Home  Practice area  Employment & Labour Law  India

Employment & Labour Law 2018 | India

   

Order the Book

Order Chapter as PDF

Published: 17/04/2018

Chapter content - Free access

1 Terms and Conditions of Employment

2 Employee Representation and Industrial Relations

3 Discrimination

4 Maternity and Family Leave Rights

5 Business Sales

6 Termination of Employment

7 Protecting Business Interests Following Termination

8 Data Protection and Employee Privacy

     Free Newsletter | 

9 Court Practice and Procedure

 1 Terms and Conditions of Employment

1.1 What are the main sources of employment law?

Matters related to employment in India are primarily governed by the Constitution of India, specific laws framed by the Central and State governments,
municipal laws, collective and individual agreements, as well as judicial precedents. These laws cover an array of issues, which may be general or specific in
nature. Based on the objective of the enactment, some key legislation has been classified in the table below:

Employment conditions

Legislation Purpose/objective

To provide for the health,

safety, welfare, working hours
Factories Act, 1948
and leave of workers in
factories (manufacturing units).

To regulate payment of wages,

terms of service, holidays,
leaves, work conditions, hours
Shops & Establishmentof work, overtime, etc. for
Acts people employed in shops and
commercial establishments
(State-wise) (such as hotels, restaurants,
bakeries, societies, charitable
trusts, educational institutions
(run for gain), etc.).

Contract Labour To regulate the engagement of

(Regulation & contractor and contract labour
Abolition) Act, 1970 by the principal employer.

Any establishment employing

100 or more workmen is
Industrial required to regulate and codify
Employment Standing conditions of service and
Order Act, 1946 obtain certification from the
concerned regulatory
authority.

For the benefit of workers

Building and other
engaged in building and
construction workers
construction activities to
(Regulation of
regulate matters related to
employment and
their safety, health and welfare
conditions of service)
and any other matters
Act, 1996
incidental thereto.

Industrial relations

To provide a machinery for

regulating the rights of the
employees and settlement of
industrial disputes in a peaceful
Industrial Disputes
and harmonious manner, along
Act, 1947 (“IDA”)
with provisions for strikes,
layoffs, unfair labour practices,
lockouts and closure of an
establishment, etc.

Trade Unions Act, To establish the rights, duties

1926 (“Trade Unions and obligations of trade unions
Act”) and facilitate their registration.

Remuneration

It regulates the payment of

wages to certain classes of
persons employed in the
industry and provides for the
Payment of Wages
responsibility for payment of
Act, 1936
wages, fixation of wage period,
time and mode of payment of
wages and permissible wage
deduction.
Employment conditions
To stipulate minimum rates of
Legislation Purpose/objective
wages that must be paid to
skilled and unskilled labours
Minimum Wages Act,
taking into account various
1948
factors such as the industry,
location and nature of work to
be undertaken.

To obligate employers to pay

bonuses to employees and
provide the principle and
Payment of Bonus Act, formula for the calculation of
1965 the bonus, minimum and
maximum bonus payable and
enforcement of liability for
payment of the bonus.

To provide for the payment of

equal remuneration to men
Equal Remuneration and women workers and for
Act, 1976 (“ER the prevention of
Act”) discrimination, on the ground
of sex, against women in the
matter of employment.

Social security benefits

To provide for the payment of

gratuity, a retirement benefit
Payment of Gratuity paid upon cessation of
Act, 1972 employment.

To provide workmen and/or

their dependents some relief in
Workmen’s
case of accidents arising out of
Compensation Act,
or during employment and
1923
causing either death or
disablement.

To provide for a scheme

wherein both the employee
and the employer make an
Employees Provident equal contribution into a
Fund and national fund which attracts a
Miscellaneous stipulated interest per annum ,
Provisions Act, 1952 and the accumulated amount is
paid on retirement to the
employee along with the
interest that has accrued.

To provide for a scheme

wherein the employer and the
Employees’ State employee must contribute a
Insurance Act, 1948 certain percentage of the
monthly wages to the
Insurance Corporation.

Additionally, India has also signed bilateral social security agreements with several countries to protect the interests of “International Workers” in India.

1.2 What types of worker are protected by employment law? How are different types of worker distinguished?

Under the Factories Act, 1948, the term “ Worker” has been defined as a person employed directly or by/through any agency (including a contractor) with
or without knowledge of the principal employer, whether for remuneration or not, in any manufacturing process, or in any other kind of work incidental to,
or connected with, the manufacturing process or the subject of the manufacturing process, but does not include any member of the armed forces of the
Union. However, the Factories Act is not the only legislation that protects all kinds of workers in India. Workers/employees in India have been identified
differently in different legislations as illustrated below:

1. Workmen and non-workmen : The Industrial Disputes Act, 1947 defines a “workman” as any person employed in any industry to do any manual,
skilled, unskilled, technical, operational or supervisory work. It does not include persons carrying out managerial functions or those whose wages exceed
INR 10,000. The “non-workmen” category of employees is mostly protected under the Shops & Establishments Act of every State.

