How Can Staffing Companies Ensure Legal Compliance with New Grievance Redressal Rules?

Dear Friends,

As per the ID Act Amendment, Section 9C was introduced. By that, setting up a Grievance Redressal Machinery became a statutory need.

Section 9C Overview

9C. (1) Every industrial establishment employing twenty or more workmen shall have one or more Grievance Redressal Committee for the resolution of disputes arising out of individual grievances.

(2) The Grievance Redressal Committee shall consist of an equal number of members from the employer and the workmen.

(3) The chairperson of the Grievance Redressal Committee shall be selected from the employer and from among the workmen alternatively on a rotation basis every year.

(4) The total number of members of the Grievance Redressal Committee shall not exceed more than six:

Provided that there shall be, as far as practicable, one woman member if the Grievance Redressal Committee has two members, and in case the number of members is more than two, the number of women members may be increased proportionately.

(5) Notwithstanding anything contained in this section, the setting up of a Grievance Redressal Committee shall not affect the right of the workman to raise an industrial dispute on the same matter under the provisions of this Act.

(6) The Grievance Redressal Committee may complete its proceedings within thirty days on receipt of a written application by or on behalf of the aggrieved party.

(7) The workman who is aggrieved by the decision of the Grievance Redressal Committee may prefer an appeal to the employer against the decision of the Grievance Redressal Committee, and the employer shall, within one month from the date of receipt of such appeal, dispose of the same and send a copy of his decision to the workman concerned.

HR professionals may provide their feedback in this thread on their experience in setting up this Grievance Redressal Machinery in their respective organizations.

Regards,
rajanlawfirm

Immediate Question for Staffing Entities

What can keep Staffing Entities secure from litigation?

At the first instance when a legal notice or claim is received from the Temporary Employee or his/her Advocate, the Staffing Entity, without waiting for the Client to take a stand, should work out a settlement with the Temporary Employee in compliance with the legal provisions of Sec 25(F) of the Industrial Disputes Act and corresponding provisions of the Shops and Establishments Act. Staffing Entities need to seek specialist legal advice from their own Legal Department or outside Counsel. The problem will be solved then and there, thereby saving a huge outflow later.

Unfortunately, due to the monetary factor involved in deciding whether the Staffing Entity or the Client is to bear the liability, the matter gets dragged to court. In fact, Staffing Entities hesitate to portray the correct position to the Client for fear of losing business. This must be avoided.

Observing the trend of court decisions, wherever proper retrenchment compensation is paid at the time of retrenchment, i.e., when the Temporary Employee is fired, the Employers have been protected.

However, every Employer will learn the hard way. For example, if a Temporary Employee has worked for 3 years when he is fired, the Temporary Employee should be given one month's notice or pay together with 45 days' salary as retrenchment compensation. But this may not be paid, and he will be let go just like that. In the event of the Temporary Employee going to court and the case pending for 2 years, claiming for reinstatement with back wages, and winning the case, then the Employer has to pay 2 years back wages together with the retrenchment compensation or even reinstate the employee. By this time, the Staffing Entity would have finished their contract with the Client, and the whole liability would be on their head. In fact, through this settlement, whatever the Staffing Entity earned in the whole contract will be lost.

The success of Staffing Business is to foresee this risk and curtail it.

With Regards,

V. Sounder Rajan

Advocates & Notaries & Legal Consultants

E-mail: [Email Removed For Privacy Reasons]

[Phone Number Removed For Privacy Reasons].

Grievance Redressal Committee Requirements

Please see 9C. (1) Every industrial establishment employing twenty or more workmen shall have one or more Grievance Redressal Committees for the resolution of disputes arising out of individual grievances.

(4) The total number of members of the Grievance Redressal Committee shall not exceed more than six.

Pointing out to "one or more Grievance Redressal Committees" and "The total number of members of the Grievance Redressal Committee shall not exceed more than six."

Regards,
Rajan Law Firm

Thank you for your query. In response to your question about whether one Grievance Redressal Committee of six members is sufficient for 1000 employees or if additional committees need to be established, it is recommended to assess the workload and complexity of grievances faced by the employees.

Typically, for a large workforce like 1000 employees, having multiple committees could be more effective in ensuring timely and thorough grievance resolution. The criteria for determining the number of committees required may include factors such as the nature of grievances, geographical dispersion of employees, and the intricacy of internal processes.

I hope this information helps. If you have any further questions or need clarification, feel free to ask.

Thanks & Regards,

The section does not provide any cap. Depending upon the class of workmen, you can have multiple Grievance Redressal Mechanisms (GRM). It is for the management to decide. Starting with one GRM may be ideal. If the complaints are not manageable, then you can go in for the multiple mode.

Regards,
Rajan Law Firm

Immediate Concern for Staffing Entities

The Gujarat High Court in the matter of Chemical vs Secretary, decided on 26 April 2011 by Honourable Mr. Justice H.K. Rathod, described the possibilities of a contract worker raising an industrial dispute before the Industrial Dispute has listed out the following contingencies:

In this connection, it will be necessary to note that even if contract labor is in vogue in a concern, employees employed by the contractor can validly raise the following contentions which may buttress their grievance that even though they are the direct employees of the principal employer, they have wrongly been treated as employees of the contractor who is not a real intermediary. Such types of disputes under the ID Act can legitimately be raised in the following cases, which are mentioned by way of illustrations only, without suggesting that they are exhaustive:

1. When it is alleged that the employees were directly employed by the principal employer and subsequently a contract system was introduced for the same activities, resulting in the snapping of the relationship of employee-employer between the workmen on the one hand and the main employer on the other, thus violating sec. 9A of the ID Act.

2. When there is an absence of proper registration of the concerned principal employer under the Contract Labour Act.

3. When there is an absence of proper licensing of the concerned contractor who employs contract labor at a given point in time.

4. Even though the principal employer may be a registered employer under the Act and the concerned contractor may be a licensed contractor under the Act, his license may not cover the activity which is carried on by the contract labor.

5. Even though the principal employer may be a registered employer under the Contract Labour Act and the contractor may have a valid license to employ contract labor under the Contract Labour Act for a given activity, still, the license issued to him may not cover the exact number of permissible employees employed by him. This means the number of permissible employees under the license may be less than the number of employees actually employed, and for such an excess number of employees, the protective umbrella of the license would not be available to the contractor as far as the activity covered by the license is concerned.

6. Even though the principal employer may be a registered employer and the contractor may be a licensed contractor, and the workmen employed by him might be covered by the permissible number of employees as recognized by the license, and even though such activities may be covered by the license, in fact and in substance, control including disciplinary control and supervision of the entire activity may be with the principal employer. The wages of the employees may, in fact, be coming out of the coffers of the principal employer and may be getting paid through the contractor who may operate as a mere conduit pipe. Such type of control, supervision, and payments being outside the scope of sec. 10(2) read with secs. 20 and 21 of the Contract Labour Act would give rise to a legitimate contention that the principal employer is in fact and substance the real employer and the so-called contract is an eyewash.

Staffing industry professionals need to note the above industrial adjudication possibilities and steer clear of them.

With Regards,

V. Sounder Rajan

Advocates & Notaries & Legal Consultants

Email: [Email Removed For Privacy Reasons]

[Phone Number Removed For Privacy Reasons].

Immediate Concern for Staffing Entities

Are there any state government statutes providing for claiming permanency?

A: Yes. The State Government of Tamil Nadu, by the Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981, has conferred this power on the Industrial Adjudicators. The State of Assam also has the Assam Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1985, which provides for employees to claim permanency. However, there is a procedure for it. These enactments were enacted before the advent of globalization.

With Regards,
V. Sounder Rajan
Advocates & Notaries & Legal Consultants
E-mail: [Email Removed For Privacy Reasons] - [Phone Number Removed For Privacy Reasons]

Tamil Nadu Industrial Establishments Act Upheld

The Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981 [Tamil Nadu Act 46 of 1981] was upheld by the Hon'ble Supreme Court in the case of State of Tamil Nadu vs. Nellai Cotton Mills Limited.

Regards,
Rajan Law Firm

Indian Court Decisions on Contractor Changes and Worker Retention

Are there any decisions of Indian Courts referring to contractors being used to be changed, but the new contractors were required under the terms of the agreement to retain the workers of the predecessor contractors?

Yes, in R. K. Panda v. Steel Authority of India Ltd. (1994) 5 SCC 304: (1994 AIR SCW 2460), the contract laborers, by filing a writ petition under Article 32, claimed parity in pay with direct employees and also regularization in the employment of the respondent-authority. They had been continuing in employment for periods ranging from 10 to 20 years. The contractors used to be changed, but the new contractors were required under the terms of the agreement to retain the workers of the predecessor contractors. The workers were employed through the contractors for different purposes like construction and maintenance of roads and buildings within plant premises, public health, horticulture, water supply, etc. In the agreement with the contractors, it was stated that the parties shall be governed by the provisions of the Act as well as by the provisions of the Payment of Bonus Act.

On these facts, the Apex Court observed as follows (at p. 2466 of AIR): "It is true that with the passage of time and purely with a view to safeguard the interests of workers, many principal employers, while renewing the contracts, have been insisting that the contractor or the new contractor retains the old employees. In fact, such a condition is incorporated in the contract itself. However, such a clause in the contract, which is benevolently inserted in the contract to protect the continuance of the source of livelihood of the contract labor, cannot by itself give rise to a right to regularization in the employment of the principal employer. Whether the contract laborers have become the employees of the principal employer in the course of time and whether the engagement and employment of laborers through a contractor is a mere camouflage and a smokescreen, as has been urged in this case, is a question of fact and has to be established by the contract laborers on the basis of the requisite material. It is not possible for the High Court or this Court, while exercising writ jurisdiction or jurisdiction under Article 136 to decide such questions, only on the basis of the affidavits. It need not be pointed out that in all such cases, the laborers are initially employed and engaged by the contractors. As such, at what point of time a direct link is established between the contract laborers and the principal employer, eliminating the contractor from the scene, is a matter which has to be established on material produced before the Court. Normally, the Labour Court and the Industrial Tribunal, under the Industrial Disputes Act, are competent to adjudicate such disputes on the basis of the oral and documentary evidence produced before them."

It is now imperative for the Indian Contract Staffing Industry to evolve a Code of Inherent Risks so that Principal Employers are forewarned in deploying Contract Staff.

