EMPLOYMENT LAW OVERVIEW INDIA 2021-2022 INDUSLAW / Proud Member of L&E GLOBAL EMPLOYMENT LAW OVERVIEW an alliance of employers’ counsel worldwide 2021-2022 / INDIA | 1 www.leglobal.org TABLE OF CONTENTS. I. GENERAL OVERVIEW 03 II. HIRING PRACTICES 09 III. EMPLOYMENT CONTRACTs 12 IV. WORKING CONDITIONs 14 V. Anti-DiscriminAtion LAws 17 VI. PAY EQUITY LAWS 21 VII. SOCIAL MEDIA AND DATA PRIVACY 22 VIII. TERMINATION OF EMPLOYMENT CONTRACTs 24 iX. RestrictiVe coVenAnts 27 X. TRANSFER OF UNDERTAKINGS 29 XI. TRADE UNIONS AND EMPLOYERS ASSOCIATIONS 30 XII. EMPLOYEE BENEFITS 33 EMPLOYMENT LAW OVERVIEW an alliance of employers’ counselcounsel worldwideworldwide 2021-2022 / INDIA | 2 I. GENERAL OVERVIEW 1. INTRODUCTION The Constitution of India (“Constitution”) is the cornerstone of individual rights and liberties, and provides the basic framework within which all laws in India, including laws relating to labour and employment, must operate. The Constitution guarantees certain fundamental rights to individuals such as the right to life, privacy, equality before the law and prohibition of discrimination in public education and employment on the basis of religion, sect, gender and caste. The Constitution recognises the ‘right to livelihood’ as an integral part of the fundamental right to life. In addition to fundamental rights, the Constitution also envisages certain ‘directive principles’ which serve as a guide to the legislature towards fulfilling social and economic goals. Given India’s history, social justice has always been at the forefront of a number of Indian regulations, specifically labour and employment laws. It is important to note that several labour laws in India have been designed from a worker emancipation perspective – including those relating to factories, mines, plantations, shops and commercial establishments, as well as those relating to payment of wages, regulation of trade unions, provision of social security, industrial safety and hygiene. However, given changing economic requirements in recent times, especially in light of the ongoing COVID-19 pandemic, the Indian Government has been increasingly conscious of the needs of businesses as well. In the last 6 months, the Indian Government has already brought in certain significant changes in labour laws with the aim of improving the ease of doing business in India. Further, there are several other big-ticket reforms in the pipeline, which we hope will see the light of day in the near future. of workmen, which are subject to far greater 2. KEY POINTS statutory protections. The service conditions of non-workmen are typically governed by the • Labour and employment laws are listed under the terms of the relevant employment contracts Concurrent List in the Constitution, which means and the internal policies of the organisation. that the Union Parliament (federal legislature) Determining whether a particular employee is a and State Legislatures have co-equal powers to workman or not, has to be undertaken on a case- enact laws relating to all labour and employment by-case basis. matters in India. Typically, the Union Parliament • India does not generally recognise employment- enacts a Central law, while the States formulate at-will. Further, in terms of the Indian Contract rules thereunder. Additionally, States often enact Act, 1872 (“Contract Act”), which is the standalone legislation as well. principal legislation governing contracts in India, • One of the central principles of Indian labour and agreements that restrain trade, business or one’s employment law is that they distinguish between profession are void – this could have an impact employees who are defined as ‘workmen’ and on employment bonds, and on non-compete and those who are in management / supervisory / non-solicit covenants in employment contracts. administrative roles (‘non-workmen’). Most of • Trade unions are typically restricted to the the legislation regulates the service conditions more traditional forms of business, such as EMPLOYMENT LAW OVERVIEW an alliance of employers’ counsel worldwide 2021-2022 / INDIA | 3 the manufacturing sector; however, in recent employed in a supervisory capacity, draw a salary times there has been some unionisation in the exceeding INR 10,000 (~USD 136) per month or Information Technology (“IT”) sector as well. The (iii) those who exercise, either by the nature of Trade Unions Act, 1926 (“Trade Unions Act”) the duties attached to the office or by reason of provides for registration of a trade union and the the powers vested in them, functions mainly of a rights and liabilities of a registered trade union. It managerial nature. is also proposed to recognise certain trade unions both at the Central and State Government levels, That said, it is important to note