2. Government employees and Private Sector Employees : The rules and regulations governing the government employees stem from the Indian
Constitution. They accordingly enjoy the protection of tenure, statutory service contentions and an automatic annual increase in salary, along with a
provision for receipt of pension (according to Central Civil Services (Pension) Rules, 1972). In the private sector, the conditions of employment are
governed by respective contracts of employment and by legislations which govern both private and government sector employees.
3. Employees in Organised or Unorganised Sector : The organised sector is where a place of work has terms of employment and so the employee has
assured work. They are registered by the government and have to follow the rules and regulations laid down by it in various laws such as Factories Act,
Minimum Wages Act, Payment of Gratuity Act, etc. The unorganised sector is a place of work which is not registered by the Government and where there
are no terms of employment. Legislations like the Beedi and Cigar Workers Act, 1966, the Plantation Labour Act, 1951 and the Mine Act, 1952 apply to
employees of this sector.

1.3 Do contracts of employment have to be in writing? If not, do employees have to be provided with specific information in writing?

Indian labour laws do not mandate the employer to provide a written contract of employment to a new employee. A contract of employment can be
communicated orally as well. Since the objective of an employment contract is to record the terms and conditions of employment including matters
related to disclosure of information, non-competition, non-solicitation, etc., it is a predominant practice in India to have a written contract of employment.

1.4 Are any terms implied into contracts of employment?

From a contractual perspective, certain terms are implied in a contract by way of customs, usage and practice. Typically, in an employment contract,
implied terms can be obligations such as duty of care, duty to maintain confidentiality, non-disclosure, etc. Further, Indian courts on numerous occasions
have held that in a contract of employment, it is implied that an employee cannot make use of his/her former employer’s trade secrets. Nonetheless, for
the sake of clarity, it is always recommended that important and essential terms be expressly mentioned in the contract.

1.5 Are any minimum employment terms and conditions set down by law that employers have to observe?

There are various state-specific and sector-specific laws, which lay down certain minimum terms with respect to wages, working hours, leave entitlement,
holidays, termination and the like. With respect to employees working in industries such as cinema, docks, mines, transport, sales promotion, etc.,
industry-specific laws govern their terms of employment.

1.6 To what extent are terms and conditions of employment agreed through collective bargaining? Does bargaining usually take place at company or
industry level?

Collective bargaining is an effective technique to resolve labour disputes in India and is utilised in cases wherein the number of employees are large and
represented by trade unions. Trade unions can be formed at company level, regional level or industry level. A collective bargaining agreement provides for
terms and conditions of employment pertaining to wages, working hours, obligation of workmen and the employer, dispute resolution, leave, holidays,
benefits and more.

2 Employee Representation and Industrial Relations

2.1 What are the rules relating to trade union recognition?

In India, trade unions are registered under the Trade Unions Act. Recognition of a trade union is a distinct process, which is not prescribed under the Trade
Unions Act; however, the management of the relevant industry/entity can recognise a registered trade union representing the labour force. It is to be
noted that neither registration nor recognition is mandatory under the Trade Unions Act yet jurisprudence provides that an unregistered trade union has
no manner of right whatsoever – this includes rights under IDA. Apart from central legislations, certain state legislations such as the Maharashtra
Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 and the Kerala Recognition of Trade Unions Act, 2010 provide for the
recognition and registration of trade unions in the respective states where such legislation is applicable.

2.2 What rights do trade unions have?

A registered trade union, in terms of the provisions of the Trade Unions Act is a body corporate by the name under which it is registered. Therefore, upon
registration, a trade union attains legal recognition and consequentially has perpetual succession and a corporate seal. It also has the right to contract by
itself or through agents, hold movable and immovable property in its name, maintain general funds which cannot be spent on objects other than those
specified in the Trade Unions Act and sue or be sued subject to immunities provided under the Trade Unions Act, in certain criminal, civil, and contractual
proceedings. One of the basic functions of a Trade Unions Act is to represent and negotiate on behalf of employees with the employer in matters of
dispute and settlement of employment matters.