With Regards,

Advocates and Notaries & Legal Consultants for Recruiting & Staffing Industry
E-mail: [Email Removed For Privacy Reasons]
Phone: [Phone Number Removed For Privacy Reasons]

ORIGIN OF 240 DAYS CLAUSE

The 240 days clause has its origin in Sec.25-B of the Industrial Disputes Act, which is extracted below:

25-B. Definition of continuous service: -- For the purpose of this Chapter,-

(1) A workman shall be said to be in continuous service for a period if he is, for that period, in uninterrupted service, including service which may be interrupted on account of sickness or authorized leave or an accident or a strike which is not illegal, or a lock-out or a cessation of work which is not due to any fault on the part of the workman;

(2) Where a workman is not in continuous service within the meaning of clause (1) for a period of one year or six months, he shall be deemed to be in continuous service under an employer—

(a) For a period of one year, if the workman, during a period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than—

(i) One hundred and ninety days in the case of a workman employed below ground in a mine; and

(ii) Two hundred and forty days, in any other case;

(b) For a period of six months, if the workman, during a period of six calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than—

(i) Ninety-five days, in the case of a workman employed below ground in a mine; and

(ii) One hundred and twenty days, in any other case;

Explanation: -- For the purpose of clause (2), the number of days on which a workman has actually worked under an employer shall include the days on which—

(i) He has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment [Standing Orders] Act, 1946 (20 of 1946), or under this Act or under any other law applicable to the Industrial establishment;

(ii) He has been on leave with full wages, earned in the previous years;

(iii) He has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and

(iv) In the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave does not exceed twelve weeks.

Continuous Service is applied in Section 25 F

25-F. Continuous precedent to retrenchment of workmen.—No workman employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until—

(a) The workman has been given one month's notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice;

(b) The workman has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days' average pay [for every completed year of continuous service] or any part thereof in excess of six months; and

(c) Notice in the prescribed manner is served on the appropriate Government [or such authority as may be specified by the appropriate Government by notification in the Official Gazette.]

Both the definition and the application have been extracted. Viewers would need to understand the statutory provision in its original form and reach their own understanding.

Regards,
Rajan Law Firm

Hi, I am working with an IT company, and being in HR, I am asked to find out statutory compliances related to an IT (US Staffing) company and certifications that can be acquired by such companies like ISO, etc. I would really appreciate it if somebody could provide an expert opinion on this.

Thanks and Regards,
Deepali
HR Executive

Important Issues in Contract Staffing Industry - F & F Settlement

Dear All, the essence of compliance with Section 25 F of the Industrial Disputes Act has been made clear by the Supreme Court of India in the reported case of Pramod Jha & others vs. State of Bihar, reported in 2003(3) SBR 617. To quote the very words of the Supreme Court, it has been held that:

“The underlying object of Section 25 F [the retrenchment provision in the Industrial Disputes Act] is twofold. Firstly, a retrenched employee must have one month's time available at his disposal to search for alternative employment, and so, either he should be given one month's notice of the proposed termination or he should be paid wages for the notice period. Secondly, the worker must be paid retrenchment compensation at the time of retrenchment, or before, so that once having been retrenched, there should be no need for him to go to his employer demanding retrenchment compensation. The compensation so paid is not only a reward earned for his previous services rendered to the employer but is also sustenance to the worker for the period which may be spent in searching for another employment.”

Retrenchment can be simply termed as termination. Two points therefore emerge:

Firstly, a terminated contract staffing employee must have one month's time available at his disposal to search for alternative employment, and so, either he should be given one month's notice of the proposed termination or he should be paid salary for the notice period.

Secondly, the contract staffing employee must be paid retrenchment compensation at the time of retrenchment, or before, so that once having been retrenched, there should be no need for him to go to the contract staffing company demanding retrenchment compensation. The compensation so paid is not only a reward earned for his/her previous services rendered to the contract staffing company but is also sustenance to the contract staffing employee for the period which may be spent in searching for another employment.

Regards,

V. Sounder Rajan, Advocates and Notaries & Legal Consultants

E-mail: [Email Removed For Privacy Reasons]
[Phone Number Removed For Privacy Reasons]

Immediate Issues for Contract Staffing Entities

What are the circumstances in which the Central Government can prohibit the employment of Contract Labour under CLRA?

Prohibition

Apart from the regulatory action under the Contract Labour (Abolition Regulation) Act, CLRA provides the Authority, the "appropriate Government" under Sec 10(1) after consultation with the Central or State Board employing agency to prohibit any establishment in a process operation or other work. Such restrictions are often adopted based on the following criteria:

- If the work is in the nature of perennial;
- If the work is incidental or necessary for the work of an operation;
- If the work is sufficient to employ a significant number of full-time workers;
- If the work is usually done through periodic workers at this factory, or a similar setting.

The Central Government, on the recommendations of the Central Advisory Board, has prohibited the employment of contract labor in various operations and categories of jobs in different establishments. These details are available by checking the Notifications.

With Regards,

V. Sounder Rajan

Advocates & Notaries & Legal Consultants

E-mail: [Email Removed For Privacy Reasons]

[Phone Number Removed For Privacy Reasons]

Gratuity Entitlement for Contract Staff

Recently, Mr. Justice K. Chandru of the Madras High Court - Madurai Bench, in the matter of Special Officer-Srirangam Co-operative Urban Bank Ltd, has held that every employee who has worked in an organization for five or more years is entitled to gratuity, irrespective of the following:

- Superannuation;
- Retirement;
- Resignation;
- Death;
- Disablement; or
- Any other terminology used by the employer to terminate the employee's service.

The only exception is under Section 4(6) of the Payment of Gratuity Act, which enables the employer to forfeit the gratuity under certain circumstances and by following a specified procedure if the employee had not been allowed to retire or reached the age of superannuation.

Our understanding of the verdict on its application in the Contract Staffing Industry is that invocation of Section 4(6) of the Payment of Gratuity Act may be particularly challenging due to the contract staff being deployed with a client.

Consequently, the entitlement for gratuity of the contract staff cannot be denied on any account.

With Regards,

V. Sounder Rajan

Advocates & Notaries & Legal Consultants

Email: [Email Removed For Privacy Reasons]

[Phone Number Removed For Privacy Reasons]

Section 4(6)(b) of The Payment of Gratuity Act, 1972

The gratuity payable to an employee may be wholly or partially forfeited if:

- (i) The services of such an employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or
- (ii) The services of such an employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment.

The termination has to be done after the conduct of a Domestic Enquiry by appointing an Enquiry Officer. In the Contract Staffing Industry, the conduct of a Domestic Enquiry is next to impossible. Therefore, Section 4(6)(b) of The Payment of Gratuity Act, 1972 literally becomes inapplicable.

Regards,
Rajan Law Firm

Non-Payment of Salary: Illegal Deduction from Salary of Contract Staff

Dear Friends, the Contract Staffing Industry may note that under the Payment of Wages Act, 1936, in case of delay in payment of wages or unlawful deductions in the salary of contract workers, there is a remedy under Section 15 of the Payment of Wages Act, 1936, which is extracted below:

Claims Arising Out of Deductions from Wages or Delay in Payment of Wages and Penalty for Malicious or Vexatious Claims

1. The State Government may, by notification in the Official Gazette, appoint a presiding officer of any Labour Court or Industrial Tribunal constituted under the Industrial Disputes Act 1947 (14 of 1947) or under any corresponding law relating to the investigation and settlement of industrial disputes in force in the State, or any Commissioner for Workmen's Compensation or other officer with experience as a Judge of a Civil Court or as a Stipendiary Magistrate to be the authority to hear and decide for any specified area all claims arising out of deductions from the wages or delay in payment of the wages of persons employed or paid in that area, including all matters incidental to such claims:

Provided that where the State Government considers it necessary to do so, it may appoint more than one authority for any specified area and may, by general or special order, provide for the distribution or allocation of work to be performed by them under this Act.

2. Where contrary to the provisions of this Act, any deduction has been made from the wages of an employed person or any payment of wages has been delayed, such person himself or any legal practitioner or any official of a registered trade union authorized in writing to act on his behalf, or any Inspector under this Act, or any other person acting with the permission of the authority appointed under sub-section (1) may apply to such authority for a direction under sub-section (3):

Provided that every such application shall be presented within twelve months from the date on which the deduction from the wages was made or from the date on which the payment of the wages was due to be made, as the case may be:

Provided further that any application may be admitted after the said period of twelve months when the applicant satisfies the authority that he had sufficient cause for not making the application within such period.

3. When any application under sub-section (2) is entertained, the authority shall hear the applicant and the employer or other person responsible for the payment of wages under section 3 or give them an opportunity of being heard and after such further inquiry (if any) as may be necessary, may, without prejudice to any other penalty to which such employer or other person is liable under this Act, direct the refund to the employed person of the amount deducted or the payment of the delayed wages together with the payment of such compensation as the authority may think fit, not exceeding ten times the amount deducted in the former case and not exceeding twenty-five rupees in the latter, and even if the amount deducted or the delayed wages are paid before the disposal of the application, direct the payment of such compensation as the authority may think fit, not exceeding twenty-five rupees:

Provided that no direction for the payment of compensation shall be made in the case of delayed wages if the authority is satisfied that the delay was due to:

(a) a bona fide error or bona fide dispute as to the amount payable to the employed person, or

(b) the occurrence of an emergency or the existence of exceptional circumstances such that the person responsible for the payment of the wages was unable, though exercising reasonable diligence, to make prompt payment, or

(c) the failure of the employed person to apply for or accept payment.

4. If the authority hearing an application under this section is satisfied:

(a) that the application was either malicious or vexatious, the authority may direct that a penalty not exceeding fifty rupees be paid to the employer or other person responsible for the payment of wages by the person presenting the application; or

(b) that in any case in which compensation is directed to be paid under sub-section (3), the applicant ought not to have been compelled to seek redress under this section, the authority may direct that a penalty not exceeding fifty rupees be paid to the State Government by the employer or other person responsible for the payment of wages.

4A. Where there is any dispute as to the person or persons being the legal representative or representatives of the employer or of the employed person, the decision of the authority on such dispute shall be final.

4B. Any inquiry under this section shall be deemed to be a judicial proceeding within the meaning of sections 193, 219, and 228 of the Indian Penal Code (45 of 1860).

5. Any amount directed to be paid under this section may be recovered:

(a) if the authority is a Magistrate, by the authority as if it were a fine imposed by him as Magistrate, and

(b) if the authority is not a Magistrate, by any Magistrate to whom the authority makes application in this behalf as if it were a fine imposed by such Magistrate.

There is also a provision for class action under Section 16 of the Payment of Wages Act, 1936, which is also extracted below:

Single Application in Respect of Claims from Unpaid Group

1. Employed persons are said to belong to the same unpaid group if they are borne on the same establishment and if deductions have been made from their wages in contravention of this Act for the same cause and during the same wage-period or periods, or if their wages for the same wage-period or periods have remained unpaid after the day fixed by section 5.

2. A single application may be presented under section 15 on behalf or in respect of any number of employed persons belonging to the same unpaid group, and in such case, every person on whose behalf such application is presented may be awarded maximum compensation to the extent specified in sub-section (3) of section 15.

3. The authority may deal with any number of separate pending applications presented under section 15 in respect of persons belonging to the same unpaid group as a single application presented under sub-section (2) of this section, and the provisions of that sub-section shall apply accordingly.

In case the employer delays the payment of salary or F & F, the aggrieved employee will normally send a demand or a legal notice, and the contract staffing company would need to comply with the demand to avoid legal proceedings. On failure, it would be followed up with an application to the local appropriate authority under the Payment of Wages Act as extracted below:

Form of Individual Application

[See sub-section (2) of section 15 of the Payment of Wages Act]

In the Court of the Authority appointed under the Payment of Wages Act, 1936 (4 of 1936) for ……… area.

