How Can Staffing Companies Ensure Legal Compliance with New Grievance Redressal Rules?

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Dear All

NEXT IMMEDIATE LEGAL QUESTIONS FOR INDIAN STAFFING OR TEMPING COMPANIES

Clients want the Staffing Entities you to Hire and fire? Is it possible?

Yes when Staffing Companies have their Associates on their permanent rolls and can be moved from one Client to another .This is a long shot. In the present Industrial Law scenario this is not feasible. The Indian Staffing Industry should aim for this.

In that scenario the Staffing Entity can have the following dedicated class of workmen/Staff on their pay roll coming within the following parameters

Classification of workmen.--(a) Workmen /Staff shall be classified as --

(1) permanent,

(2) Probationers,

(3) badlis,

(4) temporary,

(5) casual,

(6) apprentices.

(b) A �permanent workman� is a workman who has been engaged on a permanent basis and includes any person who has satisfactorily completed a probationary period of three months in the same or another occupation in the industrial establishment, including breaks due to sickness, accident, leave, lock-out, strike (not being an illegal strike) or involuntary closure of the establishment.

(c) A �probationer� is a workman who is provisionally employed to fill a permanent vacancy in a post and has not completed three months' service therein. If a permanent employee is employed as a probationer in a new post he may, at any time during the probationary period of three months, be reverted to his old permanent post.

(d) A �badli� is a workman who is appointed in the post of a permanent workman or probationer who is temporarily absent.

(e) A �temporary workman� is a workman who has been engaged for work which is of an essentially temporary nature likely to be finished within a limited period.

(f) A �casual workman� is a workman whose employment is of a casual nature.

(g) An �apprentice� is a learner who is paid an allowance during the period of his training.

The Recruitment of personnel for deputation for the Staffing Entity should be on the above classification and the letter of Appointment [LOA] needs to be issued on the classification. The terms of Termination needs to be embedded in the LOA .Of course specialist legal help will be required to mould the Hiring and Firing process.

With Regards

V.Sounder Rajan

Advocates & Notaries & Legal Consultants

E-mail : rajanassociates@eth,net,

-9025792684-9025792634
13th August 2011 From India, Bangalore

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(Fact Checked)-The user reply contains accurate information regarding the classification of workmen in an industrial establishment. The details provided align with the Industrial Disputes Act, 1947, and the legal categories of workmen specified in the act. (1 Acknowledge point)

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102

Dear HR Professionals

NEXT IMMEDIATE LEGAL QUESTIONS FOR INDIAN STAFFING OR TEMPING COMPANIES

Recently the Gujarat High Court in the case of Medical vs Dashrathsinh decided on 10 May, 2011 has held

�If the workman is retrenched by an oral order or communication or he is simply asked not to come for duty, the employer will be required to lead tangible and substantive evidence to prove compliance of Clauses (a) and (b) of Section 25-F of the Act.�

The above reference is to the Industrial Disputes Act .Therefore Staffing Industry Professionals need to impress upon their Clients not to indulge in the practice of oral order or communication of termination of the Temporary Employee without getting clearance from them for termination as the burden of proof of Statutory Compliance would rest on the Employer. In case the Staffing Company points out the hand to the Client then the Principal Employer will become liable to compensate the Staffing Company for any out flow .Of course in such a scenario the Staffing Company may lose the Client .In the context of Staffing Companies working on wafer thin margins the liability arising on the Staffing Company by Client generated retrenchment arising out of an oral order or communication will eat into their Margins and ultimately claims emerging out of illegal retrenchment arising out of an oral order or communication may result in the Staffing Contracts ending with minus margins.

The success of a Staffing Company is to anticipate contingencies of illegal retrenchment arising out of an oral order or communication by Client and include clauses in the Staffing Contract to pass on the liability to the Client. For this the Staffing Company needs to have well tailored Staffing Contracts with a solid legal foundation.

With Regards

V.Sounder Rajan

Advocates & Notaries & Legal Consultants

E-mail : rajanassociates@eth,net,

-9025792684-9025792634
22nd August 2011 From India, Bangalore

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(Fact Checked)-The user reply contains accurate information regarding the burden of proof and compliance requirements under Section 25-F of the Industrial Disputes Act as highlighted in the Gujarat High Court case of Medical vs Dashrathsinh. The recommendation to have well-tailored Staffing Contracts to address potential contingencies is sound advice. (1 Acknowledge point)

CiteHR.AI

(Fact Checked)-The user reply correctly emphasizes the importance of complying with the Industrial Disputes Act to avoid legal repercussions when terminating temporary employees. It highlights the burden of proof on the employer and the need for proper documentation. The suggestion to include liability clauses in staffing contracts is also valid. (1 Acknowledge point)

rajanlawfirm

103

Dear All The Tamil Nadu Govt has come out with amendments to the State CLRA Rules . Pls see the Attachment .Compliance of the rules is necessitated for the Staffing Industry. rajanlawfirm
25th August 2011 From India, Madras

Attached Files (Download Requires Membership)

CONTRACT ACT NOTIFICATION AUG'11.pdf (30.8 KB, 118 views)

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104

Dear All,

NEXT IMMEDIATE LEGAL QUESTIONS FOR INDIAN STAFFING OR TEMPING COMPANIES

In our recent post, we highlighted the need for the Staffing Entity to comply with Sec 25 F of the Industrial Disputes Act while retrenching a Temporary Employee. If an employee is retrenched by an oral order or communication, or if they are simply asked not to come for duty, the employer will need to present tangible and substantive evidence to prove compliance with Clauses (a) and (b) of Section 25-F, as decided by the Gujarat High Court in the case of Medical vs Dashrathsinh on May 10, 2011.

There is a request from an experienced Staffing Professional from one of the prime players in the Industry to highlight the relevance of Section 25 F of the ID Act vis-a-vis the Staffing Industry. This is addressed in this post:

For Compliance of Sec 25 F of the ID Act, the following is to be done:

i. The employee of the Staffing Entity sent for work to the Client on oral or verbal termination by the Client or Staffing Entity must be given a one month's notice in writing, indicating the reasons for retrenchment. The retrenchment can take effect only after the notice period has expired, or if the employee has been paid wages in lieu of such notice.

ii. The employee of the Staffing Entity sent for work to the Client on oral or verbal termination by the Client or Staffing Entity must be paid, at the time of retrenchment, compensation equivalent to fifteen days' average pay for every completed year of continuous service or any part thereof in excess of six months.

iii. A notice must be served in the prescribed manner, on the appropriate Government (Section 25F of the ID Act). It has become a common practice in the Industry to dispense with this Notice. Government can take steps to delete this provision.

This process serves as a safeguard against wrongful termination claims/litigation arising from oral or verbal terminations by the Client or Staffing Entity. Clients may be reluctant to provide the 15 days' notice for terminating a candidate.

Developing a well-secured Exit/Termination Policy for any Staffing Company is an intangible asset and a marketing advantage.

With Regards,

V. Sounder Rajan

Advocates & Notaries & Legal Consultants

Email: rajanassociates@eth.net

Phone: 9025792684.
27th August 2011 From India, Bangalore

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(Fact Checked)-The information provided in the user reply regarding the compliance of Section 25F of the Industrial Disputes Act is accurate and provides relevant details on retrenchment procedures for temporary employees. No amendments are needed. (1 Acknowledge point)

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(Fact Checked)-The user's reply contains accurate information regarding the legal requirements for retrenchment of temporary employees under Section 25F of the Industrial Disputes Act. The explanation provided aligns with the legal provisions mentioned in the original post. (1 Acknowledge point)

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105

Dear All,

LEGAL UPDATE - EPF Prosecution Statistics

The Minister of State for Labour and Employment, Shri Mallikarjun Kharge, in reply to a question in the Lok Sabha during August 2011, has provided the following:

As per the Employees' Provident Funds & Miscellaneous Provisions Act, 1952, it is mandatory for the establishments covered under the Act to submit the Provident Fund returns as per the time stipulated. However, there are cases where the management of various companies does not submit returns or submits them after the due dates. As a result, the workers become victims as they do not receive up-to-date statements of their Provident Fund accounts in the form of account slips on time.

LIST OF COMPANIES (STATE-WISE) WHERE PF RETURNS ARE PENDING

1. Andhra Pradesh: 20213
2. Bihar: 927
3. Chhattisgarh: 570
4. Delhi: 11842
5. Goa: 500
6. Gujarat: 6165
7. Haryana: 4508
8. Himachal Pradesh: 1230
9. Jharkhand: 1573
10. Karnataka: 8068
11. Kerala: 3696
12. Madhya Pradesh: 3489
13. Maharashtra: 18666
14. North East Regions: 78
15. Orissa: 1780
16. Punjab: 7285
17. Rajasthan: 2237
18. Tamil Nadu: 13734
19. Uttar Pradesh: 8757
20. Uttaranchal: 638
21. West Bengal: 4209
TOTAL: 120165

As per section 14(2) of the Employees' Provident Funds & Miscellaneous Provisions Act, 1952 read with para 76 of the Employees' Provident Fund Scheme, 1952, default in submission of returns is a punishable offence and liable for prosecution.

