Is an NGO Considered an Industry? Seeking Court Cases on Unfair Termination

Hi,

One of my friends is associated with an NGO registered with the Charity Commissioner and mainly involved in community development activities. The activities include running a pre-primary school, village health social activities, a technical school on house wiring and two-wheeler repair courses, a counseling cell for affected persons, and slum development work. An employee working as a driver in the project was terminated as per a contractual clause. He has approached the Government Labor Department alleging unfair termination. His contention is that he is a workman under the provisions of the ID Act. The Government Labor Officer appears inclined to accept this contention.

I would like to know if there are any decided cases by the courts on the subject.

Cyril

An organization registered as charitable under any trust or as a society will fall under the purview of the ID Act if there are activities that call for the employment of workmen. If technical schools are to be exempt from the ID Act through registration as charitable or non-profit establishments, then all employees of these schools will also be exempt from provisions such as minimum wages and EPF because most schools, if not all, are non-profit organizations on paper. Registration as a charitable organization or NGO should not serve as a defense for exploiting employees and infringing upon their rights under the EPF Act, ESI Act, Minimum Wages Act, Gratuity Act, or ID Act.

Regards,
Madhu.T.K

Dear Cyril,

You have to ensure whether your institution comes under the definition of industry. The existing definition under Section 2(j) is not valid since the Supreme Court has defined it in the case Bangalore Water Supply and Sewerage Board v. A. Rajappa. The subsequent amendment brought into the Act in 1982 is not notified.

As such, "any systematic activity" "carried on with the cooperation of employer and employees" "for satisfying human needs and wants" (with exception of spiritual needs) is coming under the definition of Industry. Hence, your organization comes under the definition of industry.

Regarding the termination of employment, you may please go through Section 2(OO)(bb) which reads "termination of the service of the workman as a result of the non-renewal of the contract of employment between the employer and the workman on its expiry or of such contract being terminated under a stipulation in that behalf contained therein" does not amount to retrenchment.

If the employment of the Driver is terminated as a result of non-renewal of the employment contract or any stipulation under the contract, he cannot have any grievance. You may present this view before the Conciliation Officer. You must attend conciliation otherwise the matter may be referred to adjudication.

Dear Cycil,

One more clarification. A driver is considered a workman under the ID Act of 1947. His contention is correct. However, he cannot have a legal grievance for the non-renewal of an employment contract. To prevent such instances, Section 2 (OO), Subsection (bb), was inserted in the Act in 1984, effective from 18th August 1984.

I hope this clarifies the matter for you.

Best regards, [Your Name]

Many thanks for your views. I am now trying to find out if there are any decided cases by the Courts, particularly about the applicability of the Act on NGOs.

I am grateful for your views.

Cyril

Hello Mr. Madhu & Kutty,

Can housing societies be deemed as employers if they hire maintenance/security staff directly? If so, what are the liabilities on the society if less than 20 laborers are employed?

Awaiting your response.

Thanks & regards,
Mims

Housing Society will fall under the State's Shops and Establishments Act. As such, all provisions therein will be applicable to the society. If the number of employees does not exceed twenty, then EPF and ESI will not be applicable.

Regards,
Madhu.T.K

Dear Mims,

I had requested clarification on the same query dated October 16, 2009. I have not received any response from you. Now, since you have directed this question to Mr. Madhu and me, and Mr. Madhu has already provided the correct reply, I would like to add one more point. In order to avail certain concessions in payment of stamp duty, etc. (as mentioned in the Chapter "State Aid to Cooperatives" in the Cooperative Societies Act applicable to your state), your society must be registered under the State Cooperative Societies Act, which grants it a legal status of a body corporate. There exist various types of housing cooperatives.

Given that your society employs individuals to carry out maintenance work, you are required to register under the State Shops and Commercial Establishment Act. This registration is essential for regulating the service conditions, working hours, leaves, etc., of the employees. Registration must be completed within 30 days of the establishment's commencement of operations, with renewal and payment of an annual fee due in December, along with fees per employee. The fee must be paid in advance for either one year or three years. Without knowledge of your specific location, I cannot determine the exact period for which the advance fee can be paid.

To the best of my knowledge, Cooperative Societies in Kerala are not exempt from registration and fee payments. They may, however, be exempt from maintaining certain registers as mandated by the Shops Act, given that they already maintain records in accordance with the provisions of the Cooperative Societies Act. Mr. Madhu might be able to provide further clarity on the situation in Kerala.

Thank you.

Hi,

I want to know if charitable organizations are eligible for PF. If yes, then what are its implications?

With Regards,
Kirti Arora

With reference to the contention that a housing society would come under the Shops and Establishment Act, could you please support the statement with case law?

The Shops and Establishments Act has been held to be applicable to educational institutions at the very most, but I have not come across any material to suggest that a housing society would also be covered by it.

Thanks,
ks