Application No. ……… of ………

Between A.B.C. ……… Applicant (through a legal practitioner/an official of ……… which is a registered Trade Union.)

And X.Y.Z………… opposite party:

The applicant states as follows:

1. A.B.C. is a person employed in the/on the factory/railway/industrial establishment entitled and resides at ………

The address of the applicant for the service of all notices and processes is:

…………

2. X.Y.Z., the opposite party, is the person responsible for the payment of his wages under section 3 of the Act, and his address for the service of all notices and processes is:…………

3. (1) The applicant's wages have not been paid for the following wage-period(s)……(give dates)

Or A sum of Rs…… has been unlawfully deducted from his wages of amount for the wage-period(s) which ended on …… (give dates)

(2) [Here give any further claim or explanation].

4. The applicant estimates the value of the relief sought by him at the sum of Rs……

5. The applicant prays that a direction may be issued under sub-section (3) of section 15 for:

(a) Payment of delayed wages as estimated or such greater or lesser amount as the Authority may find to be due.

Or Refund of the amount illegally deducted.

(b) Compensation amounting to ………

The Applicant certifies that the statement of facts contained in this application is to the best of his knowledge and belief accurate.

Signature or thumb impression of the employed person, or legal practitioner or official of a registered trade union duly authorized.

There is also a provision for group action as per the following format:

Form of Group Application

[See sub-section (2) of sections 15 and 16 of Payment of Wages Act]

In the Court of the Authority appointed under the Payment of Wages, Act, 1936 (4 of 1936) for ……… area

Application No……… of ………

Between A.B.C………… Applicants

A legal practitioner

(through a legal practitioner/an official of ……… which is a registered union).

And X.Y.Z………… Opposite Party.

The applicants state as follows:

1. [The applicants whose names and permanent addresses] appear in the attached schedule are persons employed in the/on the/factory/railway/industrial establishment entitled and reside at ………

The address of the applicants for service of all notice and processes is:

…………

2. X.Y.Z., the opposite party, is the person responsible for the payment of wages under section 3 of the Act, and his address for the service of all notices and processes is:

…………

3. The applicants' wages have not been paid for the following wage-period(s):

…………

4. The applicants estimate the value of the relief sought by them at the sum of Rs……

5. The applicants pray that a direction may be issued under sub-section (3) of section 15 for:

(a) Payment of the applicants' delayed wages as estimated…… or such greater or lesser amount as the Authority may find to be due.

(b) Compensation amounting to……

The Applicants certify that the statement of facts contained in this application is, to the best of their knowledge and belief, accurate.

Signature or thumb impression of two of the Applicants, or legal practitioner, or an official of a registered trade union duly authorized.

SCHEDULE

__________________________________________________ ______________________

S.No. Name of Applicant Permanent Address

__________________________________________________ ______________________

1 2 3

Regards,

I have a doubt regarding the following:

Government Activities and Sovereign Functions

- Any activity of the Government related to the sovereign functions of the Government, including all activities carried on by the departments of the Central Government dealing with defense research, atomic energy, and space, is mentioned. Though it is incorporated, it is not gazetted and hence not operative.

1) The Hon. Supreme Court has also kept this portion in abeyance.
2) The Group of Ministers and Group of Secretaries differed.
3) In Parliament, it was presented that this portion is inoperative. It is hanging in the fire because an alternative remedy is not shown.

Hence, please check and guide us.

Regards,

Supreme Court's Interpretation of 'Industry'

The Supreme Court, in the matter of State Of U.P vs. Jai Bir Singh on 5 May 2005, comprising the Bench of Honorable Justices N S Hegde, K.G Balakrishnan, D Dharmadhikari, and A Kumar, addressed the definition of 'industry.' This included some activities of the government while excluding others, particularly those involving sovereign functions and 'public utility services.'

"In response to the Bangalore Water Supply and Sewerage Board case, the Parliament intervened and substituted the definition of 'industry' by including some governmental activities and excluding others. For the past 23 years, the amended definition has remained unenforced. The government has faced difficulties in implementing the new definition due to judicial interpretation. It is high time for the court to reexamine this interpretation. The Legislature should have greater freedom to propose comprehensive legislation to meet the demands of employers and employees in both public and private sectors. The difficulties faced by the legislature and executive in enforcing the amended Industrial Law, largely due to judicial interpretation, need to be addressed. The experience of the Act's provisions should guide the creation of a better and more comprehensive law."

The word 'industry' was redefined under the Amendment Act, considering the judicial interpretation in the Bangalore Water case. Without such an expansive definition, Parliament could have opted for a more expansive or restrictive definition, including or excluding employment in liberal professions based on social conditions and demands for social justice. The judicial interpretation has been a barrier to enforcing the amended definition for the last 23 years.

In the Bangalore Water case, not all judges invoked the doctrine of noscitur-a-sociis. We accept the view expressed by the six judges' Bench in the Management of Safdarjung Hospital case that, while profit motive is irrelevant, the activity must be 'analogous to trade or business in a commercial sense' to be considered an 'industry.' The enumeration of 'public utility services' in section 2(n) should not be decisive unless it meets the test of being an 'industry' as defined in clause (j) of section 2.

The decision in the Management of Safdarjung Hospital case was unanimous, and we agree with the interpretation of the definition clause: "In the collocation of terms and their definitions, these terms have a definite economic content and are concerned with the production, distribution, and consumption of wealth and material services. Industry means trade and business, manufacture, or undertaking analogous to trade or business for producing material goods or wealth and services."

The six judges upheld the observations in the Gymkhana Club case: "Before work can be described as an industry, it must bear the character of 'trade,' 'business,' 'manufacture,' or 'calling,' or be an undertaking resulting in material goods or services."

In construing the definition clause, one must consider that in activities like hospitals and education, concepts like the right to 'strike' or 'close down' are not contemplated as they serve the community. If patients or students are left to the employer and employees' discretion, the service purpose would be frustrated.

We agree with Justice P.B. Gajendragadkar's observation in the Harinagar Cane Farm case: "In dealing with industrial matters, adjudication should refrain from enunciating general principles or adopting doctrinaire considerations. It should address problems as they arise and confine decisions to the points strictly arising between the parties."

We conclude with the honorable judges in the Hospital Mazdoor Sabha case: "Though section 2(j) uses broad terms, a line must be drawn to exclude some callings or undertakings."

This Court must reconsider where the line should be drawn and what limitations should be reasonably implied in interpreting section 2(j). This is a difficult problem, especially when the legislature and executive remain silent and have kept an important amended provision dormant.

We do not consider it necessary to say more and leave it to the larger Bench to give meaning and effect to the definition clause in the present context, considering the amended definition of 'industry' kept dormant for 23 years. The demands of employers and employees and the legislature and executive's inability to enforce the Amendment Act compel us to make this reference.

Let the cases be placed before the Honorable Chief Justice of India for constituting a suitable larger Bench for reconsideration of the judgment in the Bangalore Water case.

Section 9C was introduced in the Industrial Disputes (Amendment) Act, 2010 (No. 24 of 2010) of the Industrial Disputes Act. A Grievance Redressal Machinery has been introduced by the insertion of Section 9C. We are inquiring whether Section 9C comes into effect after the issue of a notification. We find that the wordings used in Section 9C are self-operative, as seen below, and a further notification may become superfluous as the provision is clear:

Setting up of Grievance Redressal Machinery

9C. (1) Every industrial establishment employing twenty or more workmen shall have one or more Grievance Redressal Committees for the resolution of disputes arising out of individual grievances.

(2) The Grievance Redressal Committee shall consist of an equal number of members from the employer and the workmen.

(3) The chairperson of the Grievance Redressal Committee shall be selected from the employer and from among the workmen alternatively on a rotation basis every year.

(4) The total number of members of the Grievance Redressal Committee shall not exceed more than six: Provided that there shall be, as far as practicable, one woman member if the Grievance Redressal Committee has two members, and in case the number of members is more than two, the number of women members may be increased proportionately.

(5) Notwithstanding anything contained in this section, the setting up of the Grievance Redressal Committee shall not affect the right of the workman to raise an industrial dispute on the same matter under the provisions of this Act.

(6) The Grievance Redressal Committee may complete its proceedings within thirty days of receiving a written application by or on behalf of the aggrieved party.

(7) The workman who is aggrieved by the decision of the Grievance Redressal Committee may prefer an appeal to the employer against the decision of the Grievance Redressal Committee, and the employer shall, within one month from the date of receipt of such appeal, dispose of the same and send a copy of his decision to the workman concerned.

Furthermore, Section 9C has already been notified.

Regards,
Rajan Associates

Sub: Changes in Section 1(6) of the Payment of Wages Act

Recently, the Government of India issued Notification S.O. No.2260(E) dated 20th September 2012, amending Section 1(6) of the Payment of Wages Act. The monthly ceiling on wages is now Rs.18,000/- per month.

Effect of the Amendment

With this change, the provisions of the Payment of Wages Act do not apply to those earning Rs.18,000/- per month and above. Only those below this ceiling will benefit from the provisions of the Payment of Wages Act.

Similar to the current action by the Central Government, when the ceiling was increased, the Andhra High Court, in the matter of The Singareni Collieries vs. The Singareni Collieries Company decided on 7th July 2011, HON'BLE SRI JUSTICE K.C. BHANU held as follows:

“Therefore, when the Central Government issued a Gazette notification extending all the provisions of the Act to all classes of persons, it can be made applicable to all persons working in the first respondent company irrespective of their wages. While substituting the present provision under Section 1(6) of the Act, the statement of objects and reasons of the Amendment Act 1947 of 2003 is very clear that the then existing ceiling of Rs.1,000/- per month was last revised to Rs.1,600/- per month in 1982. Since then, a large number of persons have gone out of the purview of the Act due to successive rises in wage levels resulting from the rise in the cost of living. With a view to covering more employed persons, it is proposed to enhance the wage ceiling from Rs.1,600/- per month to Rs.6,500/- per month. So, the legislature thought it fit to regulate the payment of wages to certain classes of persons as indicated in this Act to benefit certain classes of employed persons.”

Further, His Lordship Mr. Justice K. Chandru of the Madras High Court, in a recent judgment on 28.02.2011 in the matter of P. Palani vs. The District Manager on 28 February 2011, observed that:

“Under Section 1(6) of the Payment of Wages Act, the Act has been made applicable to persons who are drawing wages not exceeding Rs.10,000/- per month, which limit can be increased periodically at the interval of every five years. The said notification has been issued on 8.8.2007 by the Central Government's notification in S.O.1380 (E).”

With Regards,

V. Sounder Rajan

Advocate - Labour & HR & Consumer Law Consultant - Chennai

Legal Consultant for Indian Staffing & Recruiting Industry

By appreciation, we make excellence in others our own property.