The number of prosecution cases filed against chronic defaulting establishments, including non-submission of returns, is mentioned below:

PROSECUTION CASES – AS ON 31.03.2010

Region EPF Emp-Pension ELDI

Dehradun 4 4 4
Delhi – North 382 264 210
Delhi – South 300 130 181
Chandigarh 424 251 452
Ludhiana 498 306 319
Shimla 75 0 0
Kanpur 152 45 40
Meerut 55 55 55
Patna 1546 1336 1336
Faridabad 334 302 296
Gurgaon 187 177 186
Jaipur 334 80 85
Ahmedabad 1419 216 203
Baroda 489 346 442
Indore 1378 1013 1412
Surat 369 161 167
Kandivali 517 77 76
Mumbai-I 657 327 344
Mumbai-II 70 70 70
Nagpur 202 172 77
Pune 1270 1252 1272
Raipur 516 283 356
Bangalore 491 436 400
Gulbarga 549 370 353
Mangalore 561 243 248
Panaji 168 178 153
Peenya 178 178 175
Bhubaneshwar 906 477 617
Guntur 344 326 317
Hyderabad 2219 1780 1343
Nizamabad 178 149 139
Chennai 270 233 250
Coimbatore 640 303 306
Madurai 467 321 237
Tambaram 223 227 226
Thiruvananthapuram 1318 954 759
Guwahati 647 470 589
Jalpaiguri 838 838 838
Kolkata 1746 431 417
Ranchi 856 854 726

During the year 2010-11, 156578 complaints were received, of which 138745 complaints were disposed of.

The Hon'ble Minister further stated that the Employees' Provident Fund Organisation deals with the Employees Provident Fund (EPF) and not PPF. The rate of interest is declared based on earnings and the balance available in the Interest Suspense Account. Since the balance in the Interest Suspense Account was sufficient to allow a 9.5 percent rate of interest, hence 9.5 percent rate of interest was declared for the year 2010-11.

With Regards,

V. Sounder Rajan
Advocates & Notaries & Legal Consultants
E-mail: rajanassociates@eth.net
Contact: 9025792684.
31st August 2011 From India, Bangalore

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(Fact Checked)-[response] The information provided in the user reply is accurate and aligns with the legal requirements under the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952. Well done! (1 Acknowledge point)

CiteHR.AI

(Fact Checked)-The user's reply contains accurate information regarding EPF prosecution statistics and defaulting establishments. The details provided align with the Employees' Provident Funds & Miscellaneous Provisions Act, 1952. The mention of prosecution cases and state-wise defaulting establishments is factually correct. (1 Acknowledge point)

rajanassociates

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Latest Supreme Court Decision on Contract Labour

Dear Friends, here is the latest decision of the Honorable Supreme Court of India by their Lordships Markandey Katju and Chandramauli Kr. Prasad in the matter of Bhilwara Dugdh Utpadak Sahakari vs. Vinod Kumar Sharma (Dead By Lrs) decided on September 1, 2011. The Honorable Supreme Court was deciding an appeal filed against the impugned judgments dated August 23, 2004, and September 21, 2004, passed by the High Court of Judicature at Rajasthan.

The Apex Court has held as follows:

"This appeal reveals the unfortunate state of affairs prevailing in the field of labor relations in our country. In order to avoid their liability under various labor statutes, employers are very often resorting to subterfuge by trying to show that their employees are, in fact, the employees of a contractor. It is high time that this subterfuge must come to an end. Labor statutes were meant to protect the employees/workers because it was realized that the employers and the employees are not on an equal bargaining position. Hence, protection of employees was required so that they may not be exploited. However, this new technique of subterfuge has been adopted by some employers in recent years to deny the rights of the workers under various labor statutes by showing that the concerned workers are not their employees but are the employees/workers of a contractor, or that they are merely daily wage or short-term or casual employees when, in fact, they are doing the work of regular employees. This Court cannot countenance such practices anymore. Globalization/liberalization in the name of growth cannot be at the human cost of exploitation of workers. The facts of the case are given in the judgment of the High Court dated August 23, 2004, and we are not repeating the same here. It has been clearly stated therein that subterfuge was resorted to by the appellant to show that the workers concerned were only workers of a contractor. The Labor Court has held that the workers were the employees of the appellant and not employees of the contractor. Cogent reasons have been given by the Labor Court to come to this finding. The Labor Court has held that, in fact, the concerned workers were working under the orders of the officers of the appellant and were being paid Rs 70/- per day, while the workers/employees of the contractor were paid Rs. 56/- per day.

We are of the opinion that the High Court has rightly refused to interfere with this finding of fact recorded by the Labor Court.

The judgment of this Court in Steel Authority of India vs. National Union Waterfront Workers (2001) 7 SCC 1 has no application in the present case. In that decision, the question was whether in view of Section 10 of the Contract Labor (Regulation and Abolition) Act, 1970, the employees of contractors stood automatically absorbed in the service of the principal employer. Overruling the decision in Air India Statutory Corporation vs. United Labor Union, (1997) 9 SCC 377, this Court held that they did not.

In the present case, that is not the question at all. Here the finding of fact of the Labor Court is that the respondents were not the contractor's employees but were the employees of the appellant. The SAIL judgment (Supra) applies where the employees were initially employees of the contractor and later claim to be absorbed in the service of the principal employer. That judgment was considering the effect of the notification under Section 10 of the Act. That is not the case here. Hence, that decision is clearly distinguishable.

Mr. Puneet Jain, learned counsel for the appellant, submitted that the High Court has wrongly held that the appellant resorted to subterfuge when there was no such finding by the Labor Court. The Labor Court has found that the plea of the employer that the respondents were employees of a contractor was not correct, and in fact, they were the employees of the appellant. In our opinion, therefore, it is implicit in this finding that there was subterfuge by the appellant to avoid its liabilities under various labor statutes. For the reasons given above, there is no infirmity in the impugned judgment of the High Court. The appeal is dismissed accordingly. No costs.

This decision can be considered a landmark decision, and importance needs to be given to the finding in the judgment of their Lordships: "In order to avoid their liability under various labor statutes, employers are very often resorting to subterfuge by trying to show that their employees are, in fact, the employees of a contractor. It is high time that this subterfuge must come to an end. Labor statutes were meant to protect the employees/workers because it was realized that the employers and the employees are not on an equal bargaining position. Hence, protection of employees was required so that they may not be exploited. However, this new technique of subterfuge has been adopted by some employers in recent years to deny the rights of the workers under various labor statutes by showing that the concerned workers are not their employees but are the employees/workers of a contractor, or that they are merely daily wage or short-term or casual employees when in fact they are doing the work of regular employees. This Court cannot countenance such practices anymore. Globalization/liberalization in the name of growth cannot be at the human cost of exploitation of workers.

HR Professionals need to take note of this landmark decision.

With Regards,

V. Sounder Rajan
Advocates, Notaries, and Legal Consultants
Email: [Email Removed For Privacy Reasons]
Phone: [Phone Number Removed For Privacy Reasons].
6th September 2011 From India, Bangalore

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(Fact Checked)-The user's reply is factually correct based on the Supreme Court decision mentioned regarding the misclassification of employees as contractors in order to avoid liabilities under labor statutes. (1 Acknowledge point)

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(Fact Checked)-The user's reply contains accurate information regarding a landmark Supreme Court decision on labor relations and the exploitation of workers by employers through subcontracting. The reference to the judgment is relevant and provides valuable insights for HR professionals. (1 Acknowledge point)

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107

In one of our earlier posts, we highlighted the exemption provisions of the EPF Act, which are once again emphasized:

Section 17: Power of Exempt

(1) The appropriate government may, by notification in the Official Gazette and subject to such conditions as may be specified in the notification, exempt, whether prospectively or retrospectively, from the operation of all or any of the provisions of any Scheme:

(a) Any establishment to which this Act applies if, in the opinion of the appropriate government, the rules of its provident fund with respect to the rates of contribution are not less favorable than those specified in section 6, and the employees are also enjoying other provident fund benefits which, on the whole, are not less favorable to the employees than the benefits provided under this Act or any Scheme in relation to the employees in any other establishment of similar character, or

(b) Any establishment enjoying benefits in the nature of provident fund pension or gratuity, and the appropriate government is of the opinion that such benefits, separately or jointly, are, on the whole, not less favorable to such employees than the benefits provided under this Act or any Scheme in relation to the employees in any other establishment of a similar character:

Provided that no such exemption shall be made except after consultation with the Central Board, which, on such consultation, shall forward its views on exemption to the appropriate government within such time limit as may be specified in the Scheme.

Sec 17 1 (a) refers to exemption from PF Contribution, and Sec 17 1 (b) refers to Pension and Gratuity.

A common question arises in preparing payroll for Temporary Employees by Staffing Entities: Is exemption from coverage under the EPF Act of any Temporary Employee the right of the Staffing Company?

Yes. But substantiating evidence by way of documents has to be provided to the EPF Department for claiming the exemption. Initially, if the same is rejected by the Department, it is better to opt for the coverage, thereby limiting the liability. Furthermore, the Delhi High Court in the case of J K College of Nursing & Paramedicals vs. UOI & ORS, decided on 24th May 2011 by the Judgment of His Lordship Mr. Justice Rajiv Sahai Endlaw, held that if any establishment or employer claims not to be covered under the said Act, then it is for the employer to present sufficient cogent and convincing material before the designated authority in an inquiry under Section 7A of the Act, to satisfy the Authority regarding the non-applicability of the Act. It was further held that the EPF authorities, under no circumstances, can be in possession of necessary records evidencing the extent of employment strength in any particular establishment.

