Indian Employment Contracts: What Laws Should HR Know About?

Hello All HR Experts, I hope you all are having a good Monday. I am looking for a quick response.

Indian legislation underpinning employment contracts

Is there any Indian legislation or laws that underpin an employment contract? If anyone can help me with the above question, that would be a great help.

Regards, Richa

Dear Colleague,

As far as India is concerned, the labor laws focus on social security, working conditions, safety, health, and industrial relations aspects majorly.

Is there any Indian legislation/laws that underpin an employment contract?

The answer is partly yes. You may go through the provisions of the Industrial Employment Standing Orders Act 1946 and the rules thereunder, which is a tripartite document covering most of the terms of employment for the Workmen class of employees who are mainly covered under the Industrial Disputes Act 1947. For the middle/senior levels and for those who are not workmen, the terms of employment are a contract as entered under the provisions of the Indian Contracts Act 1872. You may have your own contract of employment covering all the terms and conditions. This can be prepared one time with the help of a legal practitioner and can be used.

Sample Models

For some sample models, you may refer to the link provided below. It is only suggestive, and there are many more such links. What is important is that one should not copy-paste such agreements but should have them prepared tailor-made as you know well.

[Link to sample employment agreement: https://www.startupindia.gov.in/content/dam/invest-india/Templates/public/Tools_templates/internal_templates/Lets_Venture/EMPLOYMENT_AGREEMENT%20(3).pdf](https://www.startupindia.gov.in/content/dam/invest-india/Templates/public/Tools_templates/internal_templates/Lets_Venture/EMPLOYMENT_AGREEMENT%20(3).pdf)

Dear CiteHR member Ms. Richa Thakur,

First of all, I welcome your post, though I have some reservations regarding the ambiguity of your question. It does not explicitly reveal whether you are seeking a sample contract format that complies with Indian laws or information on the laws governing an employment contract. That being said, I must state that senior CiteHR expert Dr. P. Sivakumar correctly pointed out that the Indian Contract Act 1872 governs all contracts, and the terms and conditions of workmen are generally covered by the Industrial Employment Standing Orders Act 1946.

However, with due respect to my seniors, I would like to add that an employer is free to establish the terms and conditions of a contract based on job requirements, which must be unconditionally accepted by the employee upon commencing employment. It is crucial to ensure that such employment contracts do not conflict with any laws of the nation, such as the Indian Contract Act 1872 and other acts related to service benefits like the Payment of Gratuity Act 1972. The contract should also specify the legal jurisdiction for settling future disputes, if any. It is advisable to have such contracts legally reviewed or drafted by a legal professional specializing in service matters.

I hope this addresses your query.

Regards,
Chandra Mani Lal Srivastava
Master Consultant
Subject Expert in Service Laws, Tender, Works, and Contract Management
[Email Removed For Privacy Reasons]
New Delhi/17.02.2022/11:56 pm

Employment Contracts and Indian Legislation

The contract of employment alone is not the determinative factor in the Indian condition. Those who belong to the workmen category acquire a certain status on being an employee, and that status further changes radically on completion of 240 days of continuous service. The workmen category of employees gets many statutory protections as per the Industrial Disputes Act 1947 and the Industrial Employment (Standing Orders) Act 1947. The provisions of the employment contract cannot prevail over these statutory provisions, and the employment contract terms, to the extent that they are in dissonance with the aforementioned statutes, are null and void.

Service Conditions for Non-Workmen

As for those in categories other than workers, their service conditions are governed by the employment contract, and the employees have no rights beyond what is vested in them under the employment contract. For instance, discharge simpliciter cannot be applied to the worker category but could be used against a non-worker to get rid of an inconvenient employee.

I may add that our courts have repeatedly held that any contract, including a contract of employment, could be unconscionable if the parties stand in unequal bargaining power and if a particular term of appointment is due to such unequal bargaining. In such an eventuality, the same could be unenforceable.