Forums For Adjudicating Employment Disputes
White-Collar Employees: Disputes relating to employment of private individuals are generally adjudicated by trial courts, namely District Courts and some High Courts. However, if an employment contract provides for resolution of dispute through arbitration, then arbitration would be available.
Blue-Collar Employees: The Industrial Disputes Act 1947 provides for Courts of Inquiry to inquire into industrial disputes, although it is not very common. There are also Labour Courts, Industrial Tribunals and National Tribunals for adjudication of industrial disputes.
Labour Courts adjudicate disputes relating to discharge, dismissal, reinstatement of workmen, grant of relief to workmen wrongfully dismissed, legality of strike or lock out etc.
Industrial Tribunals generally adjudicate disputes relating to leave, rules of discipline, closure of establishments, hours of work, rest intervals, bonus, provident fund, gratuity, etc.
National Tribunals primarily adjudicate disputes which, in the opinion of the Central Government involve questions of national importance or are likely to affect industrial establishments in more than one state.
The Employees’ State Insurance Act 1948 provides for Employees’ Insurance Courts for adjudication of disputes relating to rate of the contribution payable by an employer in respect of an employee.
The Employee’s Provident Funds and Miscellaneous Provisions Act, 1952 has a designated tribunal being the Employees Provident Funds Appellate Tribunal, for the purposes of hearing appeals arising out of a person aggrieved by a notification of the Central Government or any authority or with respect to any order passed by the concerned authority under the said Act.
The Main Sources Of Employment Law
Under the Constitution of India, labour is a subject in the Concurrent List where both Central & State Governments can enact legislation. As a result, National and State Legislations, Statutory Rules framed thereunder and Case Law (developed by various Courts) are the main sources of Employment Law. The Indian Contract Act 1872 and prevailing customs govern the clauses of the employment agreement
National Law And Employees Working For Foreign Companies
Generally, Indian laws apply equally to all persons who work within the territory of India, whether for Indian companies or for offices of foreign companies and prevail over any contrary provisions of the employment agreement. However, there may be some exceptions depending on the nature of the employment (such as a managing director / CEO or an officer in-charge, et.
National Law And Employees Of National Companies Working In Another Jurisdiction
Certain national enactments are applicable to Indian employees working abroad such as social security legislations including the Employees’ Provident Fund and Miscellaneous Provisions Act 1952 and Payment of Gratuity Act 1972. (Please refer to the Section entitled Social Security Contributions for further details.).
Indian Government had introduced certain compulsory regulations with respect to social security coverage for cross border employees defined as ‘International Worker’ under the Employees Provident Fund and Miscellaneous Provisions Act, 1952. The said regulations have been put in place to provide for avoidance of ‘no coverage’ or ‘double coverage’ for employees assigned to work in a foreign country.
The term International Workers covers the following category of employees:
- An Indian national who has been assigned to work in a foreign country with whom India has signed a ‘Social Security Agreement’ (‘SSA’) which is a bilateral agreement.
- A foreign national who has been employed or assigned to work in an establishment to which the social security regulations apply.
Kindly note that a SSA is intended to avoid double coverage wherein the employee is not only obligated to make social security contribution in their home country but also their hosts country.
A Bilateral SSA provides for:
- Detachment, in the form of an exemption to employees who have been assigned abroad to make contributions in the host country provided that they are making the relevant contributions in their home country. Employees desirous of such an exemption would be required to obtain a ‘Certificate of Coverage’ in order to avail the benefits of exemption as agreed to by the countries being a reciprocal signatory to the SSA.
- Exportability of Pension - Which provides for payment of pension benefits directly without any reduction to the beneficiary employee choosing to reside in the their home country or any other country.
- Totalization of benefits- The period of service rendered by a employee in a foreign country is counted for determining the eligibility for benefits but the quantum of payment is restricted.
The Certificate of Coverage is valid for a certain period depending upon the terms of the SSA as agreed between the countries.
As per provisions of the Information Technology (Reasonable Security Practices And Procedures And Sensitive Personal Data Or Information) Rules, 2011, any collection, processing, storage or transfer of specified personal information of an individual (such as password, financial information, physical, physiological and mental health condition, sexual orientation, medical records and history, biometric information, etc.) would require consent of the such individual (i.e., provider of information). An employer is required to ensure that it has appropriate security procedures and practices to prevent wrongful disclosure of any such personal information.