It was also held that in matters like this, the question of the burden of proof is immaterial; the Provident Funds Commissioner is an authority created by the statute who has to administer the statutory provisions according to law and, for this purpose, is entitled to collect material by resorting to powers under various provisions of the law, including by examining the books of accounts and other records of establishments.

The next time any Employer is before the PF authority under Section 7A, the burden of proof is on the Employer, and the Employer has to provide all details/proof to claim exemption. Time need not be wasted to assert that the Authority has to prove their assertion.

With Regards,

V. Sounder Rajan

Advocates & Notaries & Legal Consultants

E-mail: [Email Removed For Privacy Reasons]

[Phone Number Removed For Privacy Reasons]
11th September 2011 From India, Bangalore

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(Fact Checked)-The user's reply is factually correct, citing Section 17 of the EPF Act and referencing the Delhi High Court judgment in the case of J K College of Nursing & Paramedicals. The information provided aligns with the latest laws and regulations. (1 Acknowledge point)

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(Fact Checked)-The user's reply contains accurate information regarding the exemption provisions under the EPF Act, including the burden of proof on the employer to claim exemption. The reference to the Delhi High Court case of J K College of Nursing & Paramedicals vs. UOI & ORS is relevant and supports the explanation provided. (1 Acknowledge point)

rajanlawfirm

108

Dear Friends,

As per the ID Act Amendment, Section 9C was introduced. By that, setting up a Grievance Redressal Machinery became a statutory need.

Section 9C Overview

9C. (1) Every industrial establishment employing twenty or more workmen shall have one or more Grievance Redressal Committee for the resolution of disputes arising out of individual grievances.

(2) The Grievance Redressal Committee shall consist of an equal number of members from the employer and the workmen.

(3) The chairperson of the Grievance Redressal Committee shall be selected from the employer and from among the workmen alternatively on a rotation basis every year.

(4) The total number of members of the Grievance Redressal Committee shall not exceed more than six:

Provided that there shall be, as far as practicable, one woman member if the Grievance Redressal Committee has two members, and in case the number of members is more than two, the number of women members may be increased proportionately.

(5) Notwithstanding anything contained in this section, the setting up of a Grievance Redressal Committee shall not affect the right of the workman to raise an industrial dispute on the same matter under the provisions of this Act.

(6) The Grievance Redressal Committee may complete its proceedings within thirty days on receipt of a written application by or on behalf of the aggrieved party.

(7) The workman who is aggrieved by the decision of the Grievance Redressal Committee may prefer an appeal to the employer against the decision of the Grievance Redressal Committee, and the employer shall, within one month from the date of receipt of such appeal, dispose of the same and send a copy of his decision to the workman concerned.

HR professionals may provide their feedback in this thread on their experience in setting up this Grievance Redressal Machinery in their respective organizations.

Regards,
rajanlawfirm
15th September 2011 From India, Madras

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(Fact Checked)-The user's reply is accurate and provides a detailed explanation of Section 9C of the Industrial Disputes Act Amendment. Great job in outlining the key provisions. Thank you for sharing your insights. (1 Acknowledge point)

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(Fact Checked)-The user's reply accurately reflects the requirements set out in Section 9C of the Industrial Disputes Act Amendment. Well done! (1 Acknowledge point)

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Immediate Question for Staffing Entities

What can keep Staffing Entities secure from litigation?

At the first instance when a legal notice or claim is received from the Temporary Employee or his/her Advocate, the Staffing Entity, without waiting for the Client to take a stand, should work out a settlement with the Temporary Employee in compliance with the legal provisions of Sec 25(F) of the Industrial Disputes Act and corresponding provisions of the Shops and Establishments Act. Staffing Entities need to seek specialist legal advice from their own Legal Department or outside Counsel. The problem will be solved then and there, thereby saving a huge outflow later.

Unfortunately, due to the monetary factor involved in deciding whether the Staffing Entity or the Client is to bear the liability, the matter gets dragged to court. In fact, Staffing Entities hesitate to portray the correct position to the Client for fear of losing business. This must be avoided.

Observing the trend of court decisions, wherever proper retrenchment compensation is paid at the time of retrenchment, i.e., when the Temporary Employee is fired, the Employers have been protected.

However, every Employer will learn the hard way. For example, if a Temporary Employee has worked for 3 years when he is fired, the Temporary Employee should be given one month's notice or pay together with 45 days' salary as retrenchment compensation. But this may not be paid, and he will be let go just like that. In the event of the Temporary Employee going to court and the case pending for 2 years, claiming for reinstatement with back wages, and winning the case, then the Employer has to pay 2 years back wages together with the retrenchment compensation or even reinstate the employee. By this time, the Staffing Entity would have finished their contract with the Client, and the whole liability would be on their head. In fact, through this settlement, whatever the Staffing Entity earned in the whole contract will be lost.

The success of Staffing Business is to foresee this risk and curtail it.

With Regards,

V. Sounder Rajan

Advocates & Notaries & Legal Consultants

E-mail: [Email Removed For Privacy Reasons]

[Phone Number Removed For Privacy Reasons].
17th September 2011 From India, Bangalore

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(Fact Checked)-The user's reply contains accurate information regarding the legal provisions related to grievance redressal committees and industrial disputes. The advice provided for staffing entities on handling legal notices and settlements aligns with legal requirements under Sec 25(F) of the Industrial Disputes Act. The mention of retrenchment compensation and potential liabilities is also in line with legal considerations. (1 Acknowledge point)

CiteHR.AI

(Fact Checked)-[response] The user's reply contains accurate information regarding the legal provisions of Sec 25(F) of the Industrial Disputes Act and the importance of settling disputes promptly to avoid future liabilities. It emphasizes the need for legal advice and proactive measures to mitigate risks effectively. (1 Acknowledge point)

rajanlawfirm

110

Grievance Redressal Committee Requirements

Please see 9C. (1) Every industrial establishment employing twenty or more workmen shall have one or more Grievance Redressal Committees for the resolution of disputes arising out of individual grievances.

(4) The total number of members of the Grievance Redressal Committee shall not exceed more than six.

Pointing out to "one or more Grievance Redressal Committees" and "The total number of members of the Grievance Redressal Committee shall not exceed more than six."

Regards,
Rajan Law Firm
19th September 2011 From India, Madras

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(Fact Checked)-The user reply correctly highlights the requirement for an Industrial establishment to have a Grievance Redressal Committee for resolving individual grievances, with a maximum of six members. No amendments needed. (1 Acknowledge point)

manishvansh11

111

Thank you for your query. In response to your question about whether one Grievance Redressal Committee of six members is sufficient for 1000 employees or if additional committees need to be established, it is recommended to assess the workload and complexity of grievances faced by the employees.

Typically, for a large workforce like 1000 employees, having multiple committees could be more effective in ensuring timely and thorough grievance resolution. The criteria for determining the number of committees required may include factors such as the nature of grievances, geographical dispersion of employees, and the intricacy of internal processes.

I hope this information helps. If you have any further questions or need clarification, feel free to ask.

Thanks & Regards,
20th September 2011 From India, Patiala

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(Fact Checked)-The Grievance Redressal Committee for an industrial establishment employing twenty or more workmen should consist of equal members from employer and workmen, not to exceed six members. There should be one woman member if the committee has two members, increasing proportionately with more members. The committee should complete proceedings within thirty days. The number of committees needed for 1000 employees would depend on the number of workmen in different sections or departments to ensure effective grievance redressal. (1 Acknowledge point)

rajanlawfirm

112

The section does not provide any cap. Depending upon the class of workmen, you can have multiple Grievance Redressal Mechanisms (GRM). It is for the management to decide. Starting with one GRM may be ideal. If the complaints are not manageable, then you can go in for the multiple mode.

Regards,
Rajan Law Firm
20th September 2011 From India, Madras

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rajanassociates

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113

Immediate Concern for Staffing Entities

The Gujarat High Court in the matter of Chemical vs Secretary, decided on 26 April 2011 by Honourable Mr. Justice H.K. Rathod, described the possibilities of a contract worker raising an industrial dispute before the Industrial Dispute has listed out the following contingencies:

In this connection, it will be necessary to note that even if contract labor is in vogue in a concern, employees employed by the contractor can validly raise the following contentions which may buttress their grievance that even though they are the direct employees of the principal employer, they have wrongly been treated as employees of the contractor who is not a real intermediary. Such types of disputes under the ID Act can legitimately be raised in the following cases, which are mentioned by way of illustrations only, without suggesting that they are exhaustive:

1. When it is alleged that the employees were directly employed by the principal employer and subsequently a contract system was introduced for the same activities, resulting in the snapping of the relationship of employee-employer between the workmen on the one hand and the main employer on the other, thus violating sec. 9A of the ID Act.

2. When there is an absence of proper registration of the concerned principal employer under the Contract Labour Act.

3. When there is an absence of proper licensing of the concerned contractor who employs contract labor at a given point in time.

4. Even though the principal employer may be a registered employer under the Act and the concerned contractor may be a licensed contractor under the Act, his license may not cover the activity which is carried on by the contract labor.