Voltaire

Need for Indian Labour Contract Law

The topic "Does India require faster Labour Law Reforms" is much debated at every Global and Indian Contract Staffing Forum. Recently, in October 2012, during the Annual Conference of the Indian Staffing Federation, their Indian Staffing Industry Research Paper 2012 outlined specific reforms needed. In fact, the need for adopting the Private Employment Agency Convention of the International Labour Organisation (Convention No. 181 of 1997) was raised in the same document. By adopting this convention, it will be a step forward in giving statutory recognition to the Contract Staffing Industry.

Adapting and adopting Indian laws to international conventions has been an ongoing process. It is a simple legislative process. However, adopting the Private Employment Agency Convention of the International Labour Organisation (Convention No. 181 of 1997) will face serious resistance from Trade Unions.

Everyone echoes that India should follow China's example in economic reforms and the path of globalization. Without waiting for the adoption of the Private Employment Agency Convention, we can replicate the Labor Contract Law (LCL) enacted by the Chinese Parliament in 2008. The Chinese political system, modeled on the socialist pattern, has enacted a Labor Contract Law (LCL), and adopting a similar one in India may not be difficult for the government to convince Trade Unions. The Trade Unions will support the move as it contains many pro-labour provisions and provides better bargaining strength for the Unions.

The delay in implementing reforms in India's Labour Law sphere is due to the fact that changes in laws must be brought about by the Centre for central acts and the respective State Governments for state laws. This is a time-consuming process. Before making any change, stakeholders have to be consulted. It is a long-drawn process. It would be better to start by enacting a similar law as done in China. For enacting this law, the Contract Labour (Regulation & Abolition) Act has to be either amended suitably or a new law enacted on the Chinese model.

Who Can Be the Movers for Enacting the Indian Labor Contract Law (ILCL)?

Definitely, it will be the Business Associations, and each of the Indian Staffing companies in India needs to move the government to enact a special law. The Association and Federations of Employers can take up this cause as they are the ultimate Principal Employers who will employ the Contract Labour.

To narrate the history, when the Chinese Law was enacted, the Chinese legislature, during March 2006, launched the public consultation process for its draft Labor Contract Law. By April, the legislators received 191,849 responses, a majority of them from workers. Meanwhile, foreign investors and commercial groups also studied the draft law and submitted their comments. The process included recommendations from the following bodies:

- European Union Chamber of Commerce in China (EUCCC)
- American Chamber of Commerce in Shanghai (ACCS)
- U.S.-China Business Council

The first two largest foreign investors' organizations in China submitted recommendations and opinion papers on the Draft Labour Contract Law to the Legal Affairs Committee of the Standing Committee of the National People's Congress. ACCS is said to represent over 1,300 corporations, including 150 Fortune 500 companies, with big names like Dell, Ford, General Electric, Microsoft, and Nike. EUCCC in China represents more than 860 members. The U.S.-China Business Council represents 250 U.S. companies doing business across all sectors in China.

In India, Trade Unions have more stakes in the Labour Law legislative process than the Industry or its Association and Forum. Therefore, the whole legislative process hinges on Trade Union acceptance/consent. The Association Federation would need to invite the top Trade Union Leaders of the country for a dialogue on a Draft Labour Contract Law to be drafted by the Federation. This needs to be done on an emergent basis.

Until the reforms are implemented, the staffing business in India has to operate within the existing parameters of labour laws. The business and legal team of every staffing company would need to tune operations to the existing provisions and help the business team operate optimally within the prevalent labour law framework without incurring additional costs until the reforms are implemented. This is where the success of any staffing entity lies.

With Regards,

V. Sounder Rajan
Advocate - Labour & HR & Consumer Law Consultant - Chennai
Legal Consultant for Indian Staffing & Recruiting Industry

Dear All,

Recently, there was a furore at the Employees' Provident Fund Organisation (Ministry of Labour & Employment, Govt. of India) Head Office dated 30th November 2012 regarding internal instructions given for assessment under Section 7A of the EPF Act.

Impact on Payrolling in the Contract Staffing Industry

The aspect of the Circular that has a significant impact on the payrolling in the contract staffing industry is as follows:

Splitting of Wages

Basic wages, by its own definition, encompass all payments except the specified exclusions. All such allowances that are ordinarily, necessarily, and uniformly paid to employees are to be treated as part of the basic wages. The confusion in the definition of wages (and hence the issue of splitting of wages) primarily arises from the expression "commission or any other similar allowance payable to the employee" in Section 2(b)(ii) of the Act. "Commission" and "any other similar allowance" are often read as two separate expressions, leading "any other allowance" to be interpreted as an omnibus exclusion, thus promoting the practice of splitting wages to avoid PF liabilities.

The expression "commission or any other similar allowance payable to the employee" is one continuous term, meaning commission or any other "commission"-like allowance regardless of the nomenclature used. Therefore, "basic wages" are subject to exclusions expressly mentioned in the above definition and no others.

These instructions were quite drastic, giving the Department the freedom to calculate contributions based on the gross salary instead of basic plus DA, including all or any allowance regardless of its name.

Fortunately, on 14-12-2012, a news report in The Hindu stated that the Hon'ble Minister for Labour has assured that the Circular is being put on hold. This is good news for the principal employers and contract staffing players. As of now, there is nothing to worry about.

Regards,
Rajan Associates

Government Activities and Sovereign Functions

Any activity of the government related to the sovereign functions of the government includes all activities carried out by the departments of the Central Government dealing with defense research, atomic energy, and space. I request the respectable VS Rajan Associates to check this particular paragraph as it is not gazetted and hence not in operation. In response to one of the RTI queries, the Labour department clarified that it is not gazetted. Furthermore, in the first paragraph itself, it is stated that it will come into operation from the date of gazettification. Please check and confirm.

Regards.

It was earlier informed that the EPF Circular of 30th November 2012 has been kept in abeyance. The Abeyance Circular is attached for reference.

Regards,
Rajan Associates

Extracting the News Report in CLR

Posted in Labour Law: News on May 28, 2013, which is also reported in the Times of India of the same date:

The Employees Provident Fund Organization (EPFO) is readying to re-notify a new definition of "compensation" that will include all allowances. Currently, employers contribute only 12% of the basic salary and dearness allowance, which is not paid by most companies currently, towards their share of "matching" provident fund and the Employees Pension Scheme contribution. Hence, for several thousands of employees, the basic salary actually remains constant, while increments are passed by way of enhanced or new allowances. In most cases, the tax liability for the employee goes up due to the salary hike — and companies earn tax credits on salary-related expenses over the same — however, the statutory provident fund contribution remains unchanged in most cases.

As a result of the above-stated logic, EPFO had notified similar changes last year.

Regards

Dear Friends, we are starting this multi-part overview of Contract Staffing law in light of judicial precedents and the Contract Labour (Abolition and Regulation) Act, 1970. I'm sure it will be informative for the Indian Contract Staffing Industry players.

Many staffing industry players are not aware of the earliest case law in outsourcing as decided by the Indian Supreme Court.

Earliest Apex Court Decision on Outsourcing

Way back in 1968, the case law was laid down by the Hon'ble Supreme Court in the matter of GHATGE & PATIL CONCERN'S EMPLOYEES' UNION vs. GHATGE & PATIL (TRANSPORTS) PRIVATE LTD. & ANR. It is a very interesting case.

The facts are like this:

GHATGE & PATIL (TRANSPORTS) PRIVATE LTD, the company, carried on the business of transport and removal of goods by road. It owned a fleet of trucks and employed drivers and cleaners to run them. In 1963, finding difficulty in observing the provisions of the Motor Transport Workers Act 1961, GHATGE & PATIL (TRANSPORTS) introduced a scheme whereby the trucks, instead of being run by them, were hired out to contractors at a fixed rate per mile. It is the first reported case of organized outsourcing in India. To aid the process of outsourcing, employees of the company who were engaged in running the trucks resigned their jobs, and most of them who had been erstwhile drivers became contractors under the scheme. This outsourcing move was resisted by the Union GHATGE & PATIL CONCERN'S EMPLOYEES' UNION. The Union raised a dispute asking for the reinstatement of the ex-employees who had been given work on a contract basis. The matter was agitated in the Tribunal. The Tribunal held that the contract system could not be said to be an unfair labor practice, for the ex-employees were never coerced or forced to resign their jobs, and they got more benefits from the contract system than from their original contract of employment.

In appeal to the Apex Court, the GHATGE & PATIL CONCERN'S EMPLOYEES' UNION contended that the ex-employees of the company continued to be workmen notwithstanding that they were posed as independent contractors, and the beneficent legislation conceived in the interests of transport workers was being set at naught by the Management and that the setting up of the contract system amounted to unfair labor practice.

In our next part, we will deal with the manner in which the Hon'ble Bench of the Apex Court steered the matter for a landmark resolution when the very word "outsourcing" was unknown.

Dear V.S. Rajan, I have no words to express my sincere appreciation for your contribution! It's a gem! "Way back in 1968, the case law was laid down by the Hon'ble Supreme Court in the matter of GHATGE & PATIL CONCERN'S EMPLOYEES' UNION Vs. GHATGE & PATIL (TRANSPORTS) PRIVATE LTD. & ANR. It is a very interesting case." https://www.citehr.com/285737-legal-...#ixzz2k46LotSD I am waiting for the next installment of your post. The Hon'ble Supreme Court has been so futuristic and amazing in its judgment on an issue which was unknown at that time but would become so ubiquitous fifty years later! Warm regards.

EPFO Circular Dated 8th October 2013

The recent Circular No. C.III/110001/4/3 (71) Misc./2013/DL/12802 dated 8th October 2013, issued by the EPFO to all Regional P.F. Commissioners, is creating ripples among PF remitters, particularly in the staffing industry.

Upon reviewing the circular, we find that it is addressed to various Government Departments, Undertakings, and Autonomous bodies (Principal Employers - PE) for activities like watch-ward, housekeeping, and data entry. The intent of the circular appears to be aimed at Principal Employers who pay contributions on the whole of the salary or Rs.6,500/-, whichever is lower, and make that component part of the payment to the Contractor. However, the Contractor splits up the wage and deposits the contribution on a lesser basic salary. Therefore, the EPFO is asking PEs to verify whether the contractors are depositing the contributions collected from the PEs. Special attention may be given to paragraphs 5 and 7 of the Circular, which are extracted below:

"5. Instances have come to notice that placement agencies and security agencies, which provide guards and other personnel to Government Departments, Undertakings, and Autonomous Bodies, often take the employer's contribution on full wages from these employers and then bifurcate the wages of the personnel provided by them into basic wages and various other allowances, which do not form part of basic wages to evade the provident fund. This diversion of residual employer's contribution amounts to pilfering of provident fund money. Thus, Government Departments, Undertakings, and Autonomous Bodies, which settle the periodic bills of agencies and contractors, unwillingly become a party to this pilferage.