2.3 Are there any rules governing a trade union’s right to take industrial action?

The IDA, inter alia, deals with involvement of trade unions in the investigation and settlement of industrial disputes. In terms of the IDA, the first course of
dispute resolution shall be the collective bargaining mechanism, which involves negotiation and mediation techniques, failing which, voluntary arbitration
or compulsory adjudication is permissible with the active participation of trade unions. During the pendency of such a dispute before the concerned board,
court, tribunal or the arbitrator, a trade union is not permitted to call a strike.

2.4 Are employers required to set up works councils? If so, what are the main rights and responsibilities of such bodies? How are works council
representatives chosen/appointed?

The IDA mandates the formation of a work committee in the event the number of employees employed in an industrial establishment exceeds 100 or more
workmen in the preceding year. The committee shall be constituted of members/representatives from both the employer as well as the employees. The
employee representatives shall be appointed in consultation with the concerned trade union. The primary objective of such a works committee is to
promote measures for securing and preserving amity and good relations between the employer and workmen and to comment upon matters of their
common interest or concern.

2.5 In what circumstances will a works council have co-determination rights, so that an employer is unable to proceed until it has obtained works
council agreement to proposals?

Under the IDA, co-determination rights have not been provided to a work committee. However, trade unions may, by terms agreed in the collective
bargaining agreement, exert influence through their representative in the works committee. At the outset, the objective of the works committee is to
mediate differences between the employer and the employee(s).

2.6 How do the rights of trade unions and works councils interact?

As stated earlier, the rights of trade unions and work committees can be said to interact with respect to their employee representatives in the works
committee, who are members of the trade union as well.

2.7 Are employees entitled to representation at board level?

Under Indian employment laws, there is no provision that mandates the appointment of employees in the board. However, under the Companies Act,
2013, a public limited company shall appoint a Managing Director or a whole-time director, who may be in the full-time employment of the company and
represent the management’s interests rather than the employees of the organisation.

3 Discrimination

3.1 Are employees protected against discrimination? If so, on what grounds is discrimination prohibited?

The Constitution of India grants several fundamental rights to the citizens of India, such as the right to equality, prohibition of the state from
discriminating on grounds of religion, race, caste, sex or place of birth and enables the state to frame laws which are in favour of the under-privileged. The
Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 prohibits all forms of discrimination during hiring,
pay, promotion, etc. against persons with disabilities. The ER Act was enacted to eliminate gender bias and to make sure that men and women are paid an
equal salary for the same work. Similarly, the Maternity Benefit Act, 1961 and Sexual Harassment of Women at Workplace (Prevention, Prohibition and
Redressal) Act, 2013 protects the right of female employees in India. The applicability of these legislations may differ between public and private entities.
Whereas certain types of discrimination are illegal uniformly in all sectors, other types of discriminations based on caste, ethnicity and religion are still
prevalent in private sectors.

3.2 What types of discrimination are unlawful and in what circumstances?

Discrimination based on grounds of religion, race, caste, sex and place of birth are prohibited by the Constitution of India. Additionally, contravention of
any provision of the ER Act, leading to discrimination between men and women is unlawful. Further, in practice, any discrimination which is not based on
skills or merit and which is not practised for the upliftment of any section or class but merely to cause prejudice to one of the parties, is considered to be
unlawful.

3.3 Are there any defences to a discrimination claim?

There are no standard defences to a claim of discrimination. However, based on facts and circumstances, a defence of difference in the nature of work,
place of work, health and safety requirements and the need of affirmative action can be considered as valid grounds of defence.

3.4 How do employees enforce their discrimination rights? Can employers settle claims before or after they are initiated?

Based on the nature of discrimination, employees may approach courts or tribunals and file complaints to enforce their discrimination rights. In some
cases, the concerned organisation/workplace may have labour/HR policies in place, which permits such discriminated employees to approach a grievance
redressal committee or a helpline to resolve complaints pertaining to discrimination. In most cases, the employer can settle claims before or after the
initiation of complaint.

3.5 What remedies are available to employees in successful discrimination claims?

The remedies available to an employee shall depend on the nature of the claim and statute providing the employees with the right to claim. Most
legislation provides for pecuniary fines and terms of imprisonment in case of breach of any of its provisions. In cases where the discrimination has led to
termination of employment, a successful claim of discrimination will entitle the aggrieved to restoration of his/her job.

3.6 Do “atypical” workers (such as those working part-time, on a fixed-term contract or as a temporary agency worker) have any additional
protection?

No, there is no additional protection accorded to “atypical” workers. Such workers shall be protected by the same set of laws as is applicable to any typical
workmen or employee in the organisation. However, there may be variance in the organisational policies and by-laws applicable to such employees. There
are certain state-specific or region-specific laws that cover even the unprotected workers who do not fall in any of the categories of workers identified in
question 1.2, like The Maharashtra Mathadi, Hamal, and Other Manual Workers (Regulation of Employment and Welfare) Act, 1969 or Pimpri-Chinchwad
District Mathadi, Hamai, and Other Manual Workers (Regulation of Employment and Welfare) Scheme, 1992.