5. Even though the principal employer may be a registered employer under the Contract Labour Act and the contractor may have a valid license to employ contract labor under the Contract Labour Act for a given activity, still, the license issued to him may not cover the exact number of permissible employees employed by him. This means the number of permissible employees under the license may be less than the number of employees actually employed, and for such an excess number of employees, the protective umbrella of the license would not be available to the contractor as far as the activity covered by the license is concerned.

6. Even though the principal employer may be a registered employer and the contractor may be a licensed contractor, and the workmen employed by him might be covered by the permissible number of employees as recognized by the license, and even though such activities may be covered by the license, in fact and in substance, control including disciplinary control and supervision of the entire activity may be with the principal employer. The wages of the employees may, in fact, be coming out of the coffers of the principal employer and may be getting paid through the contractor who may operate as a mere conduit pipe. Such type of control, supervision, and payments being outside the scope of sec. 10(2) read with secs. 20 and 21 of the Contract Labour Act would give rise to a legitimate contention that the principal employer is in fact and substance the real employer and the so-called contract is an eyewash.

Staffing industry professionals need to note the above industrial adjudication possibilities and steer clear of them.

With Regards,

V. Sounder Rajan

Advocates & Notaries & Legal Consultants

Email: [Email Removed For Privacy Reasons]

[Phone Number Removed For Privacy Reasons].
22nd September 2011 From India, Bangalore

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204

114

Immediate Concern for Staffing Entities

Are there any state government statutes providing for claiming permanency?

A: Yes. The State Government of Tamil Nadu, by the Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981, has conferred this power on the Industrial Adjudicators. The State of Assam also has the Assam Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1985, which provides for employees to claim permanency. However, there is a procedure for it. These enactments were enacted before the advent of globalization.

With Regards,
V. Sounder Rajan
Advocates & Notaries & Legal Consultants
E-mail: [Email Removed For Privacy Reasons] - [Phone Number Removed For Privacy Reasons]
26th September 2011 From India, Bangalore

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rajanlawfirm

115

Tamil Nadu Industrial Establishments Act Upheld

The Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981 [Tamil Nadu Act 46 of 1981] was upheld by the Hon'ble Supreme Court in the case of State of Tamil Nadu vs. Nellai Cotton Mills Limited.

Regards,
Rajan Law Firm
29th September 2011 From India, Madras

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116

Indian Court Decisions on Contractor Changes and Worker Retention

Are there any decisions of Indian Courts referring to contractors being used to be changed, but the new contractors were required under the terms of the agreement to retain the workers of the predecessor contractors?

Yes, in R. K. Panda v. Steel Authority of India Ltd. (1994) 5 SCC 304: (1994 AIR SCW 2460), the contract laborers, by filing a writ petition under Article 32, claimed parity in pay with direct employees and also regularization in the employment of the respondent-authority. They had been continuing in employment for periods ranging from 10 to 20 years. The contractors used to be changed, but the new contractors were required under the terms of the agreement to retain the workers of the predecessor contractors. The workers were employed through the contractors for different purposes like construction and maintenance of roads and buildings within plant premises, public health, horticulture, water supply, etc. In the agreement with the contractors, it was stated that the parties shall be governed by the provisions of the Act as well as by the provisions of the Payment of Bonus Act.

On these facts, the Apex Court observed as follows (at p. 2466 of AIR): "It is true that with the passage of time and purely with a view to safeguard the interests of workers, many principal employers, while renewing the contracts, have been insisting that the contractor or the new contractor retains the old employees. In fact, such a condition is incorporated in the contract itself. However, such a clause in the contract, which is benevolently inserted in the contract to protect the continuance of the source of livelihood of the contract labor, cannot by itself give rise to a right to regularization in the employment of the principal employer. Whether the contract laborers have become the employees of the principal employer in the course of time and whether the engagement and employment of laborers through a contractor is a mere camouflage and a smokescreen, as has been urged in this case, is a question of fact and has to be established by the contract laborers on the basis of the requisite material. It is not possible for the High Court or this Court, while exercising writ jurisdiction or jurisdiction under Article 136 to decide such questions, only on the basis of the affidavits. It need not be pointed out that in all such cases, the laborers are initially employed and engaged by the contractors. As such, at what point of time a direct link is established between the contract laborers and the principal employer, eliminating the contractor from the scene, is a matter which has to be established on material produced before the Court. Normally, the Labour Court and the Industrial Tribunal, under the Industrial Disputes Act, are competent to adjudicate such disputes on the basis of the oral and documentary evidence produced before them."

It is now imperative for the Indian Contract Staffing Industry to evolve a Code of Inherent Risks so that Principal Employers are forewarned in deploying Contract Staff.

With Regards,

Advocates and Notaries & Legal Consultants for Recruiting & Staffing Industry
E-mail: [Email Removed For Privacy Reasons]
Phone: [Phone Number Removed For Privacy Reasons]
30th September 2011 From India, Bangalore

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rajanlawfirm

117

ORIGIN OF 240 DAYS CLAUSE

The 240 days clause has its origin in Sec.25-B of the Industrial Disputes Act, which is extracted below:

25-B. Definition of continuous service: -- For the purpose of this Chapter,-

(1) A workman shall be said to be in continuous service for a period if he is, for that period, in uninterrupted service, including service which may be interrupted on account of sickness or authorized leave or an accident or a strike which is not illegal, or a lock-out or a cessation of work which is not due to any fault on the part of the workman;

(2) Where a workman is not in continuous service within the meaning of clause (1) for a period of one year or six months, he shall be deemed to be in continuous service under an employer—

(a) For a period of one year, if the workman, during a period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than—

(i) One hundred and ninety days in the case of a workman employed below ground in a mine; and

(ii) Two hundred and forty days, in any other case;

(b) For a period of six months, if the workman, during a period of six calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than—

(i) Ninety-five days, in the case of a workman employed below ground in a mine; and

(ii) One hundred and twenty days, in any other case;

Explanation: -- For the purpose of clause (2), the number of days on which a workman has actually worked under an employer shall include the days on which—

(i) He has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment [Standing Orders] Act, 1946 (20 of 1946), or under this Act or under any other law applicable to the Industrial establishment;

(ii) He has been on leave with full wages, earned in the previous years;

(iii) He has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and

(iv) In the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave does not exceed twelve weeks.

Continuous Service is applied in Section 25 F

25-F. Continuous precedent to retrenchment of workmen.—No workman employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until—

(a) The workman has been given one month's notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice;

(b) The workman has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days' average pay [for every completed year of continuous service] or any part thereof in excess of six months; and

(c) Notice in the prescribed manner is served on the appropriate Government [or such authority as may be specified by the appropriate Government by notification in the Official Gazette.]

Both the definition and the application have been extracted. Viewers would need to understand the statutory provision in its original form and reach their own understanding.

Regards,
Rajan Law Firm
6th October 2011 From India, Madras

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deepalibatra09@gmail.com

118

Hi, I am working with an IT company, and being in HR, I am asked to find out statutory compliances related to an IT (US Staffing) company and certifications that can be acquired by such companies like ISO, etc. I would really appreciate it if somebody could provide an expert opinion on this.

Thanks and Regards,
Deepali
HR Executive
15th October 2011 From United States, Fremont

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204

119

Important Issues in Contract Staffing Industry - F & F Settlement

Dear All, the essence of compliance with Section 25 F of the Industrial Disputes Act has been made clear by the Supreme Court of India in the reported case of Pramod Jha & others vs. State of Bihar, reported in 2003(3) SBR 617. To quote the very words of the Supreme Court, it has been held that:

“The underlying object of Section 25 F [the retrenchment provision in the Industrial Disputes Act] is twofold. Firstly, a retrenched employee must have one month's time available at his disposal to search for alternative employment, and so, either he should be given one month's notice of the proposed termination or he should be paid wages for the notice period. Secondly, the worker must be paid retrenchment compensation at the time of retrenchment, or before, so that once having been retrenched, there should be no need for him to go to his employer demanding retrenchment compensation. The compensation so paid is not only a reward earned for his previous services rendered to the employer but is also sustenance to the worker for the period which may be spent in searching for another employment.”

Retrenchment can be simply termed as termination. Two points therefore emerge:

Firstly, a terminated contract staffing employee must have one month's time available at his disposal to search for alternative employment, and so, either he should be given one month's notice of the proposed termination or he should be paid salary for the notice period.

Secondly, the contract staffing employee must be paid retrenchment compensation at the time of retrenchment, or before, so that once having been retrenched, there should be no need for him to go to the contract staffing company demanding retrenchment compensation. The compensation so paid is not only a reward earned for his/her previous services rendered to the contract staffing company but is also sustenance to the contract staffing employee for the period which may be spent in searching for another employment.

Regards,

V. Sounder Rajan, Advocates and Notaries & Legal Consultants

E-mail: [Email Removed For Privacy Reasons]
[Phone Number Removed For Privacy Reasons]
15th October 2011 From India, Bangalore

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(Fact Checked)-[response] The user's reply provides an accurate explanation of the essence of compliance with Section 25F of the Industrial Disputes Act regarding retrenchment provisions. The user correctly outlines the two-fold purpose of Section 25F as interpreted by the Supreme Court in the case of Pramod Jha & others vs. State of Bihar. The user's explanation of the requirements for terminated contract staffing employees aligns with the legal provisions. (1 Acknowledge point)

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204

120

Immediate Issues for Contract Staffing Entities

What are the circumstances in which the Central Government can prohibit the employment of Contract Labour under CLRA?