that the wage which would then participate in policy-making. ceiling of INR 10,000 (~USD 136) mentioned • The Industrial Disputes Act, 1947 (“ID Act”) is the above is not the definitive criterion in respect of key legislation that governs industrial relations ascertaining whether or not a particular employee in India. The ID Act aims at securing industrial will be categorised as a workman. There have peace and harmony by providing the process for been multiple occasions when Indian Courts have settlement of industrial disputes arising between held that whether an employee is a workman two or more employers; between employers and or not depends on the exact nature of the job workmen; and disputes among workmen. responsibilities and duties and the context of his/ • The Equal Remuneration Act, 1976 (“ERA”), her role in the organisation, rather than merely mandates the payment of equal remuneration to the compensation package. Determining whether male and female workers who undertake similar a particular employee is a workman or not, has tasks. The Contract Labour (Regulation and to be undertaken on a case-by-case basis. It does Abolition) Act, 1970 (“CLRA”) is another major not depend on the level of education or the legislation that pertains to regulating contract designation. Various judicial precedents have laid labour in India. down that in order to determine an employee’s status as a ‘workman’, the actual, substantial and predominant work being performed by her is 3. LEGAL FRAMEWORK decisive, rather than the employee’s remuneration/ designation. The other factors that are useful to Given that both the Union Parliament (federal determine whether an employee is a workman or legislature) and State Legislatures have co-equal a non-workman, is by taking into account whether powers regarding labour and employment laws, the employee had any managerial responsibilities there are currently hundreds of laws relating to and whether he had authority to take any decision labour and employment in India, including around on behalf of the organisation. 50 statutes enacted by the Union Parliament. Most of these laws concern blue-collar employees Employees considered to be workmen under the or workmen, owing to the historical emphasis on ID Act have several additional rights – for instance, improving working conditions for these employees. changes to their conditions of service and any On the other hand, the legal structure relating to termination of their employment can only be non-workmen (i.e., employees having managerial undertaken as per the specified process guaranteed duties or white-collar employees) is not as under the ID Act. Further, they can approach labour comprehensive and has evolved in recent decades commissioners and/or the industrial tribunals/ mainly through judicial pronouncements. labour courts in case of any unjustified termination and/or unfair labour practice, on part of the A. DIFFERENCE BETWEEN employer. workmen AnD non-workmen The terms of service of non-workmen (i.e., those who mainly work in a managerial or administrative Section 2(s) of the ID Act defines a workman as capacity) are ordinarily governed by the State- a person who is employed to do any manual, specific shops and establishments legislation unskilled, skilled, technical, operational, clerical, or (“S&E Act”), the terms and conditions of their supervisory work for hire or reward. The definition contracts of employment and the internal policies however excludes the following persons: (i) of an organisation. Persons occupying managerial those who are employed mainly in a managerial and confidential positions in an organisation are or administrative capacity; (ii) those who, being exempt from the S&E Act of certain States such EMPLOYMENT LAW OVERVIEW an alliance of employers’ counsel worldwide 2021-2022 / INDIA | 4 as Karnataka, Andhra Pradesh, Kerala, Madhya Industrial Disputes Act, 1947: The scope of this Pradesh, Tamil Nadu and Maharashtra, among legislation is primarily restricted to workmen alone. others. These employees will typically fall outside However, the principles and processes laid down the scope of the ID Act; there are various judicial in this legislation have been replicated in other pronouncements which have held that non- statutes with wider application. The ID Act inter alia workmen are not entitled to claim protection under covers industrial disputes, industrial action (i.e., the ID Act. strikes and lockouts), regulation of retrenchment, layoffs, closure, transfer of undertakings, envisages B. OTHER FACTORS the constitution of works committees and grievance redressal committees, and also regulates changes Apart from the classification of employees into in certain service conditions of workmen. workmen and non-workmen,