4 Maternity and Family Leave Rights

4.1 How long does maternity leave last?

The Ministry of Labor and Employment has recently amended the Maternity Benefit Act, 1961 (“ Maternity Act”) to increase the duration of paid
maternity leave available for female employees from 12–26 weeks. Any female employee who has been in employment of the employer for a period of 80
days in the past 12 months shall be eligible to avail this benefit. This benefit can be availed as early as eight weeks prior to the expected delivery date.
Maternity leave has also been extended to adoptive mothers wherein every woman who adopts a child shall be entitled to 12 weeks of maternity leave,
from the date of adoption.

4.2 What rights, including rights to pay and benefits, does a woman have during maternity leave?

As per the provisions of the Maternity Act, a female employee shall be entitled to the average daily wage for the period of her actual absence. If the nature
of work is such that the employee can work from home, then based on the mutual agreement between the employer and the employee, the employer may
extend this comfort to female employees. Additionally, female employees shall also be entitled to a medical bonus in the event pre-natal and post-natal
benefits are not provided by the employer. The Maternity Act bars the employer from (i) discharging or dismissing a female employee, or (ii) varying the
terms of employment to her disadvantage during the period of maternity leave.

4.3 What rights does a woman have upon her return to work from maternity leave?

A female employee upon rejoining employment is entitled to two nursing breaks in a day, in addition to the interval for rest allowed by the employer during
the course of her daily work. This benefit is available to the female employee until the child attains the age of 15 months. Apart from this benefit, every
establishment having 50 or more employees shall have a crèche facility within a prescribed distance either separately or along with common facilities. The
employer shall allow the employee, four visits a day to the crèche, which shall also include the interval for rest. At the time of the initial appointment of the
female employee, every such establishment shall intimate in writing the benefits and facilities provided by the employer in this regard.

4.4 Do fathers have the right to take paternity leave?

No, the concept of paternity leave does not exist in Indian employment laws. However, the All India and Central Civil Services Rules allow Central
government employees 15 days of paternity leave. Various corporate offices in India can extend paternity leave to their employees as per internal leave
policies. The Paternity Benefit Bill, 2017, which has been presented before the Parliament, pushes for equal ‘parental’ benefits for both the mother and the
father.

4.5 Are there any other parental leave rights that employers have to observe?

Besides the benefits and leaves extended under the Maternity Act, employers are not required to observe any other legislation.

4.6 Are employees entitled to work flexibly if they have responsibility for caring for dependants?

There are no statutory laws mandating employers to provide flexible work timings to their employees. However, as a matter of internal policy and based
on performance and the requirement of the employee, employer organisations may extend a variety of benefits to their employees.

5 Business Sales

5.1 On a business sale (either a share sale or asset transfer) do employees automatically transfer to the buyer?

Typically, employees cannot be co-related to the assets of the company and, therefore, do not warrant an automatic transfer, as part of a business sale.
The mechanism of transfer of employees can however, be agreed by the parties, which should be aligned with the provisions of the IDA. Ideally under the
IDA, an employee is entitled to the payment of retrenchment benefits, which include notice and severance compensation, upon termination of his/her
employment. However, the IDA culls out an exemption in cases of transfer of undertaking wherein the retrenchment benefits may not be payable if: (i) the
services of such workmen are not interrupted by the transfer; (ii) the terms and conditions of the employment made by the transferee undertaking is in no
manner less favourable than the existing terms and conditions of the employment; and (iii) the new employer honours the continuous employment of the
employee and computes his/her retrenchment benefits accordingly. The aforesaid mechanism of transfer is only relevant in case of acquisitions by
business purchase and not share purchase.

5.2 What employee rights transfer on a business sale? How does a business sale affect collective agreements?

As stated in the response to question 5.1, if the provisions of the IDA are fulfilled, the buyer or the new employers as pre-condition, are required to offer
the same terms and conditions of employment to the employees. Based on the above, it is safe to assume that employee rights or the terms of the
collective bargaining agreement shall remain unchanged.

5.3 Are there any information and consultation rights on a business sale? How long does the process typically take and what are the sanctions for
failing to inform and consult?

Employment laws in India do not provide for information and consultation rights on a business sale. However, collective bargaining agreements may
contain provisions to this effect empowering the relevant trade unions.