Prohibition

Apart from the regulatory action under the Contract Labour (Abolition Regulation) Act, CLRA provides the Authority, the "appropriate Government" under Sec 10(1) after consultation with the Central or State Board employing agency to prohibit any establishment in a process operation or other work. Such restrictions are often adopted based on the following criteria:

- If the work is in the nature of perennial;
- If the work is incidental or necessary for the work of an operation;
- If the work is sufficient to employ a significant number of full-time workers;
- If the work is usually done through periodic workers at this factory, or a similar setting.

The Central Government, on the recommendations of the Central Advisory Board, has prohibited the employment of contract labor in various operations and categories of jobs in different establishments. These details are available by checking the Notifications.

With Regards,

V. Sounder Rajan

Advocates & Notaries & Legal Consultants

E-mail: [Email Removed For Privacy Reasons]

[Phone Number Removed For Privacy Reasons]
19th October 2011 From India, Bangalore

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204

121

Gratuity Entitlement for Contract Staff

Recently, Mr. Justice K. Chandru of the Madras High Court - Madurai Bench, in the matter of Special Officer-Srirangam Co-operative Urban Bank Ltd, has held that every employee who has worked in an organization for five or more years is entitled to gratuity, irrespective of the following:

- Superannuation;
- Retirement;
- Resignation;
- Death;
- Disablement; or
- Any other terminology used by the employer to terminate the employee's service.

The only exception is under Section 4(6) of the Payment of Gratuity Act, which enables the employer to forfeit the gratuity under certain circumstances and by following a specified procedure if the employee had not been allowed to retire or reached the age of superannuation.

Our understanding of the verdict on its application in the Contract Staffing Industry is that invocation of Section 4(6) of the Payment of Gratuity Act may be particularly challenging due to the contract staff being deployed with a client.

Consequently, the entitlement for gratuity of the contract staff cannot be denied on any account.

With Regards,

V. Sounder Rajan

Advocates & Notaries & Legal Consultants

Email: [Email Removed For Privacy Reasons]

[Phone Number Removed For Privacy Reasons]
27th October 2011 From India, Bangalore

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122

Section 4(6)(b) of The Payment of Gratuity Act, 1972

The gratuity payable to an employee may be wholly or partially forfeited if:

- (i) The services of such an employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or
- (ii) The services of such an employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment.

The termination has to be done after the conduct of a Domestic Enquiry by appointing an Enquiry Officer. In the Contract Staffing Industry, the conduct of a Domestic Enquiry is next to impossible. Therefore, Section 4(6)(b) of The Payment of Gratuity Act, 1972 literally becomes inapplicable.

Regards,
Rajan Law Firm
27th October 2011 From India, Madras

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123

Non-Payment of Salary: Illegal Deduction from Salary of Contract Staff

Dear Friends, the Contract Staffing Industry may note that under the Payment of Wages Act, 1936, in case of delay in payment of wages or unlawful deductions in the salary of contract workers, there is a remedy under Section 15 of the Payment of Wages Act, 1936, which is extracted below:

Claims Arising Out of Deductions from Wages or Delay in Payment of Wages and Penalty for Malicious or Vexatious Claims

1. The State Government may, by notification in the Official Gazette, appoint a presiding officer of any Labour Court or Industrial Tribunal constituted under the Industrial Disputes Act 1947 (14 of 1947) or under any corresponding law relating to the investigation and settlement of industrial disputes in force in the State, or any Commissioner for Workmen's Compensation or other officer with experience as a Judge of a Civil Court or as a Stipendiary Magistrate to be the authority to hear and decide for any specified area all claims arising out of deductions from the wages or delay in payment of the wages of persons employed or paid in that area, including all matters incidental to such claims:

Provided that where the State Government considers it necessary to do so, it may appoint more than one authority for any specified area and may, by general or special order, provide for the distribution or allocation of work to be performed by them under this Act.

2. Where contrary to the provisions of this Act, any deduction has been made from the wages of an employed person or any payment of wages has been delayed, such person himself or any legal practitioner or any official of a registered trade union authorized in writing to act on his behalf, or any Inspector under this Act, or any other person acting with the permission of the authority appointed under sub-section (1) may apply to such authority for a direction under sub-section (3):

Provided that every such application shall be presented within twelve months from the date on which the deduction from the wages was made or from the date on which the payment of the wages was due to be made, as the case may be:

Provided further that any application may be admitted after the said period of twelve months when the applicant satisfies the authority that he had sufficient cause for not making the application within such period.

3. When any application under sub-section (2) is entertained, the authority shall hear the applicant and the employer or other person responsible for the payment of wages under section 3 or give them an opportunity of being heard and after such further inquiry (if any) as may be necessary, may, without prejudice to any other penalty to which such employer or other person is liable under this Act, direct the refund to the employed person of the amount deducted or the payment of the delayed wages together with the payment of such compensation as the authority may think fit, not exceeding ten times the amount deducted in the former case and not exceeding twenty-five rupees in the latter, and even if the amount deducted or the delayed wages are paid before the disposal of the application, direct the payment of such compensation as the authority may think fit, not exceeding twenty-five rupees:

Provided that no direction for the payment of compensation shall be made in the case of delayed wages if the authority is satisfied that the delay was due to:

(a) a bona fide error or bona fide dispute as to the amount payable to the employed person, or

(b) the occurrence of an emergency or the existence of exceptional circumstances such that the person responsible for the payment of the wages was unable, though exercising reasonable diligence, to make prompt payment, or

(c) the failure of the employed person to apply for or accept payment.

4. If the authority hearing an application under this section is satisfied:

(a) that the application was either malicious or vexatious, the authority may direct that a penalty not exceeding fifty rupees be paid to the employer or other person responsible for the payment of wages by the person presenting the application; or

(b) that in any case in which compensation is directed to be paid under sub-section (3), the applicant ought not to have been compelled to seek redress under this section, the authority may direct that a penalty not exceeding fifty rupees be paid to the State Government by the employer or other person responsible for the payment of wages.

4A. Where there is any dispute as to the person or persons being the legal representative or representatives of the employer or of the employed person, the decision of the authority on such dispute shall be final.

4B. Any inquiry under this section shall be deemed to be a judicial proceeding within the meaning of sections 193, 219, and 228 of the Indian Penal Code (45 of 1860).

5. Any amount directed to be paid under this section may be recovered:

(a) if the authority is a Magistrate, by the authority as if it were a fine imposed by him as Magistrate, and

(b) if the authority is not a Magistrate, by any Magistrate to whom the authority makes application in this behalf as if it were a fine imposed by such Magistrate.

There is also a provision for class action under Section 16 of the Payment of Wages Act, 1936, which is also extracted below:

Single Application in Respect of Claims from Unpaid Group

1. Employed persons are said to belong to the same unpaid group if they are borne on the same establishment and if deductions have been made from their wages in contravention of this Act for the same cause and during the same wage-period or periods, or if their wages for the same wage-period or periods have remained unpaid after the day fixed by section 5.

2. A single application may be presented under section 15 on behalf or in respect of any number of employed persons belonging to the same unpaid group, and in such case, every person on whose behalf such application is presented may be awarded maximum compensation to the extent specified in sub-section (3) of section 15.

3. The authority may deal with any number of separate pending applications presented under section 15 in respect of persons belonging to the same unpaid group as a single application presented under sub-section (2) of this section, and the provisions of that sub-section shall apply accordingly.

In case the employer delays the payment of salary or F & F, the aggrieved employee will normally send a demand or a legal notice, and the contract staffing company would need to comply with the demand to avoid legal proceedings. On failure, it would be followed up with an application to the local appropriate authority under the Payment of Wages Act as extracted below:

Form of Individual Application

[See sub-section (2) of section 15 of the Payment of Wages Act]

In the Court of the Authority appointed under the Payment of Wages Act, 1936 (4 of 1936) for ……… area.

Application No. ……… of ………

Between A.B.C. ……… Applicant (through a legal practitioner/an official of ……… which is a registered Trade Union.)

And X.Y.Z………… opposite party:

The applicant states as follows:

1. A.B.C. is a person employed in the/on the factory/railway/industrial establishment entitled and resides at ………

The address of the applicant for the service of all notices and processes is:

…………

2. X.Y.Z., the opposite party, is the person responsible for the payment of his wages under section 3 of the Act, and his address for the service of all notices and processes is:…………

3. (1) The applicant's wages have not been paid for the following wage-period(s)……(give dates)

Or A sum of Rs…… has been unlawfully deducted from his wages of amount for the wage-period(s) which ended on …… (give dates)

(2) [Here give any further claim or explanation].

4. The applicant estimates the value of the relief sought by him at the sum of Rs……

5. The applicant prays that a direction may be issued under sub-section (3) of section 15 for:

(a) Payment of delayed wages as estimated or such greater or lesser amount as the Authority may find to be due.

Or Refund of the amount illegally deducted.

(b) Compensation amounting to ………

The Applicant certifies that the statement of facts contained in this application is to the best of his knowledge and belief accurate.

