Fixed-Term Contracts: Are They Legal for Permanent Roles? Seeking Clarity on Employment Laws

Dear Sir,

Kindly let me know under which law it is permitted to employ under a fixed-term contract. Also, is it valid for employing people in a job of a permanent nature.

Regards,
Harsh

Hi,

What level of employees are you talking about?

Basically, there are two categories of employees:

1. Workmen as defined under the Industrial Disputes Act.

2. Others who are not workmen under the ID Act.

Fixed-term contracts can be implemented for all in category 2 provided they accept it.

Even for workmen falling into this category, it is possible to have workmen for a particular term, provided the job is only for that period. It has nothing to do with confirmation. The Industrial Disputes Act provides for this, while the definition of retrenchment excludes such contractual employments under Section 2(bb).

"(bb) termination of the service of the workman
as a result of the non-renewal of the contract of
employment between the employer and the workman
concerned on its expiry or of such contract being
terminated under a stipulation in that behalf contained
therein;"

In the Coimbatore area, all textile mills follow this practice. They engage female employees for a fixed term and sign 18(1) settlements specifying an amount to be paid at the time of severance, say after 5 to 10 years.

This practice is accepted by the government, and in Tiruppur and Coimbatore areas, this is prevalent.

To answer your question, it is possible to have fixed-term contracts both under the Indian Contracts Act for those who are not covered under the ID Act, and under the ID Act for those who are covered under it.

Siva

I have a doubt. In the Contract Labour Regulation and Abolition Act, it also mentions about term contracts. Can I know what the difference is between the Indian Contracts Act and the Contract Labour Regulation and Abolition Act?

Hi,

A contract is an agreement between two parties to do or not to do an act for a consideration. This is a wider definition of any contract.

1. We hire an employee on certain terms. It is a contract.
2. We take a house on rent. It is a contract.
3. We sign a service agreement. It is a contract.

The Contract Labour Regulation Act is legislation to control the misuse of contract labour in industries.

1. We need to run a canteen that requires, let's say, 100 workers. Instead of engaging employees directly, we enter into an agreement with a contractor. He, in turn, engages employees. These employees are called contract labour and they come under the provisions of the Contract Labour Act.
2. We leave housekeeping to a contractor. Those workers fall under this Act.
3. BPO employees will not fall under this category as they do not take up jobs from various principals.

I hope this clarifies your query.

Siva

Dear Mr. Harshkumar,

Section 2 (oo-bb) of the Industrial Disputes Act, 1947, provides for it. You may employ on a fixed-term job contract basis, and in such cases, it will not constitute retrenchment.

Yes, you may engage such appointed employees in a permanent nature of jobs. However, please note that this section is not applicable in the state of Uttar Pradesh.

Mohan.

Hi all,

While there is confusion in factories, it is not permitted to employ under fixed-term contract employees in a job of a permanent nature. If this is the case, then under what section is it so?

Hi,

We are a Malaysian company currently working on a monorail project in Mumbai. We are looking to hire engineers on a 3-year contract term. Do they fall under a fixed-term contract as per the contract act you specified above?

Thank you for your input.

Regards,
Gayatheri

I could not find any clause regarding fixed-term contracts in the Contract Labour Act or any other acts. Could you please help if anywhere it mentions this term?