5.4 Can employees be dismissed in connection with a business sale?

Employers have the right to terminate the employment of any employee, subject to provision of notice and payment of retrenchment compensation as per
the provisions of the IDA.

5.5 Are employers free to change terms and conditions of employment in connection with a business sale?

Please refer to our responses to questions 5.1 and 5.2.

6 Termination of Employment

6.1 Do employees have to be given notice of termination of their employment? How is the notice period determined?

Employees must be given a notice of their termination by the employer; however, in case the employer chooses to terminate the employment with
immediate effect, i.e., without any notice, it may do so by paying wages/salary to the employee in lieu thereof. This period is stipulated to be a period of
one month under the IDA and the Shops and Establishment Acts of certain states. This period of notice may be altered as per the terms contained in the
contract between the employer and employee governing the terms of employment.

It is pertinent to note that the period of notice or wages thereof is waived off in cases of termination owing to misconduct of the employee, in which case
the employer can terminate the employment with immediate effect without any further liability. Under the IDA, such termination must be carried out
after following the due process prescribed under the Act and after the findings of the domestic enquiry conducted to consider the allegation of misconduct,
are found to be against the employee.

6.2 Can employers require employees to serve a period of “garden leave” during their notice period when the employee remains employed but does
not have to attend for work?

The concept of “garden leave” originated in England wherein employees are paid their full salary during the period in which they are restrained from
competing. However, the concept lacks legal backing in India as the same has been held to be in restraint of trade and thus hit by Section 27 of the Indian
Contracts Act, 1872. The Bombay High Court in VFS Global Services Private Limited v. Mr. Suprit Roy held that obstructing “an employee who has left
service from obtaining gainful employment elsewhere is not fair or proper”. It is, thus, clear that while the concept is not founded in any legal provisions in
India, it may be included in the employment contract; however, it can only be enforced until the employee so restrained is in service of the employer, and
not thereafter.
6.3 What protection do employees have against dismissal? In what circumstances is an employee treated as being dismissed? Is consent from a third
party required before an employer can dismiss?

An employee may challenge/dispute the case of his/her termination by the employer, in the case of termination for non-performance, either by questioning
the procedural aspect of the termination, or by denying the existence of the element of non-performance. Therefore, despite complying with all applicable
legal requirements, a termination may be construed to be bad in law if the employer fails to prove the existence of the alleged grounds amounting to
termination. In such an event, the employee may seek any of the following remedies for his/her wrongful termination: reinstatement with back-wages for
the period of wrongful termination; damages; or such specific relief as may be appropriate.

Under the IDA, an employee in the workman category who has been in continuous service for at least one year cannot be terminated at will of the
employer unless the employee is dismissed by way of disciplinary action or as a result of non-renewal of contract of employment, or terminated on the
grounds of continued ill-health, etc. Termination for any other reason whatsoever, including termination of service on the grounds of reduction in volume
of business, amounts to retrenchment and the IDA prescribes a detailed procedure for retrenchment of a workman including compliance with the last to
come first to go rule, notice, payment of prescribed compensation (i.e., 15 days’ average pay for every completed year of continuous service) filings/prior
approvals from the government (if required), etc.

For termination of services on disciplinary grounds, the procedure for dismissal of an employee (who is classified as a “workman” under IDA) on account of
misconduct and/or indiscipline, would need to be, in terms of broad principles of natural justice, the IDA and guidelines evolved from various court
decisions as follows:

(i) issuing a charge sheet;

(ii) holding a domestic enquiry;

(iii) perusing the report of the enquiry officer;

(iv) issuing show cause notice to the employee; and

(v) issuing order of punishment.

Third-party approvals, i.e., government approvals are required in case of retrenchment (defined u/S. 2(oo) of the IDA) of workmen in compliance with the
provisions of the IDA.

6.4 Are there any categories of employees who enjoy special protection against dismissal?

There is statutory embargo on the employer not to dismiss or punish female employees during the period of their pregnancy under Section 21 of the
Maternity Benefit Act, 1961.

Further, an employer shall not dismiss, discharge or reduce or otherwise punish an employee during the period when he/she is in receipt of sickness
benefit or maternity benefit and also during the period in receipt of disablement benefit for temporary disablement or is under medical treatment for
sickness or is absent from work as a result of certified illness arising out of pregnancy or confinement in accordance with Section 73 of the ESI Act. During
said period, no notice of dismissal or discharge or reduction shall be served on an employee.

6.5 When will an employer be entitled to dismiss for: 1) reasons related to the individual employee; or 2) business related reasons? Are employees
entitled to compensation on dismissal and if so how is compensation calculated?