Signature or thumb impression of the employed person, or legal practitioner or official of a registered trade union duly authorized.

There is also a provision for group action as per the following format:

Form of Group Application

[See sub-section (2) of sections 15 and 16 of Payment of Wages Act]

In the Court of the Authority appointed under the Payment of Wages, Act, 1936 (4 of 1936) for ……… area

Application No……… of ………

Between A.B.C………… Applicants

A legal practitioner

(through a legal practitioner/an official of ……… which is a registered union).

And X.Y.Z………… Opposite Party.

The applicants state as follows:

1. [The applicants whose names and permanent addresses] appear in the attached schedule are persons employed in the/on the/factory/railway/industrial establishment entitled and reside at ………

The address of the applicants for service of all notice and processes is:

…………

2. X.Y.Z., the opposite party, is the person responsible for the payment of wages under section 3 of the Act, and his address for the service of all notices and processes is:

…………

3. The applicants' wages have not been paid for the following wage-period(s):

…………

4. The applicants estimate the value of the relief sought by them at the sum of Rs……

5. The applicants pray that a direction may be issued under sub-section (3) of section 15 for:

(a) Payment of the applicants' delayed wages as estimated…… or such greater or lesser amount as the Authority may find to be due.

(b) Compensation amounting to……

The Applicants certify that the statement of facts contained in this application is, to the best of their knowledge and belief, accurate.

Signature or thumb impression of two of the Applicants, or legal practitioner, or an official of a registered trade union duly authorized.

SCHEDULE

__________________________________________________ ______________________

S.No. Name of Applicant Permanent Address

__________________________________________________ ______________________

1 2 3

Regards,
29th October 2011 From India, Madras

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sambasivakamasani

124

I have a doubt regarding the following:

Government Activities and Sovereign Functions

- Any activity of the Government related to the sovereign functions of the Government, including all activities carried on by the departments of the Central Government dealing with defense research, atomic energy, and space, is mentioned. Though it is incorporated, it is not gazetted and hence not operative.

1) The Hon. Supreme Court has also kept this portion in abeyance.
2) The Group of Ministers and Group of Secretaries differed.
3) In Parliament, it was presented that this portion is inoperative. It is hanging in the fire because an alternative remedy is not shown.

Hence, please check and guide us.

Regards,
5th November 2011 From India, Nellore

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125

Supreme Court's Interpretation of 'Industry'

The Supreme Court, in the matter of State Of U.P vs. Jai Bir Singh on 5 May 2005, comprising the Bench of Honorable Justices N S Hegde, K.G Balakrishnan, D Dharmadhikari, and A Kumar, addressed the definition of 'industry.' This included some activities of the government while excluding others, particularly those involving sovereign functions and 'public utility services.'

"In response to the Bangalore Water Supply and Sewerage Board case, the Parliament intervened and substituted the definition of 'industry' by including some governmental activities and excluding others. For the past 23 years, the amended definition has remained unenforced. The government has faced difficulties in implementing the new definition due to judicial interpretation. It is high time for the court to reexamine this interpretation. The Legislature should have greater freedom to propose comprehensive legislation to meet the demands of employers and employees in both public and private sectors. The difficulties faced by the legislature and executive in enforcing the amended Industrial Law, largely due to judicial interpretation, need to be addressed. The experience of the Act's provisions should guide the creation of a better and more comprehensive law."

The word 'industry' was redefined under the Amendment Act, considering the judicial interpretation in the Bangalore Water case. Without such an expansive definition, Parliament could have opted for a more expansive or restrictive definition, including or excluding employment in liberal professions based on social conditions and demands for social justice. The judicial interpretation has been a barrier to enforcing the amended definition for the last 23 years.

In the Bangalore Water case, not all judges invoked the doctrine of noscitur-a-sociis. We accept the view expressed by the six judges' Bench in the Management of Safdarjung Hospital case that, while profit motive is irrelevant, the activity must be 'analogous to trade or business in a commercial sense' to be considered an 'industry.' The enumeration of 'public utility services' in section 2(n) should not be decisive unless it meets the test of being an 'industry' as defined in clause (j) of section 2.

The decision in the Management of Safdarjung Hospital case was unanimous, and we agree with the interpretation of the definition clause: "In the collocation of terms and their definitions, these terms have a definite economic content and are concerned with the production, distribution, and consumption of wealth and material services. Industry means trade and business, manufacture, or undertaking analogous to trade or business for producing material goods or wealth and services."

The six judges upheld the observations in the Gymkhana Club case: "Before work can be described as an industry, it must bear the character of 'trade,' 'business,' 'manufacture,' or 'calling,' or be an undertaking resulting in material goods or services."

In construing the definition clause, one must consider that in activities like hospitals and education, concepts like the right to 'strike' or 'close down' are not contemplated as they serve the community. If patients or students are left to the employer and employees' discretion, the service purpose would be frustrated.

We agree with Justice P.B. Gajendragadkar's observation in the Harinagar Cane Farm case: "In dealing with industrial matters, adjudication should refrain from enunciating general principles or adopting doctrinaire considerations. It should address problems as they arise and confine decisions to the points strictly arising between the parties."

We conclude with the honorable judges in the Hospital Mazdoor Sabha case: "Though section 2(j) uses broad terms, a line must be drawn to exclude some callings or undertakings."

This Court must reconsider where the line should be drawn and what limitations should be reasonably implied in interpreting section 2(j). This is a difficult problem, especially when the legislature and executive remain silent and have kept an important amended provision dormant.

We do not consider it necessary to say more and leave it to the larger Bench to give meaning and effect to the definition clause in the present context, considering the amended definition of 'industry' kept dormant for 23 years. The demands of employers and employees and the legislature and executive's inability to enforce the Amendment Act compel us to make this reference.

Let the cases be placed before the Honorable Chief Justice of India for constituting a suitable larger Bench for reconsideration of the judgment in the Bangalore Water case.
5th November 2011 From India, Madras

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Section 9C was introduced in the Industrial Disputes (Amendment) Act, 2010 (No. 24 of 2010) of the Industrial Disputes Act. A Grievance Redressal Machinery has been introduced by the insertion of Section 9C. We are inquiring whether Section 9C comes into effect after the issue of a notification. We find that the wordings used in Section 9C are self-operative, as seen below, and a further notification may become superfluous as the provision is clear:

Setting up of Grievance Redressal Machinery

9C. (1) Every industrial establishment employing twenty or more workmen shall have one or more Grievance Redressal Committees for the resolution of disputes arising out of individual grievances.

(2) The Grievance Redressal Committee shall consist of an equal number of members from the employer and the workmen.

(3) The chairperson of the Grievance Redressal Committee shall be selected from the employer and from among the workmen alternatively on a rotation basis every year.

(4) The total number of members of the Grievance Redressal Committee shall not exceed more than six: Provided that there shall be, as far as practicable, one woman member if the Grievance Redressal Committee has two members, and in case the number of members is more than two, the number of women members may be increased proportionately.

(5) Notwithstanding anything contained in this section, the setting up of the Grievance Redressal Committee shall not affect the right of the workman to raise an industrial dispute on the same matter under the provisions of this Act.

(6) The Grievance Redressal Committee may complete its proceedings within thirty days of receiving a written application by or on behalf of the aggrieved party.

(7) The workman who is aggrieved by the decision of the Grievance Redressal Committee may prefer an appeal to the employer against the decision of the Grievance Redressal Committee, and the employer shall, within one month from the date of receipt of such appeal, dispose of the same and send a copy of his decision to the workman concerned.

Furthermore, Section 9C has already been notified.

Regards,
Rajan Associates
13th September 2012 From India, Bangalore

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Sub: Changes in Section 1(6) of the Payment of Wages Act

Recently, the Government of India issued Notification S.O. No.2260(E) dated 20th September 2012, amending Section 1(6) of the Payment of Wages Act. The monthly ceiling on wages is now Rs.18,000/- per month.

Effect of the Amendment

With this change, the provisions of the Payment of Wages Act do not apply to those earning Rs.18,000/- per month and above. Only those below this ceiling will benefit from the provisions of the Payment of Wages Act.

Similar to the current action by the Central Government, when the ceiling was increased, the Andhra High Court, in the matter of The Singareni Collieries vs. The Singareni Collieries Company decided on 7th July 2011, HON'BLE SRI JUSTICE K.C. BHANU held as follows:

“Therefore, when the Central Government issued a Gazette notification extending all the provisions of the Act to all classes of persons, it can be made applicable to all persons working in the first respondent company irrespective of their wages. While substituting the present provision under Section 1(6) of the Act, the statement of objects and reasons of the Amendment Act 1947 of 2003 is very clear that the then existing ceiling of Rs.1,000/- per month was last revised to Rs.1,600/- per month in 1982. Since then, a large number of persons have gone out of the purview of the Act due to successive rises in wage levels resulting from the rise in the cost of living. With a view to covering more employed persons, it is proposed to enhance the wage ceiling from Rs.1,600/- per month to Rs.6,500/- per month. So, the legislature thought it fit to regulate the payment of wages to certain classes of persons as indicated in this Act to benefit certain classes of employed persons.”