7. In this context, all the Regional Provident Fund Commissioners in charge of Regional/Sub Regional Offices are advised to start a dialogue with the Government Departments, Undertakings, and Autonomous Bodies functioning under your jurisdiction about their duties and responsibilities while engaging personnel for watch-ward, housekeeping, data entry, etc., through various agencies and contractors to check such pilferage of provident fund monies. The Officer-in-charge is also advised to collect the details of personnel engaged through various agencies and contractors from these Government Departments, Undertakings, and Autonomous Bodies and check with the records available in their own offices about such agencies and contractors. Wherever pilfering of provident fund money is noticed, immediate action shall be initiated against the erring agencies and contractors to check such unhealthy practices harming the interest of the workers."

In light of the above, the move of the Department is to ensure that there is no pilferage of PF contributions and to initiate action against the erring contractors, particularly those serving various Government Departments, Undertakings, and Autonomous bodies who receive more from the PE and remit less or do not remit at all. Those who are compliant need not fret about the Circular.

If you need a copy of the Circular, we can forward a copy upon request.

Regards,
V. Sounder Rajan
Advocate - Labour & HR & Consumer Law Consultant - Chennai
Legal Consultant for Indian Staffing & Recruiting Industry

Dear All,

In this part, we are continuing with the first reported case of outsourcing in India in the matter of GHATGE & PATIL CONCERN'S EMPLOYEES' UNION Vs. GHATGE & PATIL (TRANSPORTS) PRIVATE LTD. & ANR, and it was decided by the Hon'ble Supreme Court of India way back in 1968.

The most striking portion of the judgment is an eye-opener and a biblical pronouncement. If an abridged version is provided, the reader will not get the impetus of the actual words spoken by the Hon'ble Apex Court. Therefore, we extract the following relevant portion for your own comprehension:

“The apprehension of the Company is that some of the regulatory provisions of the Act are incapable of being observed properly in the case of drivers and cleaners going on long journeys because there is no means of enforcing them. For example, the provisions about hours of work, hours of rest, etc., are not easy to enforce en route or at far-off places. Therefore, rather than run the risk of losing the permit for want of compliance with the Motor Transport Workers Act, the Company has decided not to run transport trucks itself but to let them be run by independent hirers. There does not appear to be any bar in law to such action. Section 59 of the Motor Vehicles Act contemplates the transfer of permits with the permission of the Transport Authorities, and this enables any person to whom a vehicle covered by the permit is transferred to get the right to use the vehicle in the manner authorized by the permit. Here the vehicle is not transferred but is only let out on hire, and hence there is prima facie no need for permission. The Union made no attempt before us to establish that the inauguration of the contract system offended the Motor Vehicles Act or was prohibited under it. No objection to the system by the Authorities under the Motor Vehicles Act was proved in the case. The operators also seem to be happy because no operator appeared to complain, and the only dissatisfaction has been registered by the Union, which apparently lost the allegiance of some of its former members and even office bearers. In view of the findings of the Tribunal, which we see no reason to disapprove, it must be held that the drivers voluntarily resigned and entered into the agreements since they apparently considered them to be more favorable than the terms of their former employment. In this view of the matter, it is difficult to hold that the Tribunal was wrong in its conclusion that there was no exploitation of the drivers. It is also equally true that there is no bar in law to the introduction of the system. The Union, however, contends that on the analogy of some cases of this Court in which contract labor was put down as unfair labor practice because it involved exploitation of labor, we should declare this system also to be harmful to the interests of labor. Contract labor was declared in this Court to be an unfair labor practice because the intention was to introduce a middleman to avoid observance of laws and to deny to labor the advantages it had acquired by bargaining or as a result of awards. Such is hardly the case here. The two systems were there for the drivers to choose. It is reasonable to think that the drivers must have chosen a system that was considered by them to be more beneficial to themselves. There was no compulsion for the drivers to resign their jobs, and they did so voluntarily, obviously thinking that the new system was more profitable to them. We cannot lose sight of the fact that some of the office-bearers of the Union were among the first to resign. Many of the drivers resigned the jobs and entered into agreements even after the dispute was taken up by the Union. The present case is, therefore, not analogous to the case of contract labor where employment of labor through a contractor or middleman put the labor at a disadvantage in collective bargaining and thus robbed labor of an important weapon in its armory.

The matter of dispute no doubt referred in the second part to ex-drivers but it referred generally to the new system in the first. The Tribunal was wrong in thinking that the first part also referred to the ex-drivers (now operators). On the whole, however, it is clear that the Company has not done anything illegal. A person must be considered free to arrange his business so that he avoids a regulatory law and its penal consequences, which he has, without the arrangement, no proper means of obeying. This, of course, he can do only so long as he does not break that or any other law. The Company has declared before us that it is quite prepared, if it was not already doing so, to apply and observe the provisions of the Motor Transport Workers Act in respect of its employees proper where such provisions can be made applicable. In view of this declaration, we see no reason to interfere because Parliament has not chosen to say that transport trucks will be run only through paid employees and not independent operators. The appeal fails, but in the circumstances of the case, we make no order as to costs.

In our next part, in a nutshell, we will deal with questions that arose for consideration in the above case and the decision rendered.

Regards,

V. Sounder Rajan

Advocate - Labour & HR & Consumer Law Consultant - Chennai

Legal Consultant for Indian Staffing & Recruiting Industry

Labour Law Reforms: A Step for the Future to Generate Employment and Make India Globally Competitive

Recently, the Union Cabinet, on 31-07-2014, approved changes to three important labour laws:

Factories Act

Proposed changes in the Factories Act are:

• Employee’s safety at the workplace.
• Doubling the provisions of overtime from 50 hours a quarter to 100 hours in some cases, and from 75 hours to 125 hours in work of public interest.
• Increasing penalties for violations of the Act's provisions.
• Relaxing norms for workmen in some industries at night.
• Reducing from 90 to 240 days the number of days an employee needs to work to become eligible for benefits like leave with pay.

Apprentices Act

The scope of employment as apprentices, now restricted to shop floors, will be expanded to include the induction of non-engineers as apprentices. There is a possibility of opening the door to other sectors for apprentices.

The stipend paid to apprentices is also being increased. In the first year, apprentices will get 70% of what semi-skilled workers earn, 80% in the second year, and 90% in the third year. For employees in small-scale units, the government will pay 50% and the employer will pay the balance.

Labour Laws (Exemption from Furnishing Returns and Maintaining Registers by Certain Establishments) Act, 1988

The changes to the Act will enable employers, especially thousands of small-scale industries, to file just one return for compliance with the following labour laws:

It will also exempt small-scale industries with fewer than 40 workers from complying separately with each of the laws. A single-page return on compliance is what the amendment seeks to fulfill. The covered laws are as follows:

1. The Payment of Wages Act, 1936
2. The Weekly Holidays Act, 1942
3. The Minimum Wages Act, 1948
4. The Factories Act, 1948
5. The Plantations Labour Act, 1961
6. The Working Journalists and Other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955
7. The Contract Labour (Regulation and Abolition) Act, 1970
8. The Sales Promotion Employees (Conditions of Service) Act, 1976
9. The Equal Remuneration Act, 1976

Stakes for the Contract Staffing Industry on the Amendments

• Blue-collared staffing will get an impetus on overtime from doubling the provisions of overtime from 50 hours a quarter to 100 hours in some cases, and from 75 hours to 125 hours in work of public interest.
• Due to the inclusion of apprentices in the non-engineering domain, i.e., other sectors, the staffing industry will benefit.
• Implementation of the apprenticeship training scheme in organizations operating business/trade in more than four states will rest with the central government. Therefore, contract staffing companies operating business/trade in more than four states will benefit.
• The proposal to allow registers/records to be maintained in computer, floppy, diskette, or other electronic media and submitted through email can proceed.

With Regards,

V. Sounder Rajan
Advocate - Labour & HR & Consumer Law Consultant - Chennai
Legal Consultant for Indian Staffing & Recruiting Industry

Labour Law Environment Becoming Compliance-Friendly for Contract Staffing Business

The Labour Law environment is becoming compliance-friendly for the Contract Staffing Business, being part of the Indian Contract Staffing Industry. In the first stage of Labour law reforms, the Central Government has gone ahead with a five-point agenda.

The text of the Prime Minister’s announcement on 16th October 2014 has been officially released through PIB. The announcement centers on five points:

1. Dedicated Shram Suvidha Portal
This will allot a Labour Identification Number to nearly 6 lakh units and allow them to file online compliance for 16 out of 44 labour laws.

2. All-new Random Inspection Scheme
This scheme will utilize information technology to eliminate human discretion in the selection of units for inspection, and uploading of inspection reports within 72 hours of inspection is mandatory.

3. Universal Account Number (UAN) for EPF Subscribers
This will enable 4.17 crore employees to have their Provident Fund account portable, hassle-free, and universally accessible.

4. Apprentice Protsahan Yojana
This will mainly support manufacturing units and other establishments by reimbursing 50% of the stipend paid to apprentices during the first two years of their training.

5. Revamped Rashtriya Swasthya Bima Yojana
This will introduce a Smart Card for workers in the unorganized sector, seeded with details of two more social security schemes.

Now, let us analyze the takeaways for the Contract Staffing Business.

Shram Suvidha Portal

The most important takeaway is the dedicated Shram Suvidha Portal. Through this, a Labour Identification Number will be allotted, and online compliance for 16 out of 44 labour laws can be addressed. The salient features, as indicated in the PIB Press Note, are:

- Unique labour identification number (LIN) will be allotted to units to facilitate online registration.
- Filing of self-certified and simplified Single Online Return by the industry. Now units will only file a single consolidated return online instead of filing 16 separate returns.
- Mandatory uploading of inspection reports within 72 hours by the Labour inspectors.
- Timely redressal of grievances will be ensured with the help of the portal.

This will bring the necessary ease in compliance with provisions related to labour and will be a step forward in promoting the ease of doing Contract Staffing Business. The complete database available centrally at the unified portal will also add to the informed policy process. The portal will be operative in four central organizations, namely Chief Labour Commissioner, Directorate General of Mines Safety, Employee Provident Fund, and Employees’ State Insurance Corporation. In this endeavor of the Ministry, complete information of all 11 lakh units for these organizations has been collected, digitized, and de-duplicated, reducing the total number to 6-7 lakh. It is proposed to allot LIN to all these 6-7 lakh units.

Random Inspection Scheme

The second takeaway is the benefit of the random inspection scheme. Computers generated targets, not the present form of targeting the employers for the sake of harassment and other collateral purposes, will do the inspection of selected units. Further, under all new random inspection schemes, within 72 hours of inspection, the inspection report of the inspectors who carried out the inspection shall be uploaded in the specified portal. The highlights of the proposed scheme listed in the PIB Press Note are:

- Serious matters are to be covered under the mandatory inspection list.
- A computerized list of inspections will be generated randomly based on pre-determined objective criteria.
- Complaints-based inspections will also be determined centrally after examination based on data and evidence.
- There will be a provision of an Emergency List for inspection of serious cases in specific circumstances.

A transparent Inspection Scheme will provide a check on the arbitrariness in the compliance mechanism. Immediately on inauguration, SMS/email was sent to 1800 Labour inspectors of these enforcement agencies on behalf of the Prime Minister.