Grounds for the termination of workmen in India can be divided into three primary categories. These include (i) misconduct, (ii) superannuation, and (iii)
retrenchment, layoffs, and closure. An employer can terminate the employment of an employee due to individual reasons such as misconduct, non-
performance or loss of confidence. In each such case, the termination should be preceded by a domestic enquiry. Business-related factors could include: (i)
redundancy on account of mechanisation; (ii) job elimination pursuant to outsourcing; (iii) business restructuring; or (iv) closure of business
unit/downsizing. In case this happens, the procedure as stated in the IDA needs to be complied with.

In case of retrenchment of employees, the retrenchment compensation is to be paid to the employees at the rate of 15 days’ wages (for every completed
year) to be calculated at the last drawn salary of an employee. The calculation of compensation is to be based from the date of appointment and in case an
employee has completed 240 days, he/she will be entitled to 15 days’ retrenchment compensation besides one month’s notice or salary in lieu thereof, as if
he/she has worked for one year.

6.6 Are there any specific procedures that an employer has to follow in relation to individual dismissals?

For non-workmen category of employees, or contract workers, the contract of employment or the Service Agreement governs the procedure in case of
dismissal and any or all procedures stipulated therein must be followed by the employer. In the event the employee being terminated enjoys statutory
protection of employment such as a “workman” as defined in the IDA and/or protection under the state-specific labour laws such as the Shops and
Establishments Act, then prior to terminating such an employee, the employer would have to serve the employee with 30 days’ notice or pay salary in lieu
thereof.

The procedure to be followed for termination due to ‘misconduct’ involves framing of charges and issuance of a charge sheet, conducting a domestic
enquiry by an inquiry officer, followed by issuance of a show cause notice after which the employee is given an opportunity to submit his/her defence and
call upon witnesses to make his/her representation. Decision to terminate the employment depends on the gravity of the misconduct on the part of the
employee, and a simple warning or suspension letter may also be issued in cases of first offenders or minor offences.

6.7 What claims can an employee bring if he or she is dismissed? What are the remedies for a successful claim?

An employee is entitled to claim unfair dismissal on the following grounds, namely by questioning the procedural aspect (of the termination) and by
denying existence of the element of non-performance. Thus, despite complying with requirements of a valid and legal termination, the employer faces a
challenge to the termination if the evidence of the reasons leading to termination of the employee is not supported by proof. Under some circumstances,
the employee may also allege unfair labour practice on part of the employer.

For a successful claim, workmen can seek their reinstatement with the employer along with back-wages for the period of suspension/termination. The
adjudicating authority can award a penalty lesser than dismissal, if it finds misconduct on behalf of the workman.

For a non-workman, the only relief available is that of damages from the employer as governed by the terms of the service agreement, unless the employer
is a public-sector undertaking in which case reinstatement can also be sought.
6.8 Can employers settle claims before or after they are initiated?

The employers can settle the claims at any time after the dispute arises by way of entering into a settlement agreement on mutually acceptable terms
between the parties. The first stage of an industrial dispute is “Conciliation” wherein both parties can arrive at an appropriate and acceptable solution to
the dispute. If the conciliation fails, the failure of conciliation report makes the basis for the reference of the dispute by the appropriate Government.

Notwithstanding the conciliation stage, the parties can mutually settle the dispute at any time before or thereafter.

6.9 Does an employer have any additional obligations if it is dismissing a number of employees at the same time?

In the event the dismissal falls under the category of retrenchment and the number of workmen being dismissed meets the threshold specified in the IDA
for such retrenchment, the procedures and obligations mentioned therein get triggered. For dismissal of non-workmen, and also for workmen by any
means other than retrenchment, there are no additional obligations for dismissal of employees in the case of several workmen, as compared to dismissal of
one.

6.10 How do employees enforce their rights in relation to mass dismissals and what are the consequences if an employer fails to comply with its
obligations?

In case of mass dismissal, an industrial dispute can be raised under the IDA or an appropriate forum can be approached under the Shops and Establishment
Act of the concerned state. Non-compliance with the statutory requirements might render the dismissal invalid and the employees could also be
reinstated. Further, wrongful terminations are considered unfair labour practices under certain circumstances and an adverse finding in this regard may
be made against the employer and appropriate prescribed punishment shall be accorded in each case.