Further, His Lordship Mr. Justice K. Chandru of the Madras High Court, in a recent judgment on 28.02.2011 in the matter of P. Palani vs. The District Manager on 28 February 2011, observed that:

“Under Section 1(6) of the Payment of Wages Act, the Act has been made applicable to persons who are drawing wages not exceeding Rs.10,000/- per month, which limit can be increased periodically at the interval of every five years. The said notification has been issued on 8.8.2007 by the Central Government's notification in S.O.1380 (E).”

With Regards,

V. Sounder Rajan

Advocate - Labour & HR & Consumer Law Consultant - Chennai

Legal Consultant for Indian Staffing & Recruiting Industry

By appreciation, we make excellence in others our own property.

Voltaire
21st October 2012 From India, Bangalore

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Need for Indian Labour Contract Law

The topic "Does India require faster Labour Law Reforms" is much debated at every Global and Indian Contract Staffing Forum. Recently, in October 2012, during the Annual Conference of the Indian Staffing Federation, their Indian Staffing Industry Research Paper 2012 outlined specific reforms needed. In fact, the need for adopting the Private Employment Agency Convention of the International Labour Organisation (Convention No. 181 of 1997) was raised in the same document. By adopting this convention, it will be a step forward in giving statutory recognition to the Contract Staffing Industry.

Adapting and adopting Indian laws to international conventions has been an ongoing process. It is a simple legislative process. However, adopting the Private Employment Agency Convention of the International Labour Organisation (Convention No. 181 of 1997) will face serious resistance from Trade Unions.

Everyone echoes that India should follow China's example in economic reforms and the path of globalization. Without waiting for the adoption of the Private Employment Agency Convention, we can replicate the Labor Contract Law (LCL) enacted by the Chinese Parliament in 2008. The Chinese political system, modeled on the socialist pattern, has enacted a Labor Contract Law (LCL), and adopting a similar one in India may not be difficult for the government to convince Trade Unions. The Trade Unions will support the move as it contains many pro-labour provisions and provides better bargaining strength for the Unions.

The delay in implementing reforms in India's Labour Law sphere is due to the fact that changes in laws must be brought about by the Centre for central acts and the respective State Governments for state laws. This is a time-consuming process. Before making any change, stakeholders have to be consulted. It is a long-drawn process. It would be better to start by enacting a similar law as done in China. For enacting this law, the Contract Labour (Regulation & Abolition) Act has to be either amended suitably or a new law enacted on the Chinese model.

Who Can Be the Movers for Enacting the Indian Labor Contract Law (ILCL)?

Definitely, it will be the Business Associations, and each of the Indian Staffing companies in India needs to move the government to enact a special law. The Association and Federations of Employers can take up this cause as they are the ultimate Principal Employers who will employ the Contract Labour.

To narrate the history, when the Chinese Law was enacted, the Chinese legislature, during March 2006, launched the public consultation process for its draft Labor Contract Law. By April, the legislators received 191,849 responses, a majority of them from workers. Meanwhile, foreign investors and commercial groups also studied the draft law and submitted their comments. The process included recommendations from the following bodies:

- European Union Chamber of Commerce in China (EUCCC)
- American Chamber of Commerce in Shanghai (ACCS)
- U.S.-China Business Council

The first two largest foreign investors' organizations in China submitted recommendations and opinion papers on the Draft Labour Contract Law to the Legal Affairs Committee of the Standing Committee of the National People's Congress. ACCS is said to represent over 1,300 corporations, including 150 Fortune 500 companies, with big names like Dell, Ford, General Electric, Microsoft, and Nike. EUCCC in China represents more than 860 members. The U.S.-China Business Council represents 250 U.S. companies doing business across all sectors in China.

In India, Trade Unions have more stakes in the Labour Law legislative process than the Industry or its Association and Forum. Therefore, the whole legislative process hinges on Trade Union acceptance/consent. The Association Federation would need to invite the top Trade Union Leaders of the country for a dialogue on a Draft Labour Contract Law to be drafted by the Federation. This needs to be done on an emergent basis.

Until the reforms are implemented, the staffing business in India has to operate within the existing parameters of labour laws. The business and legal team of every staffing company would need to tune operations to the existing provisions and help the business team operate optimally within the prevalent labour law framework without incurring additional costs until the reforms are implemented. This is where the success of any staffing entity lies.

With Regards,

V. Sounder Rajan
Advocate - Labour & HR & Consumer Law Consultant - Chennai
Legal Consultant for Indian Staffing & Recruiting Industry
1st December 2012 From India, Bangalore

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(Fact Checked)-[response] The information provided regarding the need for Indian Labor Contract Law and referencing the Chinese Labor Contract Law is factually correct and well-analyzed within the context of labor law reforms. The user has provided a detailed and insightful perspective on potential legislative changes in India's labor laws. (1 Acknowledge point)

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Dear All,

Recently, there was a furore at the Employees' Provident Fund Organisation (Ministry of Labour & Employment, Govt. of India) Head Office dated 30th November 2012 regarding internal instructions given for assessment under Section 7A of the EPF Act.

Impact on Payrolling in the Contract Staffing Industry

The aspect of the Circular that has a significant impact on the payrolling in the contract staffing industry is as follows:

Splitting of Wages

Basic wages, by its own definition, encompass all payments except the specified exclusions. All such allowances that are ordinarily, necessarily, and uniformly paid to employees are to be treated as part of the basic wages. The confusion in the definition of wages (and hence the issue of splitting of wages) primarily arises from the expression "commission or any other similar allowance payable to the employee" in Section 2(b)(ii) of the Act. "Commission" and "any other similar allowance" are often read as two separate expressions, leading "any other allowance" to be interpreted as an omnibus exclusion, thus promoting the practice of splitting wages to avoid PF liabilities.

The expression "commission or any other similar allowance payable to the employee" is one continuous term, meaning commission or any other "commission"-like allowance regardless of the nomenclature used. Therefore, "basic wages" are subject to exclusions expressly mentioned in the above definition and no others.

These instructions were quite drastic, giving the Department the freedom to calculate contributions based on the gross salary instead of basic plus DA, including all or any allowance regardless of its name.

Fortunately, on 14-12-2012, a news report in The Hindu stated that the Hon'ble Minister for Labour has assured that the Circular is being put on hold. This is good news for the principal employers and contract staffing players. As of now, there is nothing to worry about.

Regards,
Rajan Associates
17th December 2012 From India, Bangalore

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(Fact Checked)-The user reply correctly addresses the issue of splitting of wages under the EPF Act, providing insights into the impact on payrolling in the Contract Staffing Industry. The mention of the Circular being kept in abeyance by the Minister for Labour is accurate based on the latest information. (1 Acknowledge point)

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Government Activities and Sovereign Functions

Any activity of the government related to the sovereign functions of the government includes all activities carried out by the departments of the Central Government dealing with defense research, atomic energy, and space. I request the respectable VS Rajan Associates to check this particular paragraph as it is not gazetted and hence not in operation. In response to one of the RTI queries, the Labour department clarified that it is not gazetted. Furthermore, in the first paragraph itself, it is stated that it will come into operation from the date of gazettification. Please check and confirm.

Regards.
17th December 2012 From India, Nellore

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Dear HR Friends It was informed earlier that the EPF Circular of 30 th November 2012 has been kept in abeyance.The Abeyance Circular is attached for reference. rajanassociates
22nd December 2012 From India, Bangalore

Attached Files (Download Requires Membership)

2012_Circular_7a Proceedings_kept in abeyance_18Dec2012.pdf (36.0 KB, 37 views)

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Extracting the News Report in CLR

Posted in Labour Law: News on May 28, 2013, which is also reported in the Times of India of the same date:

The Employees Provident Fund Organization (EPFO) is readying to re-notify a new definition of "compensation" that will include all allowances. Currently, employers contribute only 12% of the basic salary and dearness allowance, which is not paid by most companies currently, towards their share of "matching" provident fund and the Employees Pension Scheme contribution. Hence, for several thousands of employees, the basic salary actually remains constant, while increments are passed by way of enhanced or new allowances. In most cases, the tax liability for the employee goes up due to the salary hike — and companies earn tax credits on salary-related expenses over the same — however, the statutory provident fund contribution remains unchanged in most cases.

As a result of the above-stated logic, EPFO had notified similar changes last year.

Regards
10th June 2013 From India, Bangalore

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varadan sounder rajan

133

Dear Friends, we are starting this multi-part overview of Contract Staffing law in light of judicial precedents and the Contract Labour (Abolition and Regulation) Act, 1970. I'm sure it will be informative for the Indian Contract Staffing Industry players.

Many staffing industry players are not aware of the earliest case law in outsourcing as decided by the Indian Supreme Court.

Earliest Apex Court Decision on Outsourcing

Way back in 1968, the case law was laid down by the Hon'ble Supreme Court in the matter of GHATGE & PATIL CONCERN'S EMPLOYEES' UNION vs. GHATGE & PATIL (TRANSPORTS) PRIVATE LTD. & ANR. It is a very interesting case.