Portability of UAN (EPF)

The third takeaway for the Staffing Business is the portability of UAN, whereby all employees will be allotted one number that will be theirs for a lifetime. UAN will be linked with the bank account and other KYC details. For the Contract Staffing Business, the earlier system of depending upon the declaration of the employee for exempting them from contribution will be regulated. If an employee is exempted, he will not have a UAN number at all.

The balance two items of Apprentice Protsahan Yojana and Revamped Rashtriya Swasthya Bima Yojana are not relevant as Apprentice Protsahan Yojana will support manufacturing units. Similarly, Revamped Rashtriya Swasthya Bima Yojana is for a smart card for workers in the unorganized sectors, meaning those who are covered by EPF will not come under Revamped Rashtriya Swasthya Bima Yojana.

Follow-up Notification

When the follow-up notification is issued by the Ministry of Labour, the exact details and its working can be measured. For the present, the most important points being the first three will be subject to the amendment to the three major labour laws that were presented to Parliament during the monsoon session of Parliament. Once the amendment becomes law, the whole scheme will become clear for the Contract Staffing Business. We need to record that again this implementation is in the Central Sphere, i.e., Central CLRA domain, and for Staffing Business to benefit, similar amendments are to be replicated by the concerned State Government with reference to many compliances in State-based Labour Law enactments, more particularly the Shops and Establishments Act of each and every State.

With Regards,
V. Sounder Rajan
Advocate - Labour & HR & Consumer Law Consultant - Chennai
Legal Consultant for Indian Contract Staffing & Recruiting Industry

Contract Staffing - Legal Knowledge Base - EPF Act

Shri Shankar Aggarwal, Secretary, MOL&E, through the PIB, has released the following press note post the Second Round of Tripartite Consultations on March 31st, 2015, regarding the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (EPF & MP Act) Amendments among the following stakeholders:

Presence of: Shri Bandaru Dattatreya, the Minister of State, Labour & Employment (I/C) & Shri Shankar Aggarwal, Secretary, MOL&E

- Trade Unions: Shri A.K. Padmanabhan, CITU; Shri A.D. Nagpal, HMS; Shri B.L. Sachdeva, AITUC; Shri Ashok Singh, INTUC

- Industry: Shri Sharad Patil, EFI (Employers Federation of India); Shri S.S. Patil, AIMA (All India Manufacturers Association); Shri Bhardwaj, Laghu Udhyog Bharati; Shri Sushant Singh, CII (Confederation of Indian Industries)

- State Governments: Representatives of various state governments

The Second Round of Tripartite Consultations on the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (EPF & MP Act) Amendments was held on March 31st, 2015. Shri Bandaru Dattatreya, the Minister of State, Labour & Employment (I/C), chaired the second round of tripartite consultations on EPF & MP Act Amendments. The consultations gain greater importance in view of the new amendments proposed in the backdrop of the Union budget proposals impacting the functioning of EPFO.

Inaugurating the consultations, Shri Dattatreya briefly discussed the major changes being considered in the proposals. They include reducing the minimum number of employees required for coverage under the Act from the existing 20 to 10, eliminating the Schedule Head for coverage and introducing a negative list instead, special provisions for encouraging the functioning of small-scale units, provisions for setting up multiple Appellate Authorities under the Act, removing ambiguities in the implementation of the Act, ensuring greater clarity in the definitions under the Act, especially regarding wages that qualify for deduction for the purposes of the Act, introducing greater transparency and accountability in the enforcement of the Act by having an objective inspection scheme, introducing a scheme for unorganized workers, and providing a choice to the worker by giving an option to join NPS/EPFO, which aligns with the proposals mentioned in the Union Budget.

Taking part in the discussions, the representatives of the employers’ associations and federations generally welcomed the various proposals contained in the amendments under consideration. They generally voiced the opinion that the introduction of NPS would mean greater choice for the worker. However, there were also views that NPS cannot match the benefits offered by EPFO and therefore, are not comparable. It was also felt that the amendments would help in sharpening the competitiveness of Indian Industry and would enable India to become a manufacturing hub. However, there was a need to further encourage the concessions granted to the small-scale industries. The increase of coverage also received wide acceptance from both employers’ and employees’ sides.

Opposing certain amendments proposed, representatives of the Trade Unions expressed reservations, especially regarding the move to introduce NPS as a substitute for EPFO. They also expressed reservations regarding the inspection scheme, which they argued brought about centralization in the decision-making process, contrary to the prevailing wisdom that favors decentralization.

Summing up the discussions, Shri Shankar Aggarwal, Secretary, MOL&E, assured that the concerns of all stakeholders will be addressed when finalizing the legislative amendments. Further, the objective behind bringing in the changes is to further strengthen the delivery of social security benefits.

In his concluding remarks, Shri Dattatreya stressed the need to focus on the unorganized sector of the workforce, which constitutes 93% of the total workforce. He said that the need of the hour is to include more segments of the workforce, like Anganwadi workers, into the ambit of social security legislations. He also informed that the Ministry is contemplating the issue of smart cards to the labor workforce so that social security benefits reach each intended beneficiary. He also assured that the Act would be amended, taking into account the sensitivities of all concerned.

Shri Sharad Patil, EFI (Employers Federation of India); Shri S.S. Patil, AIMA (All India Manufacturers Association); Shri Bhardwaj, Laghu Udhyog Bharati; Shri Sushant Singh, CII (Confederation of Indian Industries); Shri A.K. Padmanabhan, CITU; Shri A.D. Nagpal, HMS; Shri B.L. Sachdeva, AITUC; Shri Ashok Singh, INTUC were some of the notable representatives of employers’ associations and employees’ associations (trade unions) who took part in the deliberations, in addition to the representatives of various state governments.

Our Views

The most important point on the agenda was the move to introduce NPS as a substitute for EPFO, which means that there has to be an exemption provision introduced in the EPF Act to exempt those persons opting to switch over to NPS. The government has a duty to convince the Trade Unions and seek their consent so that the exemption provision, when introduced, has a smooth sailing in both Houses of Parliament.

Regards,
V. Sounder Rajan
Advocate

Dear Mr. Rajan,

Your thread is very helpful for us. I am working in an engineering staffing company as AM-HR. I need your guidance.

Dear Sir,

We have engaged 4 vehicles through a travel agency. As per the agreement, the agency provides vehicles with drivers for the transportation of our employees. I want to know what our legal liabilities are for vehicle drivers under labor law. Are there any liabilities to pay minimum wages and PF of principal employers?

Regards,
Sandeep Satsangi
9992112044

Contract Labour (Regulation and Abolition) Act, 1970, is sought to be amended. Attaching the proposed amendments.

Attaching the FTC notification for viewing by members.

---
Thank you for sharing the FTC notification with the members.

Fixed Term Employment in the Blue-Collar Sphere

In the blue-collar sphere, as per the definition of a Fixed Term Employee in the amended Industrial Employment (Standing Orders) Central Rules, 1946, by notification sub-para (h), a "fixed term employment workman" is a workman who has been engaged on the basis of a written contract of employment for a fixed period:

Provided that:
(a) His hours of work, wages, allowances, and other benefits shall not be less than that of a permanent workman.
(b) He shall be eligible for all statutory benefits available to a permanent workman proportionately according to the period of service rendered by him, even if his period of employment does not extend to the qualifying period of employment required in the statute.

Points to be Noted

1. There should be a written contract, either an appointment letter with the acceptance of the Fixed Term Employee or a Fixed Term Employment Agreement or Contract signed by both the employer and the Fixed Term Employee.

2. There should be a fixed period, i.e., a starting date and an end date in the written contract, either an appointment letter with the acceptance of the Fixed Term Employee or a Fixed Term Employment Agreement or Contract signed by both the employer and the Fixed Term Employee.

3. Hours of work, wages, allowances, and other benefits shall not be less than that of a permanent workman employed for the same job.

4. A Fixed Term Employee shall be eligible for all statutory benefits available to a permanent workman proportionately according to the period of service rendered by him, even if his period of employment does not extend to the qualifying period of employment required in the statute.

Regards, V. Sounder Rajan HR & Employment Law Attorney Specializing in Recruiting and Contract Staffing Industry M: [Phone Number Removed For Privacy-Reasons]

Changes in EPF Appellate Tribunal Jurisdiction

The Government of India abolished the EPF Appellate Tribunal in Delhi and Bengaluru via a notification dated 26-05-2017. Previously, appeals against orders under Section 7A of the EPF Act were filed before the EPF Appellate Tribunal. Now, all cases that need to be filed before the EPF Appellate Tribunal in Delhi and Bengaluru will be heard by the Central Government Industrial cum Labour Courts (CGIT) located at 22 places in India. The directions of the Ministry are attached.

Regards, V. Sounder Rajan HR & Employment Law Attorney Specializing in Recruiting and Contract Staffing Industry M: [Phone Number Removed For Privacy-Reasons]

Important Points in Ghatge & Patil (Transports) Case

i) Since the drivers had resigned their jobs, they could not be said to be employed in the Motor Transport undertaking. The word 'employed' in the definition of the Motor Transport Act Worker is not used in the sense of using the services of a person but rather in the sense of keeping a person in one's service. Persons who are independent and hire a vehicle for their own operation, paying a fixed hire per mile from their earnings, cannot be said to be persons employed in the Motor Transport Undertaking in the sense of persons kept in service. The operators were therefore not Motor Transport Workers within the definition.

(ii) There was no bar in law to the introduction of the contract system. A person must be considered free to arrange his business to avoid a regulatory law and its penal consequences, which he has without the arrangement, no proper means of obeying. This, of course, he can do only so long as he does not break that or any other law.

(iii) Those who resigned did so voluntarily and they got substantial benefits under the new system.

(iv) The Tribunal was right in its conclusion that there was no exploitation of the ex-employees. There was thus no unfair labor practice. The present case was not analogous to the case of contract labor when employment of labor through a contractor or middleman put the labor at a disadvantage in collective bargaining and thus robbed labor of an important weapon in its arsenal.

..... to be continued

Regards, V.Sounder Rajan HR & Employment Law Attorney Specializing in Recruiting and Contract Staffing Industry M: [Phone Number Removed For Privacy-Reasons]

You need to check with CGIT-Hyderabad. The jurisdiction of CGIT is as follows:

Jurisdiction of Central Government Industrial Tribunal-cum-Labour Courts (CGIT-cum-LCs)

1. Mumbai-I - Maharashtra (partly), Goa (partly), U.T of Daman and Diu (partly)
2. Mumbai-II - Maharashtra (partly), Goa (partly), U.T of Daman and Diu (partly)
3. Nagpur - Maharashtra (partly), Goa (partly), U.T of Daman and Diu (partly)
4. Dhanbad-I - Bihar (partly), Jharkhand (partly)
5. Dhanbad-II - Bihar (partly), Jharkhand (partly)
6. Jabalpur - Madhya Pradesh, Chhattisgarh
7. Kanpur - Uttar Pradesh (partly), Uttarakhand
8. New Delhi-I - Union Territory of Delhi only
9. New Delhi-II - Haryana (partly), Uttar Pradesh (partly)
10. Asansol - West Bengal (partly), Bihar (partly)
11. Kolkata - West Bengal
12. Chandigarh-I - U.T. of Chandigarh, Punjab, HP, J and K, Haryana (partly) - Odd No
13. Chandigarh-II - U.T. of Chandigarh, Punjab, HP, J and K, Haryana (partly) - Even No
14. Jaipur - Rajasthan
15. Lucknow - Uttar Pradesh (partly), Uttarakhand
16. Bangalore - Karnataka
17. Ernakulam - Kerala, U.T. of Lakshadweep
18. Chennai - Tamil Nadu, U.T. of Puducherry
19. Hyderabad - Andhra Pradesh, Telangana
20. Bhubaneswar - Odisha
21. Guwahati - North Eastern States
22. Ahmedabad - Gujarat

As the jurisdiction is newly created, local practices play a major role.