Legal Requirements As To The Form Of Agreement
Except for some State specific requirements by which an employer is expected to issue a letter covering certain aspects of employment, there are no stipulated legal requirements as to the prescribed form of an employment agreement. The prevailing practice is either that the employer issues an appointment letter listing the terms and conditions of employment, which is then signed by the employee; or the employer and employee enter into a bilateral written agreement.
An employment agreement can be in oral form. The acceptance of such contract must be absolute and unqualified, be expressed in some usual and reasonable manner as provided under the Indian Contract Act, 1872. However, a written employment agreement is preferred to avoid disputes at a later stage.
Generally, for blue-collar employees, it used to be common for there to be no employment agreement executed between the employer and employee, but instead, appointment letters were issued. However, it is now increasingly common to produce formal employment agreements with the employees.
There is no legal requirement to provide for a trial period or a period of probation, in the case of white-collar employees or blue-collar employees. Notwithstanding the above, depending upon the applicability of Industrial Employment Standing Orders Act, 1948, the initial period of probation, in case of blue-collar employees, could be three (3) months. As a matter of practice, companies do have probation period and extension of probation period if required either in the Handbook/ Company Policy or in the Letter of Appointment.
Hours Of Work
White-Collar Employees: The hours of work of any employee are ordinarily governed by the terms of the employment agreement.
Such employment agreements should conform with the Shops and Establishments Acts enacted by individual states in India (or the Factories Act 1948, if an employee works from an office located within a factory premises). As a result, conditions such as hours of work may differ from state to state and also depending upon the nature of establishment. The requirement of overtime, over a certain number of hours, may also change based on the Shops and Establishments Acts, etc, as applicable.
For instance, the Bombay Shops and Establishments Act 1948 stipulates the maximum hours of work as 9 hours per day and 48 hours per week in shops, commercial establishments, residential hotels, restaurants, eating houses, theatres or other places of public amusement or entertainment.
Blue-Collar Employees: For blue collar employees working in non-manufacturing establishments the hours of work will be governed by the State specific Shops and Establishments Act. For blue collar employees working in manufacturing establishments, the Factories Act 1948 stipulates that an adult employee may be required to work for a maximum period of 9 hours per day and 48 hours per week, excluding overtime, and 10 hours a day and 60 hours a week, including overtime. Overtime work is subject to a maximum of 50 hours in any quarter. A child or adolescent will not be allowed to work beyond a maximum period of 4½ hours per day. (Please refer to the section entitled “Minimum/Maximum Age – Blue- Collar Employees” wherein the age group categorising a person as a child or adolescent is specified.)
Special Rules For Part-time Work
There are special rules under Indian laws for part-time work. The Government of India has proposed introduction of new rules that would apply in case of ‘gig workers’ and ‘platform workers’.
White-collar employees: Earnings are mutually agreed upon by the employer and employee and this clause forms an essential term of the employment agreement.
Indian law entitles employees to twice the ordinary rate of wages in respect of overtime work.
Blue-Collar Employees: The Central or State Government fixes the minimum rates of wages payable to employees under the Minimum Wages Act 1948 and reviews such minimum rates of wages periodically.
The Payment of Bonus Act 1965 entitles employees in establishments (having 20 or more employees) to payment of a bonus on the basis of profits, production or productivity. Employees earning INR 21,000 or less per month are entitled to statutory bonus. The minimum bonus payable is 8.33% of salary and the maximum is 20%.
The Payment of Wages Act 1936 prescribes a time-limit within which wages payable to employees must be disbursed by the employers and ensures that no unauthorised deductions are made by employers.
White-collar employees: Depending upon where a person is working, the holiday entitlement is generally governed by the holidays announced by the relevant State. Generally, an employee would be entitled to mandatory weekly holiday, (eg. Sundays), national holidays (such as Independence Day, Republic Day etc.) and State holidays. In addition to the above, employees may be entitled to paid leave ranging from 15 to 25 days as stipulated in the Shops and Establishments Acts of each state or Factories Act, as applicable.
Rest periods are also prescribed by the Factories Act or Shops and Establishments Acts, as applicable. For instance, the Bombay Shops and Establishments Act 1948 stipulates that every shop and commercial establishment shall remain closed on one day of the week, and a maximum of 5 hours of work followed by an interval of at least one hour for rest and a maximum of 3 hours of overtime.
