Labour Laws in India Applicable To IT Companies

The recent and ongoing economic down surge has resulted in a large number of IT jobs being cut and hiring strictures being put in place, both of which, quite understandably, have not gone down well with the young IT professionals the country churns out every year. In 2013, the incident of the fresh HCL recruits forming a Union and staging protests after the IT Company delayed their joining dates at least five times officially, shows a change in the trend. Also, there has been a sudden rise in Unions like the All India IT Employee Association. Whether, such a change in the trend bodes well, remains to be seen.

A common misconception in the IT industry is that Trade Unions Act is not applicable to the IT industry. Employers as well as employees strongly believe that employees of an IT Company do not have the right to form a Trade Union. However, nothing is further from the truth than this. The Fundamental Right to form associations or unions is accorded to all citizens under Article 19 (1) (c) of the Constitution of India and therefore, like all citizens, even IT employees can form and/or join Trade Unions. Now, whether the particular employee is a workman or not is a subject matter of judicial scrutiny. Whether a software professional/software engineer/IT employee can be termed an employee or a workman is entirely a question of fact, the answer to which depends on a number of factors such as the nature of work of the individual, his remuneration, his decision making powers, use of mental faculties, extent of involvement with the business of his company, power of supervision etc.

In light of this, it is necessary to understand how some labour laws are applicable to the IT and ITES industry;

Labour Welfare Enactments:

The Trade Unions Act, 1926

“Trade Union” under the Act is defined as, “… any combination, whether temporary or permanent, formed primarily for the purpose of regulating the relations between workmen and employers or between workmen and workmen, or between employers and employers, or for imposing restrictive conditions on the conduct of any trade or business, and includes any federation of two or more Trade Unions.” By virtue of the right granted to all citizens under Article 19 (1) (c) of the Constitution of India to form associations, even IT employees can form Trade Unions. Although the Act does not make registration compulsory, registration is necessary to be entitled to the benefits provided to the Unions under the Act. Under the provisions of the Trade Unions Act, 1926, any 7 or more members of a trade union may apply in the prescribed manner to the Registrar of Trade Unions for registration of the union. A trade union after registration becomes a body corporate, gets perpetual succession and common seal, can acquire and hold both movable and immovable property, can enter into a contract and can even sue and be sued in its registered name.

Shops & Establishments Act (Bombay Shops & Establishments Act, 1948)

IT and ITES companies in a particular State are covered within the definition of ‘commercial establishments’ under the The Shops & Establishments Act of the State. Chapter VI of the Bombay Shops & Establishments Act, 1948 covers work timings for young persons and women in a commercial establishment;

Section 33(3) of the Act states that no woman shall be required or allowed to work in an establishment after 9.30 pm.

Schedule II of this Act under Exemption no 476 (for Software and IT establishments) including Customer Service Care Centre operating through Computer in the state of Maharashtra states that section 33(3) shall be subject to the following:

(i) Special arrangement should be made for protection of female employees working before 6.00 am and after 8.30 pm including transport.

(ii) Female employees should be provided jobs jointly or in groups.

(iii) Arrangement for rest rooms and lockers should be made for woman employees.

Section 34 A states that no young person or woman working in any establishment, whether as an employee or otherwise, shall be required or allowed to perform such work as may be declared by the State Government by notification in the Official Gazette, to be work involving danger to life, health or morals.

In the event an employer contravenes any provisions under this Act, an aggrieved employee may approach the local Labour Commissioner and file a complaint against the employer.

The Payment of Gratuity Act, 1972

The Payment of Gratuity Act applies to any establishment in which ten or more persons are employed, or were employed on any day of the preceding twelve months. It provides for the payment of gratuity to an employee, after he has rendered continuous service for not less than five years, on his superannuation, retirement or resignation, or on his death or disablement due to accident or disease. The five year continuous work requirement is not necessary if service is terminated due to death or disease, and upon death, the gratuity is paid to the nominee of the deceased employee. This piece of legislation is equally applicable, both to workmen and employees and as per provisions of the Act, no gratuity payable to an employee or workman shall be liable to attachment in execution of any decree or order of any civil, revenue or criminal court (Section 13). In the event, Gratuity is withheld by an employer or delayed; the aggrieved employee may approach the Labour Commissioner and file a complaint against the employer.

The Employees’ Provident Fund & Miscellaneous Provisions Act, 1952

The Provident Fund Act applies to any establishment employing twenty or more persons and it is the employer’s responsibility to ensure compliance of the provisions under Provident Fund Act. Under the Act, the salary ceiling set for the applicability of the Act to employees is currently Rs 6,500/-. Therefore, employees earning less than Rs 6,500/- are covered under the Act while those earning more than the ceiling amount have an option to make an application with their company to exempt them from making Provident Fund contributions. However, as a good practice, not only software firms but also other companies today insist on fresh recruits contributing to Provident Fund as it is a good saving and security scheme.

The Employees’ Compensation Act, 1923

What was earlier known as the Workmen’s Compensation Act, 1923 has now been amended to cover employees in its sweep as well. The Employees Compensation Act, 1923 aims at compensating workmen and employees for various injuries, even death, incurred during the course of their services. In the Bombay Shops and Establishments Act of 1948, Section 38A states that the provisions of the Employee’s Compensation Act, 1923 (VIII of 1923), and the rules made thereunder from time to time shall, mutatis mutandis apply to employees of an establishment to which the Act applies, as if they were workmen within the meaning of the Employee’s Compensation Act, 1923.