Fixed Term Employment and Temp Staffing

Fixed Term Employment is also part of Temp Staffing. The Ministry of Labour and Employment, through a notification dated 16 March 2018, had notified the Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018. This amendment introduced a significant labor reform, allowing fixed-term employment for all sectors.

Definition of Fixed Term Employee

A Fixed Term Employee is defined as 'a workman who has been engaged on the basis of a written contract of employment for a fixed period.' It is provided that (a) his hours of work, wages, allowances, and other benefits shall not be less than those of a permanent workman; and (b) he shall be eligible for all statutory benefits available to a permanent workman proportionately according to the period of service rendered by him, even if his period of employment does not extend to the qualifying period of employment required in the statute.

Focus on Government Legislation in the Contract Staffing Industry (CSI)

Contract staffing can be broadly divided into "Blue Collared" and "White Collared." The focus of the government on labor law legislation primarily rests on the main sector, i.e., industry (manufacturing). In relation to contract staffing legislation by the government, the emphasis will be on blue collar. However, it is not realistic to expect the same level of attention to the needs of the contract staffing industry in the white collar sector. CSI must comply with and operate within existing laws.

Regards, V. Sounder Rajan HR & Employment Law Attorney Specializing in Recruiting and the Contract Staffing Industry M: [Phone Number Removed For Privacy-Reasons]

Distribution of the Legislative Power on Labour

Union List (Central Government)

Entry No. 55
Regulation of labour and safety in mines and oil fields

Entry No. 61
Industrial disputes concerning Union employees

Entry No. 65
Union agencies and institutions for “vocational training”

Concurrent List (Central as well as State Government)

Entry No. 22
Trade unions, industrial and labour disputes

Entry No. 23
Social security and insurance, employment and unemployment

Entry No. 24
Welfare of labour including conditions of work, provident funds, employers’ invalidity, old-age pension, and maternity benefits

V. Sounder Rajan
HR & Employment Law Attorney
Specializing in Recruiting and Contract Staffing Industry
M: [Phone Number Removed For Privacy-Reasons]

National Company Law Tribunal - Mumbai Bench (NCLT)

In a landmark judgment dated September 12, 2018, in the matter of Precision Fasteners Ltd, the National Company Law Tribunal - Mumbai Bench (NCLT) held that provident fund dues to a company's workmen are excluded from the liquidation assets. This enables the workmen/employees to realize their savings as well as the employer's contributions as part of their fundamental right to life, while the right of the creditors is merely a property right. Therefore, the dues in respect of provident/pension/gratuity shall not be considered as liquidation assets under the provisions of the Insolvency and Bankruptcy Code, 2016.

V. Sounder Rajan
HR & Employment Law Attorney
Specializing in Recruiting and Contract Staffing Industry
M: [Phone Number Removed For Privacy-Reasons]

Web Portal for Registration of Internal Complaints Committee

The Women Development and Child Welfare Department, Government of Telangana, has recently launched a web portal for the Registration of Internal Complaints Committee (ICC) under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013. As per Section 4 of the act, it is mandatory for all workplaces having 10 or more employees to constitute a committee under the act for each of the offices separately and also to frame a policy under the act.

As per the Telangana State Government notification, the details of the ICCs shall be registered by the company through the web portal: http://tshebox.tgwdxw.in. The last date for completing the online registration is 15th July 2019. Failure to complete the registration will attract a penalty of Rs. 50,000/-.

In view of the above notification, all establishments will be required to furnish the details under the option of "Register As ICC," and the same should be done for each office separately. This is limited to the offices in the state of Telangana, requiring the completion of registration on or before 15th July 2019.

T-She Box: Sexual Harassment Electronic Box

Order for Registration of Internal Complaints Committee

The Women & Child Development Department, Mumbai City Collectorate, Government of Maharashtra, has issued an order to register the Internal Complaints Committee (ICC) under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013. As per Section 4 of the Act, it is mandatory for all workplaces with 10 or more employees to constitute a committee under the Act for each office separately and also to frame a policy under the Act.

As per the Mumbai City Collectorate order (attached), the details of the ICCs shall be submitted by the company as per the enclosed format. The last date for submission is 20th July 2019. Failure to submit will attract a penalty of Rs. 50,000/-.

In view of the above order, establishments will be required to furnish the details. This requirement is limited to offices in the district of Mumbai City, requiring such entities to submit the details on or before 20th July 2019.

As per the District Women & Child Development Officer's order, the details of the ICCs shall be submitted by the company as per the enclosed format to his office at Bldg. 117, BDD Chawl, 1st Floor, Dr. Ambedkar Colony Compound, Dr. G. M. Bhosale Marg, Worli, Mumbai 400 018. The last date for submission is 20th July 2019.

Managing Volume Fluctuations in a BPO

We are a Noida-based BPO with a workforce of 300 employees. Our data entry process experiences fluctuating volumes throughout the week, with a twofold increase during 5-6 hours on Mondays and Fridays. Employing full-time staff to manage this for only 7-8 days a month leads to underutilization and increased costs in a low-margin process. To address this, we plan to manage volume fluctuations by deploying 8-10 part-time resources on these days. We intend to hire these part-time resources from a third-party vendor, and they will work from 2:00 a.m. to 9:00 a.m. at our office premises. We will provide them with midnight meals available in our office cafeteria.

Questions on Employment and Compliance

1. Will these part-time resources be considered employees, or can they be treated as service providers since they will work from office premises only four days a month?
2. Will PF, Bonus, ESIC, etc., be applicable?
3. Are we required by law to provide transport, even if the part-time employees are male?
4. Are there any other compliance requirements we need to follow?

You are welcome to provide any other suggestions to manage the situation.

Our Suggestion

The definition of an employee under the UP Shops and Establishments Act is broad. An "employee" means a person wholly or mainly employed on wages by an employer in connection with any trade, business, or manufacture carried on in a shop or commercial establishment. This includes caretakers, gardeners, watch and ward staff, clerical or other staff of a factory or industrial establishment not covered by the Factories Act, 1948, and any apprentice or contract or piece-rate worker. Therefore, welfare benefits like ESIC and EPF should be provided either by you or the service provider. If provided by you, you can deduct it from the service provider's bills.

Regards, V. Sounder Rajan Advocate - Labour & HR & Consumer Law Consultant - Chennai Legal Consultant for Indian Staffing & Recruiting Industry

Recent trend in accepting permanency claim for contract staff

In the process of enriching legal knowledge for HR professionals, it is necessary to highlight that recently, on 7/2/2020, Mr. Justice Chandrachud of the Hon’ble Supreme Court of India, in the matter of ONGC vs. Krishan Gopal, has reaffirmed the power of Labour Courts alone to grant the relief of permanency. The key points are as follows:

(i) The statutory power of the Labour Court or Industrial Court to grant relief to workmen, including the status of permanency, continues to exist in circumstances where the employer has indulged in an unfair labour practice by not filling up permanent posts even though such posts are available and by continuing to employ workmen as temporary or daily wage employees despite their performing the same work as regular workmen on lower wages.

(ii) Where an employer has regularised similarly situated workmen either in a scheme or otherwise, it would be open to workmen who have been deprived of the same benefit at par with the workmen who have been regularised to make a complaint before the Labour or Industrial Court, since the deprivation of the benefit would amount to a violation of Article 14.

(iii) In order to constitute an unfair labour practice under Section 2(ra) read with Item 10 of the Vth Schedule of the ID Act, the employer should be engaging workmen as badlis, temporaries, or casuals, and continuing them for years, with the object of depriving them of the benefits payable to permanent workmen.

With regards,
V. Sounder Rajan
Advocate-Chennai

Very Important Internal Circular Regarding Section 7A of Employees’ Provident Funds & Miscellaneous Provisions Act, 1952

Section 7A of the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952 provides for the quantification of the amount due from any employer under any provision of this Act and the schemes framed thereunder. The amount so quantified is recovered in accordance with the procedure prescribed under various provisions of the Act.

EPF issued an internal circular on 14th February 2020 and notified revised procedures/guidelines for the initiation of inquiries under Section 7A of the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952. This circular is attached.

V. Sounder Rajan
Advocate - Labour & HR & Consumer Law Consultant - Chennai
Legal Consultant for Indian Staffing & Recruiting Industry

Deprived Workers Of Their Dues: Karnataka High Court Directs Mysore Electrical To Reinstate Employees Unilaterally Shifted To Contractual Engagement

The finding of the labor court regarding the alleged transaction being a sham and camouflage has already been upheld in response to point No. 1 above. Once this court determines that the agreement is a sham and camouflage, the workers cannot be denied their rightful benefits. In the present case, there is no agreement at all; it is merely a contention by the employer. The said contention is also a sham and is meant to conceal the employer's liability to pay the due amounts to the workers.

The Hon'ble Apex Court in SAIL's case has held that if a contract is found to be not genuine but mere camouflage, the so-called laborers will have to be treated as employees of the principal employer. The principal employer shall be directed to regularize the services of the contract labor in the establishment concerned, subject to there being a vacancy. If there is no vacancy and the principal employer intends to employ regular workers, preference should be given to the former contract laborers, if found suitable. If necessary, the conditions such as maximum age and academic qualifications, other than technical qualifications, may be relaxed appropriately, considering the age of the worker at the time of their initial employment by the contractor.

- vsrlaw

Supreme Court Ruling on Maternity Benefits for Contractual Employees

Information on the recent ruling of the Supreme Court in the matter of Neetu Singh vs. Union of India and others, extending maternity benefits to contractual employees beyond the contractual period. This judgment has significant ramifications in the contractual staffing industry, particularly in IT staffing. The gist of the judgment is that the Supreme Court of India ruled that maternity benefits must be granted even if the period of benefit extends beyond the term of contractual employment. The court held that maternity benefits can extend beyond the term of contractual employment and are not co-terminus with the employment period. The court also observed that the Maternity Benefits Act, 1961, overrides other laws and agreements that may restrict the entitlement to maternity benefits. The court directed the employer to pay maternity benefits as would have been available in terms of Sections 5 and 8 of the Maternity Benefits Act, 1961, with payment to be made within three months. The court was hearing an appeal against a Delhi High Court ruling that had restricted maternity benefits to a mere 11-day period, citing the expiration of a contractual agreement. You can read more about the judgment from the link.

