Ex-Employee Filed a Case: Are IT Companies Bound by the Shops and Establishment Act?

One of our ex-employees has filed a case in the Haryana labour court for non-payment of F&F and salary.

Queries Regarding Labour Court Case

I have a few queries to deal with this case:

1. Are IT companies bound by the Shops and Establishment Act?
2. In case the company is STPI, do they have any privileges?
3. Do cases like these protect the employer when the maximum wages of an employee are more than Rs. 36,000?

Dear Nexgendude, the replies to your queries are as below:

Is IT companies bound by the Shops and Establishment Act

Reply: Yes, there is no exemption. A company either has to register under the Factory Act or the Shops and Establishment (S and E) Act. There is no exemption.

In case the company is STPI, do they have any privileges

Reply: STPI deals with the export of software products (digital goods). It acts as a bridge between the software company and the government. However, compliance with labor laws has to be done. STPI has nothing to do with labor laws.

Does cases like these protect the employer when the maximum wages of the employee are more than Rs. 36,000

Reply: Irrespective of the salary drawn, under the provisions of the S and E Act of your state as well as the Payment of Wages Act, the wages have to be paid to each employee by the stipulated date. There is no ground for seeking exemption of any kind.

Final Comments: Though you have raised the queries, you have not mentioned why things came to such a pass where a former employee had to approach the court to get his/her legitimate dues. Did the employee abandon his/her employment and now has filed a suit?

If the employee had committed any misconduct, then your company should have ordered a domestic inquiry to establish the blameworthiness and awarded a suitable punishment. However, all this should have been completed before his exit.

Nevertheless, withholding the salary is illegal. His case has sent a very wrong signal to the other employees. It will create an atmosphere of distrust in the company. When I quit the company, will I get my legitimate dues that the company will owe me? This question will always lurk in the minds of the current employees.

While employees may pretend that they trust the company's top-level officials, their trust could be superficial. Please be aware that open hostility is better than false trust!

Thanks,

Dinesh Divekar

What exactly are you expecting from the government agencies as an employer? Even if you do not know the legal implications, one must follow the principles of natural justice in dealing with HR-related issues first. One cannot escape and seek legal remedy by not following the rules. I hope the issue is as straightforward as you mentioned. Our learned colleague has already explained in detail why you cannot take the shield even if you are an employer. In fact, the burden is much more on the employer to show why it was not resolved across the table.

Paying a good salary does not exempt you in any way from abruptly cutting off the flow of salary without any strong reasons.

Regards