7 Protecting Business Interests Following Termination

7.1 What types of restrictive covenants are recognised?

Incorporation and subsequent enforcement of ‘restrictive covenants’ such as confidentiality, non-disclosure and non-solicitation, intended to restrict the
employees from disseminating confidential and other important information exclusively available with an employer are commonly found in employment
contracts. While these restraints are recognised for as long as the employee remains in the service of the employer, any form of post-employment
restraint is considered as reducing the economic mobility of the employees and thereby limiting their personal freedom of right to livelihood. In view of
Section 27 of the Indian Contracts Act, 1872, which renders any agreement, which restrains anyone from carrying on a lawful profession, trade or business
void, the courts have prioritised the protection of rights of an employee seeking employment over protecting the interests of the employer seeking to
protect itself from competition. However, the validity of such restrictive covenants is tested on the standards of reasonability – involving considerations of
duration and space of the restriction in question.

7.2 When are restrictive covenants enforceable and for what period?

Restrictive covenants have been held to be enforceable for the period of the service of the employer bound by such covenants, and not thereafter unless
the agreement not to carry on business of which goodwill is sold. Any covenants which cover a post-employment period have faced difficulty in being
enforced, as the courts view them as a restraint to the employee getting gainful employment with a potential employer for reason of being bound by the
previous employer.

7.3 Do employees have to be provided with financial compensation in return for covenants?

While there is no provision of law mandating such compensation, it is not out-of-the-ordinary for a stipulation to this effect to be included in the
employment agreement. If a non-compete fee is paid to the employee then the restrictive covenant would force the employee to not breach even after
employment termination/cessation as the employer can file a case against such a breach by the former employee and claim compensation to the extent of
the non-compete fee paid.

7.4 How are restrictive covenants enforced?

As already discussed, the restrictive covenants are in most cases only enforced for the duration of the service. The same can be enforced by way of: (i)
serving the employee with a Legal Notice; (ii) seeking enforcement of undertaking based on clauses of the agreement; (iii) initiating a civil suit seeking
injunction/specific performance of contract as well as damages; and (iv) filing a suit for seeking injunction from the acts arising from such breach.

Damages may be awarded to the employer for the breach of the employment contract, but that requires demonstration of evidence of the damages.
Hence, interim relief in the form of injunction is the most common remedy that can be availed by the employer.

8 Data Protection and Employee Privacy

8.1 How do employee data protection rights affect the employment relationship? Can an employer transfer employee data freely to other countries?

It is a common practice for employers to collect sensitive personal data or information (“ SPDI”) of their employees for various reasons such as for selection
processes, record retention purposes, employee evaluations or other legitimate business purposes. Since this information is collected and retained by the
employer, the onus to maintain reasonable security practices and procedures for the protection of such SPDI of the employee to prevent any kind of
wrongful loss or wrongful gain to any person also lies on the employer. If such wrongful gain takes place due to a default or lapse of the employer, the
employer is liable to pay compensation to the relevant employee which could be up to INR 5 crores (approximately US$ 100,000) or even above INR 5
crores if the civil courts are approached.

With regard to onward transfer (within or outside India) of such information, it can only be done by the employer/data collector where specific employee
consent has been taken (unless such transfer is mandated by law), provided the transferee also adheres to similar levels of data protection as mandated
under the Information Technology Act, 2008.

8.2 Do employees have a right to obtain copies of any personal information that is held by their employer?

Employees have a right to obtain any information that is held by the employer, so long as the information pertains to the employee themselves. Such a
right is not barred under law.

8.3 Are employers entitled to carry out pre-employment checks on prospective employees (such as criminal record checks)?

Prior to confirming the engagement of an employee, the employer/company may conduct background checks/pre-employment checks on such candidates,
which may include but are not limited to: verification calls to previous employers/reporting managers; authenticating documents issued from the
educational institution(s) of the candidate; or conducting any such search of public records as may be available, to ascertain that the candidate does not
have a criminal record or history of wrongful acts whether financial or sexual in nature, or to verify the candidates’ address/dependants in the event of the
employee absconding, etc. There is no legal provision that gets violated if an employer wishes to procure such publicly available information or through
links/contacts provided by the employee himself/herself. It is often an essential condition precedent in the employment contract that such background
checks should be cleared to the satisfaction of the employer and the confirmation of the offer from the employer is contingent upon the same.

8.4 Are employers entitled to monitor an employee’s emails, telephone calls or use of an employer’s computer system?

In order to safeguard its confidential and proprietary information or enforce its obligations agreed under various agreements with its business
counterparts, the employer can monitor the activities of the employee, systems, premises, official e-mail ID, company SIM, handsets or computer systems.
The employer can prescribe such IT Policies for employees to ensure data protection. The employer may also have to justify such monitoring if it goes
beyond the official premises or is found to be violative of the employees’ right to privacy, which is guaranteed by the Constitution of India.