Accordingly, all contract staffing companies need to prepare a communication mail to their clients, citing the judgment as overriding the contractual terms between the client and the contract staffing company.

Regards,

V. Sounder Rajan
Advocate
Chennai

Key Ruling on Contract Workers Regularisation - Madras High Court's Landmark Ruling on 18-3-2025

The Madras High Court's recent ruling is not just a significant development but a crucial one that may impact contract workers in undertakings. The court has held that contract laborers must be granted permanent status if they have completed 480 days of service within two years. This judgment, delivered by Justice D. Bharatha Chakravarthy, dismisses appeals by the Tamil Nadu Power Distribution Corporation Limited (TNPDCL), formerly TANGEDCO. The ruling, which will have a chain-reaction effect in the Contract Staffing Industry, is a key piece of information for all professionals in the field.

Key Takeaways from the Verdict:

- Workers' Status: Contract laborers completing 480 days within two years are entitled to permanent employee status under the Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981.
- Dismissal of Appeals: The Court dismissed TNPDCL’s appeal against the Assistant Commissioner of Labour's (Enforcement) decision favoring the workers, given on 28 April 2023.
- Validity of Evidence: Workers provided valid service documentation, while the Management failed to counter these claims with evidence.
- Employer-Employee Relationship: The ruling rejected the argument that contracting out work negates employer obligations, affirming the workers’ rights. Contracting out means bringing in a Contractor as an intermediary to avoid permanency claims from the workers.

Implications:

- Urgent Implications: Workers must be absorbed within 12 weeks of the ruling, maintaining continuity of service without back wages. This timeline underscores the need for immediate action.
- Deceased Workers and Retirement: Legal heirs of deceased workers will receive terminal benefits, and retirement benefits will be granted to eligible workers.

Context of the Case:

The management’s attempt to disqualify workers based on contractor transfer or lack of inclusion under the Industrial Disputes Act of 1947 failed in court. Justice Chakravarthy’s judgment reinforces that transferring workers to contractors cannot undermine their rights. The ruling cites a Supreme Court precedent affirming worker protections under the 1981 Act.

The Specialty of the Act:

Tamil Nadu, an advanced State for improving employee rights, enacted the Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981, a special Act. The other States have no such enactment and are regulated by the I.D. Act and the SAIL Judgment of the Supreme Court. Another State has a similar Act, replicating the Tamil Nadu Act in Assam, namely the Assam Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1985.

Legal Eagle Takeaway:

When transitioning employees from contract roles to contractor roles, Contract Staffing Companies must seek proper legal advice. This proactive step can help avoid claims and mitigate the risks of permanent placement.

Best regards,
V. Sounder Rajan
Employment Law Counsel for the Recruiting and Contract Staffing Industry (IT and Non-IT)
Mob: [Phone Number Removed For Privacy-Reasons]

March 25, 2025

Subject: Misappropriation & Termination in Temp/FTE Roles

Handling misappropriation in temporary or FTE roles requires a structured approach to balance due process with employer protection. Here’s a framework for compliant severance & reduced legal risks:

1. Investigation:
* Conduct an internal audit for suspected misappropriation and gather evidence.
* Suspend system access.

2. Disciplinary Action:
* Issue suspension, then a show cause notice.
* Conduct an impartial inquiry, ideally by an external expert.
* If misappropriation is proven: proceed with termination, recovery via deductions/legal action, and file a police report for serious fraud.

3. Severance:
* Temporary employees usually lack severance unless contracted.
* Misconduct dismissal negates severance.
* Provide a termination letter citing findings/legal justification.
* Use ADR (arbitration/mediation) for disputes.

4. Legal Compliance:
* Comply with labor laws (Industrial Disputes Act, State Shops & Establishments Act).
* Assess contract terms to avoid wrongful termination.
* Follow contractual terms for FTE contracts.
* Implement a unified disciplinary process for client-deputed employees.

5. Client Consent (Crucial):
* Audit Approval: Client approves methodology & auditor, reviews findings pre-action.
* Suspension/Notice: Client approves suspension, especially if the employee manages client funds. The show cause notice aligns with client concerns.
* Termination: Client consent is critical to avoid legal issues due to their obligations.
* Confidentiality: Protect client data; NDA reaffirmation is required post-termination. Consent is needed for disclosure.
* Fund Recovery: Client defines the recovery process (deductions, legal action, settlement).

Risk Mitigation:
* NDA: All employees handling funds must sign an NDA.
* Client Consultation: Inform the client and obtain written approval.
* Legal Review: Validate the process legally.
* External Auditor: Consult an external auditor with the client.

Bottom Line:
Client's written consent is vital at each stage to avoid disputes, ensure compliance, and protect the staffing firm. This is key in audits, findings review, aligning notices, and defining recovery.

Key Takeaways:
✔ Clear misconduct clauses in contracts.
✔ Impartial inquiries.
✔ Secure recovery options contractually.
✔ Use ADR.

Success hinges on client consent to avoid disputes, ensure compliance, and protect liability. Share for streamlining misappropriation/termination processes.

Best regards,
V. Sounder Rajan
Employment Law Counsel - [Phone Number Removed For Privacy-Reasons]

Breaking News for the Contract Staffing Industry

A landmark Supreme Court ruling on the employment status of contract workers, dated March 17, 2025, has significant implications for the industry.

A recent ruling by the Supreme Court of India on March 17, 2025, by the Bench of Justice Ahsanuddin Amanullah and Justice Prashant Kumar in CBSE vs Rajeshkumar Mishra & others has provided crucial clarification regarding the status of contract workers. The court ruled that contract workers cannot assert direct employee status with the Principal Employer, in this case, the CBSE, without substantial documentary evidence.

Key Highlights

Documentary Evidence Required: The ruling emphasizes that an employment relationship cannot be established solely based on supervisory control. It mandates the need for proper documentation, such as appointment letters or payment records, for contract workers to claim the benefits of permanent employment.

Case Background: The decision arose from a case involving contract workers hired by a contractor seeking direct employment recognition from the CBSE. The court upheld that financial transactions and employment relationships were primarily managed through the contractor.

Impact on Employers: This verdict significantly protects Principal Employers by reinforcing their stance against misclassification. It underscores the importance of clear and comprehensive contractual agreements, thereby reducing the risk of unjust claims and providing a shield for employers.

Encouragement for Compliance: Companies are strongly urged to ensure compliance with labor laws and maintain accurate employment relationship records, fostering better governance in staffing agreements.

Reduction in Litigation: By establishing that claims of direct employment must be substantiated with evidence, this ruling aims to decrease frivolous lawsuits and disputes in contractual jobs, providing relief for all parties involved.

Awareness for Workers: Contract workers are reminded of the importance of securing documentation to support any claims for permanent employment status.

Conclusion

The Supreme Court's judgment is a critical development for the Contract Staffing Industry, offering clarity and crucial protection for both workers and employers. HR professionals and legal teams must adapt their practices to align with this ruling.

Regards, V. Sounder Rajan Retainer Counsel for the Recruiting and Contract Staffing Industry (IT and Non-IT) - Mob-[Phone Number Removed For Privacy-Reasons]

Important Update: The Maharashtra Government Passes Maharashtra Private Placement Agency (Regulation) Bill 2025

In a substantial development impacting the recruiting placements and related contract staffing industries, the Maharashtra government passed the Maharashtra Private Placement Agency (Regulation) Bill 2025 on March 26, 2025. This proactive legislation is designed to regulate private placement agencies, combat employment-related fraud, protect job seekers, and enhance employment opportunities within the territories of Maharashtra State.

Key Highlights of the Bill:

Government Registration: It is now imperative for all placement agencies to register with the government. Non-compliance will result in penalties, including imprisonment for operating without registration.

State Controlling and Monitoring Authority: The bill establishes an authority to supervise the implementation of regulations, ensuring adherence and providing an additional layer of security for job seekers.

Accountability Measures: Agencies proven guilty of fraud, misinformation, or exploitation could face registration suspension or cancellation, thus ensuring accountability within the industry.

Support for Job Seekers: The Skill Development Department will collaborate with registered agencies to conduct job fairs, provide career guidance, and offer skill development initiatives. This collaborative approach promises better employment opportunities and a brighter future for job seekers.

Implications for Job Seekers:

Fraud Protection: The bill strives to curb deceptive recruitment practices, thus safeguarding job seekers from misinformation.

Enhanced Credibility: Mandatory registration will establish a structured regulatory framework, instilling trust among job seekers.

Increased Accountability: Agencies failing to fulfill their obligations will face strict consequences, reinforcing industry standards.

Employment Opportunities: Registered agencies will actively promote job opportunities through collaboration with the Skill Development Department, benefiting all job seekers.

In conclusion, the Maharashtra Private Placement Agency (Regulation) Bill 2025 is a significant step towards creating a safer and more trustworthy environment for job seekers in Maharashtra. It not only shields individuals from fraudulent practices but also ensures compliance within the staffing industry, laying the groundwork for a more prosperous future.

Next Steps: The bill must receive assent from the Governor of Maharashtra before it can take effect. It will then be notified in the Gazette. Subsequently, a portal will be launched to facilitate registration.

Thank you for your attention and for your continued commitment to our industry. Let’s collaborate towards a more transparent and reliable recruitment landscape where job seekers' rights are safeguarded, and opportunities are plentiful!

Best regards,
V.Sounder Rajan
Employment Law Counsel for the Recruiting and Contract Staffing Industry (IT and Non-IT)
[Phone Number Removed For Privacy-Reasons]

Breaking News: The Madras High Court's Landmark Ruling on Sexual Harassment Under the POSH Act

The Internal Complaints Committee (ICC), a vital body under the POSH Act, plays a significant role in receiving and addressing complaints of sexual harassment at the workplace. This recent ruling has substantial implications for the staffing industry.

On March 26, 2025, the Madras High Court emphasized the importance of the POSH Act in a key judgment. The court declared that any unwelcome workplace behavior, regardless of the intent, is now legally considered sexual harassment.

Key Highlights

The Court upheld the Internal Complaints Committee (ICC) findings in HCL Technologies Ltd. vs Parthasarathi, stressing that the perception of the victim determines harassment. The ICC is not required to provide CCTV footage or allow cross-examinations during investigations.

Implications for the Industry

This ruling, which highlights the urgent need for workplace sensitivity and comprehensive POSH Act training, holds practical implications for employers. It calls for the prioritization of fair investigations and regular awareness sessions to ensure readiness and compliance.

Legal Insight

The focus of investigations should be on the impact of the conduct on the victim, not the intent of the perpetrator. Proactive steps, such as training ICC members and employees, are vital in creating a safer work environment.

LinkedIn provides a platform for uniting and championing workplace fairness and sensitivity! V. Sounder Rajan, Employment Law Counsel (IT & Non-IT Staffing)  [Phone Number Removed For Privacy-Reasons]