Navigating Compliance: Can Two Companies Share Statutory Duties in One Factory?

Common Statutory Compliance in Manufacturing Units

Can an employer have common statutory compliance in the manufacturing unit for two different entities?

A & B are two separate companies from one group working in one factory. Company A is registered under the Factories Act, and common compliances are followed for both organizations (A & B). Is separate compliance required to be maintained for both companies?

Compliance for Companies in the Same Group

One group has one factory in Maharashtra. Company A & B belong to the same group, where Company A has 25% of the manpower and Company B has the remaining 75% of the workforce running this factory. Company A is registered under the Factories Act. There are common statutory compliance measures being followed for both Company A & B.

Question

Since A & B belong to one parent group, for compliance purposes, should all employees (from A & B) be treated as one company under the Factory Act? Or is separate compliance/documentation required for A & B? How should this be approached?

I hope my doubt is clear now.

Like I said, you need to provide all the details if you want the correct advice. Claiming to make it simple and in the process hiding some information does not work.

Compliance for Employees of Different Companies

Anyway, the compliances can only be done for the employees of the company where they are employed. So, Company A cannot handle compliances for employees from Company B unless Company B is a contractor under the Contract Labour Regulations.

But the answer, again, depends on a number of circumstances, which you are reluctant to disclose on the forum. In that case, I would suggest you seek help from a labor consultant or a lawyer who is an expert on the matter.

For all purposes under labor laws, the employees will be clubbed together even if the entities have different registrations, provided the management is the same and when there exists financial integrality, i.e., transfer of funds from one establishment to another.

Options for Compliance in Manufacturing Units

Usually, in this type of situation, there may be two options.

Option 1: Single Location with Extension

Both A and B are located in one place. One of them started earlier, and subsequently, the second one developed as a part of the extension of the existing factory. Then the extended site plan should be approved by the factory directorate. Other formalities such as Trade License, Pollution, etc., need to be taken care of, and compliance under labor laws will be common.

Option 2: Different Locations or Same Location under Same Management

Both A and B may be in the same location or at different locations under the same management. There is a possibility to get different Factory licenses, Trade Licenses, etc., and compliance under labor laws will also differ. Usually, if the factories are at different locations, it would be better to have two sets of compliance.

Case Study: JSW Bengal Steel and JSW Cement Plant

JSW Bengal Steel started the factory at Salboni, West Bengal. However, it has not been finally finished. It has all the approvals and compliance under JSW Bengal Steel. Subsequently, the same management started JSW Cement Plant at the same premises with a completely different entity - Factory license, PF, ESI compliance, etc., are handled differently without any issues.

Case Study: USD HR Solutions Client

USD HR Solutions has one client in the business of Pathology, imaging, etc., under one roof and one management with four different organizations. They have registrations under the S & E Act differently, different labor laws compliance - even when the number of employees is less than 10 in two entities, there is no ESIC compliance. All organizations have PF registration (voluntary and normal).

It depends on the management's strategy on how to run the organizations with proper compliance.

Employers can maintain common regulatory compliance for two different entities, much like how strategies in the game FNAF must be flexibly adjusted for each situation. Consistency in regulatory compliance helps ensure efficient operations and regulatory compliance.

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