The Supreme Court has held in People’s Union for Civil Liberties v. Union of India that a telephonic conversation in private without interference would
come under the purview of right to privacy as mandated in the Constitution and that unlawful means of phone tapping is an invasion of privacy. While this
constitutional right to privacy is only available against state action, the principal is still relevant to a private employer. The employer must have a valid and
legal requirement to obtain monitor its employee’s activities when the same is done to safeguard the company interests. At the same time, the employer
must also tread this line thinly and respect the employee’s need for privacy.

8.5 Can an employer control an employee’s use of social media in or outside the workplace?

In view of a lack of regulatory provisions in this area, it is reasonable that an employer may control or regulate an employee’s use of social media in the
workplace, more so when the same involves use of the employer’s systems or resources, and even restrict the employees from commenting on anything
related to the employer, its business counterparts or other employees, or about the business of the employer. This can be done by way of a stipulation in
the service agreement or by way of the company’s IT policy (which governs employees’ IT usage at the workplace) and the Social Media Policy (which can
govern the posts/comments in any personal profile regarding a company/its business counterparts/business of the company or other employees).
Employers may very well restrict their employees’ use of social media at the workplace to maintain minimum loss of productivity. Needless to mention
that with some restrictions, social media use may be permitted when such access is required for the job profile, to achieve business objectives and/or to
create/maintain visibility on social media for the employer/business.

9 Court Practice and Procedure

9.1 Which courts or tribunals have jurisdiction to hear employment-related complaints and what is their composition?

In the case of workmen governed by the IDA, any employment-related complaint can be heard by and adjudicated upon by the following forums:

(i) Grievance Redressal Committee.

(ii) Works Committee.

(iii) Conciliation Officers.

(iv) Board of Conciliation.

(v) Courts of Inquiry.

(vi) Labour Courts.

(vii) Industrial Tribunals and/or National Tribunals.

(viii) Workmen Compensation Commissioner.

For employees not falling under the category of “workmen” under the IDA, the appropriate civil court or the authorities prescribed under their respective
State’s Shops and Establishments Act are the correct forum of law. For sexual harassment, complaints can be made before the Internal Complaints
Committee of the employer or the District Officer so appointed under the aforesaid legislation by the government.

9.2 What procedure applies to employment-related complaints? Is conciliation mandatory before a complaint can proceed? Does an employee have
to pay a fee to submit a claim?

Where any industrial dispute exists, or is apprehended, upon initiation of a complaint by the workman, the Conciliation Officer holds conciliation
proceedings in the manner prescribed under the IDA and a fair and amicable settlement between the disputing parties is attempted under these
conciliation proceedings. In either case, whether the mandatory conciliation is successful or not, the Conciliation Officer shall send a report to the
government detailing the reasons thereof and the facts of the case. Upon receipt of the report from the Conciliation Officer, the Government decides
whether a reference of the matter to the concerned forum (Central Government Industrial Tribunal (“CGIT”) or Labour Court cum Industrial Tribunal
(“LCIT”)) is warranted or not, and such reference is accordingly notified. Thereafter, the matter is adjudicated upon by the CGIT/LCIT as an industrial
dispute following the due process of law.

There is no fee payable by the workmen for these proceedings except such fee as may be paid to avail legal services of an advocate. To that extent, during
the conciliation proceedings, it is the workman’s discretion to be represented through a professional, and until the time he/she so chooses to make his/her
own case, the management cannot bring in a professional to represent them at such conciliation as well.

On the other hand, a non-workman not protected under the IDA, can avail the remedies arising out of the service or employment agreement and approach
the civil courts by way of filing a civil suit against the employer. In such a case, the appropriate and requisite court fee shall have to be paid.

9.3 How long do employment-related complaints typically take to be decided?

 There is no timeline fixed for adjudication/disposal of employment-related complaints. While timelines are fixed for certain stages under the law, once the
dispute is adjudicated to the courts, depending on the facts and circumstances of each case and also keeping in mind the vast backlog and pendency of the
courts in India, the timeline varies greatly. This aspect of court cases is often what drives the employees to settle the disputes at an early stage.

9.4 Is it possible to appeal against a first instance decision and if so how long do such appeals usually take?

Yes, it is possible to appeal against first instance decisions, by both the employees and the employer. The timeline of such appeal, however, would depend
on the facts and circumstances of each case and cannot be fixed.

Contributing firm

Chapter author

Neeraj Dubey
Lakshmikumaran & Sridharan

© 2019 Global Legal Group

The content of this website is for general information purposes only and does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no
responsibility for losses that may arise from reliance upon information contained herein. This material is intended to give an indication of legal issues upon which you may need advice. Full legal
advice should be taken from a qualified professional when dealing with specific situations. Please see our terms and conditions page for further details.