The Employees’ State Insurance Act, 1948

The ESI Act, 1948 applies to industries and establishments within a geographical area which has been notified by the appropriate Government as an area covered by the Act. In case a Commercial Establishment has been brought under the purview of this Act by the appropriate Government, the Act will cover employees whose compensation is up to Rs. 15,000/-.

Now, if an employee is covered under the ESI Act on account of his salary being under the Rs. 15,000/- cap, he is not eligible to receive benefits under The Employees Compensation Act, 1923. In a Commercial Establishment, therefore, employees who are below the Rs. 15,000/- cap shall be eligible to benefits under the ESI Act and those above, shall be covered by The Employees Compensation Act, 1923.

The Contract Labour (Regulation & Abolition) Act, 1970

The Contract Labour Act is applicable in case if the Commercial Establishment employs its personnel through a Service Provider for carrying out various jobs such as Security, cleaning, loading unloading etc. The registration of an establishment under this legislation is mandatory. In case the Service Provider employs 20 or more workers, registration of the Contactor is also mandatory. The Principle Employer is responsible for payment of wages and all statuary compliances. This Act shall apply to Housekeepers hired by the Establishment for upkeep of the premises and other menial duties.

The Payment of Bonus Act, 1965

In Maharashtra, the Payment of Bonus Act, 1965 applies to Commercial Establishments with 10 or more employees on any day during that accounting year. The Act lays down a scheme for the calculation of bonus for the employees, as well as payment of maximum and minimum bonus, deductions from bonus, etc. The Act provides for filing of various returns.

Equal Remuneration Act, 1976

As per Section 1 of the Equal Remuneration Act, 1976, the Act is applicable to establishments only via notifications issued by the Appropriate Government. As per notification number S.O. 144 (E), dated 02 March1977, ‘Data processing and tabulating services’ are covered under the ambit of the Act bringing IT and ITES industries under the sweep of the Act. The Act provides that employers cannot discriminate against men and women in matters of recruitment. It also gives the duty of Employer to pay equal remuneration to men and women workers for same work or work of a similar nature.

Industrial Employment (Standing Orders) Act, 1946

The Industrial Employment (Standing Orders) Act, 1946, covers industrial establishments wherein 100 or more workmen are employed on any working day. The Government can, however, apply the provisions of the Act to make it applicable to any industrial establishment employing less than 100 workmen. The definition of ‘industrial establishment’ under the Act covers industrial establishments as defined under The Payment of Wages Act, 1936 and The Factories Act, 1948. The Act essentially covers ‘workman’ (as defined under the Industrial Disputes Act, 1947. It therefore remains to be seen whether the Act will eventually be brought to cover IT & ITES industries.

In the state of Maharashtra, the Act covers industrial establishments wherein 50 or more workmen are employed on any working day and covers all establishments covered under the Bombay Shops & Establishments Act, 1948 bringing under its ambit the IT & ITES industry under its sweep.

The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959

This Act applies to establishments which operate in the private sector, hence Commercial Establishments are covered. However, the Act will only apply in a Commercial Establishment where ordinarily 25 or more persons are employed to work for remuneration. The Act mandates that, in the event of a notification to that effect by the appropriate Government (Govt. of Maharashtra in Maharashtra), a private sector establishment before filling up any vacancy in any employment in that establishment shall notify that vacancy to such employment exchanges as may be prescribed.

The Minimum Wages Act, 1948

The Minimum Wages Act applies to Commercial Establishments as the employees of a Commercial Establishment fall within Entry 17 of the Schedule to the Act. The said Entry provides that the Act applies to any person employed in a commercial establishment as defined in the Bombay Shops & Establishments Act, 1948. However, as the salary of employees in Commercial Establishment is normally quite high, compliance with the Act is usually not a problem.

Labour Welfare Enactments for women in the IT & ITES industry:

The Maternity Benefit Act, 1961

The Maternity benefit Act, 1961 exists for the benefit of working women who are pregnant, or have given birth or suffered a miscarriage. The Maternity Benefit Act applies to any establishment in which 10 or more persons are employed, or were employed, on any day of the preceding 12 months. It is to be noted that the portion describing applicability of the Act uses the word ‘persons’ and not ‘women’, meaning that it is not necessary that there must be a minimum of 10 women in an establishment for the Act to apply, only 10 persons, including at least one woman. The Act regulates the employment of women in such establishments for certain periods before and after child birth. They will be entitled to Maternity benefits as per the provisions of the Act.

The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

To solidify the Supreme Court’s guidelines laid down in Vishaka V/s State of Rajasthan and to have a comprehensive legal framework for the protection of women at workplaces, The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 was brought into force from 9 December 2013. The Act ensures that women are protected against sexual harassment at all the work places, be it in public or private. The Act has made provisions for the creation of Internal Complaints Committee’ (“ICC”) at each office or branch, of an organization employing at least 10 employees. The ICC shall comprise of senior level working women employed in company, two members from employees, one member from NGO or person familiar with issues relating to sexual harassment. As per the Act, the Government must set up a ‘Local Complaints Committees’ (“LCC”) at the district level to investigate complaints regarding sexual harassment from establishments where the ICC has not been constituted. The Act has laid down detailed procedure for dealing with complains and enquiries, protection of victims and prescribes punishment for sexual harassment and also punishes false complaints of harassment. The Act defines sexual harassment as sexual coloured remarks, demand or request for sexual favours, showing pornography, unwelcome physical, verbal, non-verbal sexual conduct and uninvited physical contact and advances. Noncompliance with this Act may invite a fine of up to Rs 50,000/- upon the employer and also cancellation of license to carry out business activities.

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