Blue-Collar Employees: For blue collar employees working in non-manufacturing establishments, the holidays/rest periods will be governed by the State specific Shops and Establishments Act (and also Industrial Employment Standing Orders Act, 1948, depending upon its applicability). This would be similar to the entitlement of white collar employees.
For blue collar employees working in manufacturing establishments, the Factories Act 1948 provides for a mandatory weekly holiday, compensatory holidays and specifies that no person will be required to work for more than ten days consecutively without a holiday. This act further stipulates intervals of rest of at least half an hour following a maximum of five hours of work and provides for annual leave with wages.
The Weekly Holidays Act 1942 provides for the grant of a weekly holiday to blue-collar employees in shops, restaurants and theatres without any deduction or abatement of wages.
White-collar employees: The minimum age for employment in any establishment is 15 years of age in certain trades. However, in practice employees who are considered suitable for such employment are at least 20 years old.
Blue-collar employees: Any child who is younger than 14 years of age is statutorily barred from employment. Adolescents aged between 15 and 18 require a certificate of fitness to be employed in certain trades.
The maximum age for employment of white-collar and blue-collar employees is whatever age is stipulated by the employer.
In case of illness, an employee (white-collar or blue-collar employee) is entitled to paid sick leave, the duration of which varies from industry to industry or state to state.
Alternatively, white-collar employees are entitled to paid sick leave (usually ranging from 5 to 7 days) as specified in their employment agreement or as per the Shops and Establishment Act or Factories Act, as applicable to an establishment (factory or commercial establishment) and the jurisdiction where the establishment is located, whichever is more beneficial to the employee.
The Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act 1995 provides for encouragement of employment of persons suffering from specified disabilities.
Location Of Work/Mobility
Location of work and mobility are mutually agreed by the employer and employee (white- collar or blue-collar employee) verbally or in the terms of the employment agreement.
Under the Employees’ Provident Funds and Miscellaneous Provisions Act 1952 (applicable to establishments where 20 or more white- collar and/or blue-collar employees are employed) employees are entitled to receive a pension. From the monthly contributions payable by the employer towards the Employees’ Provident Fund, 8.33% of the employee’s pay is remitted by the employer to the Employees’ Pension fund contribution (please refer to the section entitled “Social Security Contributions” wherein the details relating to contributions to the Provident Fund are specified). The Central Government will also contribute to the fund at the rate of 1.16% of the pay of the employee.
Parental Rights (Pregnancy/ Maternity/ Paternity/ Adoption)
The Maternity Benefit Act 1961 is applicable to women engaged in white-collar employments in the public sector, as well as blue-collar employments. This act entitles women, who have less than 2 suriviving children, to receive maternity benefit before and after childbirth for a maximum period of 26 weeks, of which not more than 8 weeks can precede the date of expected delivery. A woman employee who has more than 2 surviving children is entitled to 12 weeks of paid maternity leave. The legislation also prescribes for payment of medical bonus and nursing breaks after birth until the child attains the age of 15 months.
A woman employee is allowed 12 weeks of paid leave on adoption or surrogate birth.
The Government of India has ordered that female Government employees are further entitled to:
- Maternity leave of up to 180 dats,
- “Child Care Leave” of a maximum of two years during her entire service, and
- “Child Adoption Leave” of up to 180 days.
The Government of India has entitled male Government Servants (including apprentices) to paternity leave of 15 days within six months of the date of adoption. In the private sector, paternity leave is not ordinarily granted though the same is seen as an emerging trend with various private employers (non-government companies) granting a paternity leave of 10 to 15 days.
Barring limited requirements in some State specific statutes which make certain aspects mandatory, it is customary to specify certain terms in the employment agreement such as names and addresses of parties, job title, duties, responsibilities and job description of the position held by the employee, salary and emoluments, date of commencement of employment, hours of work, probation period, if any, confirmation upon completion of period of probation, entitlement to leave, provisions relating to confidentiality and intellectual property, performance review and bonus, dispute resolution and termination of employment.
The employer and employee are free to mutually agree upon other non-compulsory terms, provided they are not contrary to statutory provisions.
Types Of Agreement
The various kinds of employment agreements may be categorised as:
Fixed-Term employment agreements: which have a fixed duration and expire on a designated date or on completion of a project.
Full-time employment agreements: which contain compulsory terms governing employees who work on a full-time basis.