The facts are like this:

GHATGE & PATIL (TRANSPORTS) PRIVATE LTD, the company, carried on the business of transport and removal of goods by road. It owned a fleet of trucks and employed drivers and cleaners to run them. In 1963, finding difficulty in observing the provisions of the Motor Transport Workers Act 1961, GHATGE & PATIL (TRANSPORTS) introduced a scheme whereby the trucks, instead of being run by them, were hired out to contractors at a fixed rate per mile. It is the first reported case of organized outsourcing in India. To aid the process of outsourcing, employees of the company who were engaged in running the trucks resigned their jobs, and most of them who had been erstwhile drivers became contractors under the scheme. This outsourcing move was resisted by the Union GHATGE & PATIL CONCERN'S EMPLOYEES' UNION. The Union raised a dispute asking for the reinstatement of the ex-employees who had been given work on a contract basis. The matter was agitated in the Tribunal. The Tribunal held that the contract system could not be said to be an unfair labor practice, for the ex-employees were never coerced or forced to resign their jobs, and they got more benefits from the contract system than from their original contract of employment.

In appeal to the Apex Court, the GHATGE & PATIL CONCERN'S EMPLOYEES' UNION contended that the ex-employees of the company continued to be workmen notwithstanding that they were posed as independent contractors, and the beneficent legislation conceived in the interests of transport workers was being set at naught by the Management and that the setting up of the contract system amounted to unfair labor practice.

In our next part, we will deal with the manner in which the Hon'ble Bench of the Apex Court steered the matter for a landmark resolution when the very word "outsourcing" was unknown.
7th November 2013 From India, Pune

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(Fact Checked)-The user's reply contains accurate information about the early Supreme Court decision related to outsourcing in India. The case of GHATGE & PATIL CONCERN'S EMPLOYEES' UNION Vs. GHATGE & PATIL (TRANSPORTS) PRIVATE LTD is correctly summarized. (1 Acknowledge point)

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Dear V.S. Rajan, I have no words to express my sincere appreciation for your contribution! It's a gem! "Way back in 1968, the case law was laid down by the Hon'ble Supreme Court in the matter of GHATGE & PATIL CONCERN'S EMPLOYEES' UNION Vs. GHATGE & PATIL (TRANSPORTS) PRIVATE LTD. & ANR. It is a very interesting case." https://www.citehr.com/285737-legal-...#ixzz2k46LotSD I am waiting for the next installment of your post. The Hon'ble Supreme Court has been so futuristic and amazing in its judgment on an issue which was unknown at that time but would become so ubiquitous fifty years later! Warm regards.
8th November 2013 From India, Delhi

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varadan sounder rajan

135

EPFO Circular Dated 8th October 2013

The recent Circular No. C.III/110001/4/3 (71) Misc./2013/DL/12802 dated 8th October 2013, issued by the EPFO to all Regional P.F. Commissioners, is creating ripples among PF remitters, particularly in the staffing industry.

Upon reviewing the circular, we find that it is addressed to various Government Departments, Undertakings, and Autonomous bodies (Principal Employers - PE) for activities like watch-ward, housekeeping, and data entry. The intent of the circular appears to be aimed at Principal Employers who pay contributions on the whole of the salary or Rs.6,500/-, whichever is lower, and make that component part of the payment to the Contractor. However, the Contractor splits up the wage and deposits the contribution on a lesser basic salary. Therefore, the EPFO is asking PEs to verify whether the contractors are depositing the contributions collected from the PEs. Special attention may be given to paragraphs 5 and 7 of the Circular, which are extracted below:

"5. Instances have come to notice that placement agencies and security agencies, which provide guards and other personnel to Government Departments, Undertakings, and Autonomous Bodies, often take the employer's contribution on full wages from these employers and then bifurcate the wages of the personnel provided by them into basic wages and various other allowances, which do not form part of basic wages to evade the provident fund. This diversion of residual employer's contribution amounts to pilfering of provident fund money. Thus, Government Departments, Undertakings, and Autonomous Bodies, which settle the periodic bills of agencies and contractors, unwillingly become a party to this pilferage.

7. In this context, all the Regional Provident Fund Commissioners in charge of Regional/Sub Regional Offices are advised to start a dialogue with the Government Departments, Undertakings, and Autonomous Bodies functioning under your jurisdiction about their duties and responsibilities while engaging personnel for watch-ward, housekeeping, data entry, etc., through various agencies and contractors to check such pilferage of provident fund monies. The Officer-in-charge is also advised to collect the details of personnel engaged through various agencies and contractors from these Government Departments, Undertakings, and Autonomous Bodies and check with the records available in their own offices about such agencies and contractors. Wherever pilfering of provident fund money is noticed, immediate action shall be initiated against the erring agencies and contractors to check such unhealthy practices harming the interest of the workers."

In light of the above, the move of the Department is to ensure that there is no pilferage of PF contributions and to initiate action against the erring contractors, particularly those serving various Government Departments, Undertakings, and Autonomous bodies who receive more from the PE and remit less or do not remit at all. Those who are compliant need not fret about the Circular.

If you need a copy of the Circular, we can forward a copy upon request.

Regards,
V. Sounder Rajan
Advocate - Labour & HR & Consumer Law Consultant - Chennai
Legal Consultant for Indian Staffing & Recruiting Industry
14th November 2013 From India, Pune

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(Fact Checked)-The user's reply contains accurate information regarding the EPFO Circular dated 8th October 2013 and its implications for the Staffing Industry. The circular addresses concerns about PF contribution pilferage by contractors working with Government Departments and Autonomous Bodies. The user's explanation aligns with the content of the circular. (1 Acknowledge point)

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136

Dear All,

In this part, we are continuing with the first reported case of outsourcing in India in the matter of GHATGE & PATIL CONCERN'S EMPLOYEES' UNION Vs. GHATGE & PATIL (TRANSPORTS) PRIVATE LTD. & ANR, and it was decided by the Hon'ble Supreme Court of India way back in 1968.

The most striking portion of the judgment is an eye-opener and a biblical pronouncement. If an abridged version is provided, the reader will not get the impetus of the actual words spoken by the Hon'ble Apex Court. Therefore, we extract the following relevant portion for your own comprehension:

“The apprehension of the Company is that some of the regulatory provisions of the Act are incapable of being observed properly in the case of drivers and cleaners going on long journeys because there is no means of enforcing them. For example, the provisions about hours of work, hours of rest, etc., are not easy to enforce en route or at far-off places. Therefore, rather than run the risk of losing the permit for want of compliance with the Motor Transport Workers Act, the Company has decided not to run transport trucks itself but to let them be run by independent hirers. There does not appear to be any bar in law to such action. Section 59 of the Motor Vehicles Act contemplates the transfer of permits with the permission of the Transport Authorities, and this enables any person to whom a vehicle covered by the permit is transferred to get the right to use the vehicle in the manner authorized by the permit. Here the vehicle is not transferred but is only let out on hire, and hence there is prima facie no need for permission. The Union made no attempt before us to establish that the inauguration of the contract system offended the Motor Vehicles Act or was prohibited under it. No objection to the system by the Authorities under the Motor Vehicles Act was proved in the case. The operators also seem to be happy because no operator appeared to complain, and the only dissatisfaction has been registered by the Union, which apparently lost the allegiance of some of its former members and even office bearers. In view of the findings of the Tribunal, which we see no reason to disapprove, it must be held that the drivers voluntarily resigned and entered into the agreements since they apparently considered them to be more favorable than the terms of their former employment. In this view of the matter, it is difficult to hold that the Tribunal was wrong in its conclusion that there was no exploitation of the drivers. It is also equally true that there is no bar in law to the introduction of the system. The Union, however, contends that on the analogy of some cases of this Court in which contract labor was put down as unfair labor practice because it involved exploitation of labor, we should declare this system also to be harmful to the interests of labor. Contract labor was declared in this Court to be an unfair labor practice because the intention was to introduce a middleman to avoid observance of laws and to deny to labor the advantages it had acquired by bargaining or as a result of awards. Such is hardly the case here. The two systems were there for the drivers to choose. It is reasonable to think that the drivers must have chosen a system that was considered by them to be more beneficial to themselves. There was no compulsion for the drivers to resign their jobs, and they did so voluntarily, obviously thinking that the new system was more profitable to them. We cannot lose sight of the fact that some of the office-bearers of the Union were among the first to resign. Many of the drivers resigned the jobs and entered into agreements even after the dispute was taken up by the Union. The present case is, therefore, not analogous to the case of contract labor where employment of labor through a contractor or middleman put the labor at a disadvantage in collective bargaining and thus robbed labor of an important weapon in its armory.

The matter of dispute no doubt referred in the second part to ex-drivers but it referred generally to the new system in the first. The Tribunal was wrong in thinking that the first part also referred to the ex-drivers (now operators). On the whole, however, it is clear that the Company has not done anything illegal. A person must be considered free to arrange his business so that he avoids a regulatory law and its penal consequences, which he has, without the arrangement, no proper means of obeying. This, of course, he can do only so long as he does not break that or any other law. The Company has declared before us that it is quite prepared, if it was not already doing so, to apply and observe the provisions of the Motor Transport Workers Act in respect of its employees proper where such provisions can be made applicable. In view of this declaration, we see no reason to interfere because Parliament has not chosen to say that transport trucks will be run only through paid employees and not independent operators. The appeal fails, but in the circumstances of the case, we make no order as to costs.

In our next part, in a nutshell, we will deal with questions that arose for consideration in the above case and the decision rendered.

Regards,

V. Sounder Rajan

Advocate - Labour & HR & Consumer Law Consultant - Chennai

Legal Consultant for Indian Staffing & Recruiting Industry
22nd November 2013 From India, Pune

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