Small Tech Company Struggles with Factory Act Compliance and Consultant Retaliation – Seeking Guidance and Solutions

We are a small software and hardware technology company with 15 employees in 2010, increasing to 21 employees now. Last year, we were penalized under the Factory Act for not obtaining a license. Consequently, we hired a consultant to assist us in obtaining the necessary license. However, the consultant failed to file the annual return as required by the Factory Act and did not take any steps towards compliance with the Employees' State Insurance Corporation (ESIC) despite clear instructions to do so since 2010.

Our administrative personnel made efforts to complete the Provident Fund (PF) procedures for four employees (earning below ₹15,000). However, progress on ESIC compliance has been hindered as the consultant did not provide the required login credentials. Subsequently, we terminated our contract with him, which led to threats of retaliation from him citing his "contacts" within regulatory authorities.

Additionally, we do not maintain records of employee time or attendance due to our flexible work hours policy. Leave records are also not kept in the format mandated by the Factory Act, which we understand to be complex. The consultant mentioned the necessity of maintaining 15-16 registers under the Factory Act, none of which we currently possess.

We are committed to compliance and are willing to fulfill all legal requirements. We seek guidance on the necessary steps to rectify the situation.

Furthermore, what are the potential penalties for failing to file the Factory Act return for one year?

Thank you in advance for your assistance.

Sincerely,
A concerned employer

Steps to Ensure Compliance with the Factory Act

1) Annual and Half-Yearly Returns

Under Rule 107 of the Gujarat Factory Rules, the manager of every factory must furnish the following returns to the Inspector or other officer appointed by the State Government:

- Annual Return: On or before the 1st of February each year, submit an annual return in duplicate in Form No. 24, covering the following matters:
- Average number of workers employed daily and normal hours worked per week.
- Leave with wages.
- Number of discharged or dismissed workers.
- Wages in lieu of leave.
- Compensatory holidays.
- Canteens in factories with more than 250 workers.
- Crèches in factories with more than 50 women workers.
- Shelters, restrooms, and lunchrooms in factories with more than 150 workers.

- Half-Yearly Return: On or before the 15th of July and the 15th of January each year, submit a half-yearly return in duplicate in Form No. 25.

Penalties: Under Section 92 of the Act, penalties for any contravention of the Act or rules can include a fine of Rs 100,000 or imprisonment for up to 2 years, or both. See the website below for more details on the Factory Act.

2) Suggestions for Compliance

- File all pending returns.
- Ensure all safety, welfare, and other requirements of the Act are fulfilled.
- If you have any pending Factory Act cases, contact a labor law consultant or an advocate.

3) Dealing with the Old Consultant

- Record any conversation where threats are made.
- Lodge a First Information Report (FIR) under the Indian Penal Code for Extortion (Sec 383) and Conspiracy (Sec 120B).
- Lodge a case for deficiency of service in the Consumer Court.

Visit the website below for more information on these matters.