaning as any activity for which establishment is set up which includes any activity which is essential or necessary to the core activity and it again provides certain exceptions which are follows:-

1]. Sanitation works, including sweeping, cleaning, dusting and collection and disposal of all kinds of waste;
2]. Watch and ward services including security service;
3]. Canteen and catering services;
4]. Loading and unloading operations;
5]. Running of hospitals, educational and training institutions, guest houses, clubs and the like where they are in the nature of support services of an establishment;
6]. Courier services which are in nature of support services of an establishment;
7]. Civil and other constructional works, including maintenance;
8]. Gardening and maintenance of lawns, etc;
9]. Housekeeping and laundry services, etc., where they are in nature
support services of an establishment;
10]. Transport services including ambulance services;
11]. Any activity of intermittent in nature even if that constitutes a
core activity of an establishment; and
12]. Any other activity which is incidental to the core activity.

Also a rider was introduced by the Andhra Pradesh Amendment that the above 12 activities by themselves should not be the core activities of such establishment.

It must be noticed that the Andhra Pradesh Amendment has force only in Andhra Pradesh State and not in the rest of the Country and this was the first step initiated by a State Govt to put India on the path of globalization.

With Regards

Advocates & Notaries & Legal Consultants

E-mail : rajanassociates@eth,net,

-9025792684.

Absence From duty

The Bombay Shops and Establishments Act Sec 66 proviso (a) says that notice of termination is not required under Sec 66 if an employee absents from service without notice in writing or without sufficient reasons for seven days or more which can be construed as misconduct .

Consequently the severance of the Temporary Employee for absence from duty has to be in tune with the legal requirement. Though the legal provision says that termination is possible without notice. It may not be a practical solution when in the Staffing Industry when one is dealing with large numbers .Documenting the absence is a legal compliance issue. The need for issuing a call letter requiring the employee to report for the job is the first step. This can be followed by the termination letter . But a synthesis of combining both may require legal acumen and be a perfect solution for fast tracking the legal compliance on this aspect.

With Regards

Advocates & Notaries & Legal Consultants for Staffing & Recruiting Industry

E-mail : rajanassociates@eth,net,

-9025792684-9025792634

Dear All

The portion of Maharashtra Govt Draft Labour Policy 2010 on Contract Labour is very impressive which reads like this:

Contract Labour

The issue of contract labour is one on which employers and unions are strongly divided. Employers see contract labour as an essential component of labour market flexibility that will contribute to economic efficiency and competitiveness. Trade unions see contract labour as a form of exploitation and a means to deny workers permanent jobs.

Contract labour must be distinguished from outsourcing of tasks to particular entities for cleaning and security services, computer technology expertise, and consultancy services. These are commercial contracts for service as between the user and service-provider and fall outside the scope of labour legislation. The provider-entity, however, is an employer and thus is required to comply with all appropriate labour laws.

Out-sourcing and commercial contracts are not the real issue. The real issue is the employment of labour, under contract, for specific durations or specific tasks as a means of cost-cutting, or to provide flexibility, or as a substitute for jobs that would normally be regular and permanent.

The Department of Labour proposes to facilitate discussions with the social partners on the issue of contract labour with a view to deciding on a model that provides both fairness and flexibility. This may involve some discussion on possible amendments of existing laws as, for example, preventing employers from using lower-cost contract labour as a substitute for permanent workers, and by paying a loading to contract workers to compensate for their loss of benefits including leave and access to social security. It might also consider whether the current system of contracting agents as the employers of contract workers, as distinct from the direct employment of such workers by the principal employer, is in the best interests of works and employers.

The productivity of contract workers is also an issue for tripartite discussions.The Department of Labour, through discussions with social partners as mentioned above, would like to evolve models and/or structures through which a win-win situation can be developed, both for the employers and the workers in a globalized scenario. The win-win situation could be developed if the employer is given flexibility to engage labour and the labour is ensured protection of rights. One such proposal could also be to engage contract labour with a loading factor as a premium for flexibility.

It is also suggested that in order to develop a long term solution on contract labour and develop models to meet the twin concerns of flexibility to industry and fairness to labour, it may be necessary to go through a transition phase in which, the first step could be to study the present labour laws and their actual implementation to identify on what is incentivising contract labour and disguised employment? It would also be necessary to define fairness in terms of “equal treatment”. What is “equal treatment” would also have to be agreed upon more specifically between all social partners in a clear-cut manner.

Further, there would be need to work out solutions along with changes in law if required, which would further the objective to reach towards the end goal of increased productivity in a situation of ‘flexibility’ and ‘fairness’ as defined by ‘equal treatment’.

