Sales Promotion Employees and Standing Order Compliance: Are They Covered Across India?

Are sales promotion employees also covered under the said act if they are more than 2,500 in number all over India?

Sales promotion employees are not part of the 'Industrial Establishment' as defined under IESO Act.

Dear Mr. KK!HR,

Employment Relationship of Sales Promotion Employees

By definition, the employment relationship with their employers, Sales Promotion Employees are a specific class of employees engaged in the exclusive work of sales promotion. As per Sec.6 of the SPE(CS) Act, 1976, the ID Act, 1947 is, inter alia, made applicable to SPEs treating them on par with "workman" as defined under the latter.

Moreover, the establishment/organization they are employed can be a composite one having factories, registered offices, administrative branches coming thus under the definition of the term "Industrial establishment" u/s 2(e) of the IE(SO) Act, 1946 by virtue of the meaning assigned to it. Therefore, if the IE(SO) Act, 1946 could not be applicable to SPEs, it must be due to the reason that the establishment wherein they are employed must be the one to which the Act of 1946 does not have application at all or they should simply escape the ambit of the definition of "workman" under the Act.

I request your clarification in this regard substantiating your above remarks. My request is based on the controversy that remains unsettled till to-date about the rights of SPEs, and I shall be much obliged if you can cite some case laws in this regard.

Standing Order Act and Its Applicability

The Standing Order Act is applicable to establishments covered by the Payment of Wages Act. Many state governments have extended the application of the Payment of Wages Act to commercial establishments under their respective Shops and Commercial Establishments Act. In Maharashtra, the Standing Order Act is applicable to commercial establishments covered under their state's Shops and Commercial Establishments Act. Similarly, in Karnataka, IT companies have been exempted for the time being. Kerala has extended the application of the Payment of Wages Act to commercial establishments, thereby covering such establishments under the Industrial Employment (Standing Orders) Act. As such, sales promotion employees, being employees of any commercial establishment within the meaning of the Payment of Wages Act, shall be covered by the Standing Orders of that establishment.

Confusion Regarding Applicability to Non-Industrial Establishments

However, confusion arises as to whether an establishment not being an industrial establishment within the meaning of section 2(e) of the Act, having branches all over India, should have standing orders. If yes, should it be one standing order at its head office level and applicable to all employees across India? I support the views expressed by Umakanthan Sir that an establishment where employees are employed can be a composite one having factories, registered offices, and administrative branches, thus coming under the definition of the term "Industrial establishment" under section 2(e) of the IE(SO) Act, 1946.

Supreme Court Ruling on Functional Integrality

In the ruling of Western India Match Co. Ltd vs. Their Workmen (1964 AIR 472, 1964), the Supreme Court observed that "The functional integrality, interdependence or community of financial control and management; community of manpower and its control, recruitment, and discipline; the manner in which the employer has organized the different activities; whether he has treated them as independent of one another or as interconnected and interdependent, are some of the tests to find out whether the two units are part of one and the same establishment." The Court further held that the difference in the rules and practice in connection with their recruitment, control, and discipline, in the standing orders applicable to them, and in the maintenance of their muster rolls made no difference to the situation. Accordingly, if we see that different activities and operations are for a sole objective, all employees who contribute towards that objective shall be covered by the rules set to attain it. Therefore, I don't find anything wrong in including sales promotion employees under the standing orders of the company.

Unfortunately, we are still groping in the dark even though we are nearing a month since the start of the discussions on this subject loop.

Nature of the Establishment

Is it limited to only marketing of goods made by some other establishment, or is it a part of the manufacturing as well as sales included unit? My comments were reckoning the former position. Again, we need clarity on whether the unit is a part of any of the notified industries as per the SPE Act 1976. The provisions of the Act provide for leave, appointment letters, and the applicability of Acts like the ID Act, MB Act, EC Act, etc. Significantly, there is no mention of the SO Act. However, the premise that 'No workman can be transferred out of the State without his prior consent' as per the ID Act is not the real position. The ID Act does not have any provision regarding transfer.

Legal Provisions on Transfer

As regards transfer, the accepted legal provision is that transfer is a necessary condition of service, and the courts will interfere only if it violates statutory rules or conditions of service of the employee or is out of bias, malice, and prejudice. Please specify whether there was any clause in the offer of appointment made to you regarding transfer, and also whether the transfer adversely affects salary, other earnings, promotion prospects, status in the organization, etc.

Once the position is made clear, we will be able to give better advice on the options.