Contracts of Apprenticeship: The Apprentices Act 1961 regulates the training of apprentices and governs the terms to be incorporated in a contract of apprenticeship. This act is applicable to blue-collar as well as white-collar employees, as apprentices are classified under the enactment as trade apprentices, graduate and technician apprentices and technician (vocational) apprentices.
Almost every contract of employment in India contains a privacy and confidentiality clause. A breach of confidentiality may serve as grounds for termination of employment. An employee is duty-bound to maintain secrecy/confidentiality of sensitive information gathered in the course of employment, whether or not the employment agreement contains a specific clause to that effect.
Ownership of Inventions/Other Intellectual Property (IP) Rights
Generally, ownership of inventions or other IP rights is contractually provided for in the employment agreement. In the absence of any such express or implied contractual provision, ownership of IP rights is governed by applicable laws.
Patents: The mere existence of an employment agreement does not, in itself, disqualify the employee from obtaining a patent for an invention made by him during his term of service, even though:
- the invention may relate to subject-matter useful to the employer,
- the employee have used the employer’s time, servants and materials in completing his invention, or
- the employee had allowed his employer to use the invention during his employment.
Under the Patent’s Act, the true and first Inventor is the first owner of the work/invention and there is no automatic assignment of such work/invention in favour of the employer. For that reason, it is advisable that the employer takes appropriate steps to ensure that such invention/work is assigned in its favour.
The Copyright Act 1957 lays down the general rule that the author of a work will be the first owner of copyright therein.
Further, this act stipulates that in case of a work made in the course of the author’s employment or apprenticeship, the employer can be deemed to be the first owner of the copyright therein, in the absence of any agreement to the contrary. It is however preferable that an employee signs a specific assignment agreement in this respect.
Both under the Copyright Act and the Patents Act, any assignment has to be in writing. It has to identify the work, so strictly speaking a blanket assignment or assignment of future work is not possible.
In recent times, it has become usual for employers to undertake background checks (including criminal background) and medical examination of individuals prior to engaging them as employees. As this process may involve use of personal information, the consent of the concerned individual is required.
Companies in India can hire non-nationals. The Indian Government has begun to enforce a new quota system that seeks to limit the number of foreign nationals in the country.
The Ministry of Labour and Employment, Government of India, issued guidelines in 2009 stating that no employment visa will be issued to foreign nationals in any sector unless the individual is drawing a salary in excess of USD 25,000 per annum. However, this condition is not applicable to (i) Ethnic cooks (ii) Language teachers (other than English language teachers) and (iii) Translators and staff working for the concerned Embassy/High Commission in India. Further, foreigners coming to India on Project Visas for executing Steel and Power Sector Projects are also exempt from the requirement of minimum floor salary being in excess of USD 25,000 per annum.
The salary threshold limit of USD 25,000 per annum is worked out taking into account salary and other allowances paid to the foreigner. However, it excludes perquisites like housing, telephone, transport, entertainment etc.which are received in kind. In general, employment visas are only issued to foreign nationals who are highly skilled and/or qualified professionals and who are engaged or appointed by a company/organization/industry/undertaking in India, on contract of employment basis. Employment visas are not granted to foreign nationals for jobs for which qualified Indians are available or for routine, ordinary, secretarial / clerical positions. Further, it is essential that an employment visa applicant is sponsored by an entity in India.
Hiring Specified Categories Of Individuals
In the private sector there is no classification of individuals for employment.
A percentage of posts for white-collar as well as blue-collar employees are reserved for employment in the Government, in public sector units, and in certain educational institutions, for Scheduled Castes and Scheduled Tribes with inadequate representation in these services and institutions. Caste, gender, state of domicile, rural people, religion, physically disabled persons, members of the armed forces etc are some of the criteria used to identify under-represented groups.
Outsourcing And/Or Sub-Contracting/Temporary Agency Work
In the case of an outsourcing arrangement in India, the company to which work is outsourced is responsible for its blue-collar and white-collar employees. If such employees breach any obligations relating to data protection and confidentiality, a number of civil and criminal remedies are available under various Indian laws to the outsourcing company against such employees, as well as the company to which work is outsourced.
If a blue-collar employee is hired as “contract labour” through a contractor (or sub-contractor), the main employer continues to be responsible to such an employee in case the contractor fails to provide wages or facilities for health and welfare of the employee, such as canteens, rest-rooms, drinking water and first aid facilities. In case of failure of the employer to make such provisions, penalties of imprisonment and fines are prescribed.