We are optimistic to see how far the above is translated into Law.

With Regards

Advocates & Notaries & Legal Consultants[HR]

E-mail : rajanassociates@eth,net,

-9025792684-9025792634

Dear All
By way of refurbishing HR Knowledge for the Staffing Industry we have attached the historic ESI Circular which in effect had recognized Outsourcing as a legal practice in India .
With Regards
Advocates & Notaries & Legal Consultants
E-mail : rajanassociates@eth,net,
-9025792684-9025792634


Attached Files
File Type: doc -VSRA-ESI circular on outsourcing[1].doc (82.0 KB, 301 views)

Dear All
In order to place the valuable material on the trends in Labour Law from 1960 to 1999 MR C Niranjan Rao Advocate has placed a valuable post in CTE HR Legal Issue trail and to view it please see the link https://www.citehr.com/294538-recent...#axzz152qqfpnY
With Regards
Advocates & Notaries & Legal Consultants for Recruiting & Staffing Industry
E-mail : rajanassociates@eth,net,
-9025792684-9025792634

Dear All

Sub: Statistics of Enforcement of Labour Laws by the Central Govt:

The enforcement of the provisions of various Labour laws has been prescribed under provisions of the relevant Acts and is secured through the officers of the Central Industrial Relations Machinery (CIRM) in the Central Sphere, and through the State enforcement machinery in the State Sphere. Some of the labour enactments are also enforced by the Employees State Insurance Corporation and Employees Provident Fund Organization.

The information regarding inspections conducted, prosecutions launched, claim case filed and decided and amount awarded under Minimum Wages Act and Payment of Bonus Act in Central Sphere is found in the Attachment.



In regard to Employees Provident Fund, over 80 complaints alleging Provident Fund evasion had been received during 2007-2010 by Vigilance Wing of Employees Provident Fund Organisation.

Shri Harish Rawat, Minister of Labour and Employment gave this information in reply to a question in the Lok Sabha .

The above data will give a picture on the realistic Enforcement scenario in respect of these two enactments .

Presently the level playing field available for the Indian Staffing Industry to operate in the present liberalised regime of the Central Government is quite adequate and is commendable and will be an invitation to International Staffing Companies to open shop in India

With Regards

Advocates & Notaries & Legal Consultants for Recruiting & Staffing Industry

E-mail : rajanassociates@eth,net,

-9025792684-9025792634


Attached Files
File Type: doc Statistics on violations Minimum Wages-Bonus Act.doc (35.0 KB, 294 views)

Subject - NO EPF Contribution on Leave encashment

Dear All

In decision of the Madras High Court of Mr Justice K.Chandru in the case of Thiru Arooran Sugars Ltd. And Five Ors. vs Asstt. Provident Fund Commissioner (Enf) Employees' Provident Funds Organisation And Anr *decided on 12/10/2007 wherein it was the stand of the respondent/PF Department that the leave encashment given to the workman is covered by the term of basic wages. In support of their stand, they were relying upon the judgment of the Bombay High Court as well as the Karnataka High Court and claimed all the petitioners/managements were bound to make contribution in terms of the leave encashment given to the workman as part of the basic wages.

But the Court rejected the contention of the Department and held

"If the two decisions of the Supreme Court in Bridge & Roof Company (India) Ltd's case (supra) as well as TI Cycles of India's case (supra) read together, there will be no difficulty in arriving at the conclusion that the basic wage was never intended to include in the leave with wages for which encashment is allowed. The term basic wage which includes all emoluments which are earned by an employee while on duty or on leave or on holidays with wages. In accordance with the terms of the contract of employment, it cannot mean it can only mean the weekly holidays, national festival holidays. In many cases, the employees do not take leave and encash it only at the time of retirement or as legal heirs at the time of his death, which is an uncertain contingency. Even though the employer made annual provisions for such contingency unless the contingency of encashing of leave takes place, the question of the actual payment to the workmen never takes place. In case, he avails the entire leave, during his tenure, then the question of payment of any contribution may not arise. Any payment of contribution cannot be based upon different contingencies and uncertainties.

Finally the Court precluded the Department from claiming Contribution on Leave Encashment and further held :

"By allowing the deduction on the encashment of annual leave, in no way, the employees are benefited and at the time of death or retirement or resignation, a lump-sum amount in his hand will give him a greater relief because at that time only, he is receiving the entire PF contributions standing to his credit also."

In the Staffing Industry in case Client permits Leave Encashment then application of the essence of the decision will become relevant.

With Regards

Advocates & Notaries & Legal Consultants for Recruiting & Staffing Industry

E-mail : rajanassociates@eth,net,

-9025792684-9025792634


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