Roundup of Recent Changes to Indian Employment Laws
Several changes have been recently introduced to simplify and rationalise Indian labour laws and create a conducive labour environment. This update summarises some of the key central and State government amendments.
1. State Amendments to the Contract Labour (Regulation and Abolition) Act, 1970 (CLRA)
The CLRA is a central statute that regulates engagement of contract labour/agency workers in India. It imposes various obligations in relation to registration, health and safety, etc., on both the service provider and the service recipient. Even though the CLRA is a central statute, State governments have the ability to amend certain provisions of this statute. On this basis, the Maharashtra and Karnataka State governments have recently introduced/proposed certain amendments to the CLRA.
Applicability threshold of CLRA in Maharashtra increased
The CLRA prescribes a minimum threshold for the application of the statute to establishments and contractors engaging contract labour. With effect from 5 January 2017, the Maharashtra State government has increased this threshold for application of the CLRA from 20 to 50 workmen. Accordingly, in Maharashtra, the CLRA is now applicable to establishments engaging, and contractors providing, 50 or more workmen on any day in the previous 12 months.
With this amendment, the obligations under the CLRA would no longer be triggered for establishments and contractors engaging between 20 to 50 workmen. There are certain other States (such as Haryana) where there have been discussions on similarly changing this threshold, which may be implemented in the near future.
Women contract workers in Karnataka may be permitted to work at night
The government of Karnataka has amended the CLRA Rules permitting employment of female contract labour from 7:00 pm to 6:00 am, provided prescribed conditions are complied with. The amendment is not yet in force and will be effective upon its publication in the State's Official Gazette.
The conditions prescribed under the amended CLRA Rules, include providing transport facilities from and to the workplace, providing security guards in the transport vehicles and the workplace, engaging employees on rotation basis, etc.
While the amendment to the CLRA Rules permits engaging women contract workers at night without any special approval, the position under the S&E Act is quite different. The Karnataka Shops and Commercial Establishments Act, 1961 (S&E Act) prohibits the employment of women employees at night. Only IT/ITeS establishments are exempt from this restriction, subject to prior government approval. The term "employee" is defined broadly under the S&E Act and could be read to include a contract worker. Consequently, this amendment to the CLRA Rules creates ambiguity in the interplay between the provisions of these two statutes in Karnataka.
Since "employees" under the S&E Act can be interpreted to include women contract workers, it is not clear whether IT/ITeS organizations, would still need to obtain an approval under the S&E Act with respect to women contract staff at night or would they be allowed to engage them without approval on account of the changes to the CLRA Rules. Similarly, for non-IT/ITeS establishments, it is unclear whether the CLRA Rules amendment will allow them to now engage women contract labour at night or the prohibition under the S&E Act will continue to apply.
We understand that various representations have been made before the labour department around the ambiguities arising out of this amendment, which will hopefully be clarified.
2. New legislation providing rights for persons with disabilities enacted
The Central government has enacted the Rights of Persons with Disabilities Act, 2016 (Disabilities Act) which received the assent of the President on 27 December 2016. The Disabilities Act is not yet in force and will come into effect on the date notified by the Central government in the Official Gazette.
The primary purpose of the Disabilities Act is to give effect to the United Nations Convention on the Rights of Persons with Disabilities. The Disabilities Act imposes an obligation on the government to take steps towards ensuring equality of opportunity for persons with disabilities and preventing discrimination on the basis of disabilities. The Disabilities Act replaces the existing Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (PWD Act), which will be repealed once the Disabilities Act is brought into force.
The PWD Act was limited in its scope, and did not impose any specific obligations on private employers. The Disabilities Act, however, has a wider scope and imposes the following obligations in relation to private employers:
Every establishment must notify an equal opportunity policy, detailing measures proposed to be taken by it for skill development and employment of persons with disabilities;
A copy of the establishment's equal opportunity policy must be registered with the authority appointed under the Disabilities Act; and
Every establishment must maintain records of persons with disabilities in relation to their matters of employment, facilities provided and other necessary information as prescribed.
All private employers are expected to comply with these conditions, in accordance with rules that are yet to be prescribed by the Central government. Based on one's discussions with relevant authorities, we understand that they are in the process of drafting rules for the implementation of the Disabilities Act. The Disabilities Act will only be notified once these rules are ready.
3. Amendments to the Industrial Disputes Act, 1947 and Payment of Wages Act, 1936 in Haryana
Applicability of Chapter V-B of Industrial Disputes Act, 1947 (ID Act) in Haryana increased to 300 or more workmen
Chapter V-A and V-B of the ID Act deal with conditions for retrenchment of workmen and closure of establishments. Establishments that are covered under Chapter V-B are required to seek permission from the government before giving effect to any retrenchment or closure. However, Chapter V-B applies only to factories, mines and plantations (Covered Establishments) that employ more than the prescribed threshold number of workmen. The Haryana State Government has increased the threshold for applicability of Chapter V-B of the ID Act from 100 to 300 workmen. Therefore, Covered Establishments with less than 300 workmen on an average over the last 12 months will now be covered by Chapter V-A of the ID Act, and not by Chapter V-B. The amendment has been brought into effect from 3 November 2016.
The impact of this amendment is twofold:
(a) Relaxed retrenchment norms: Covered Establishments engaging between 100 to 300 workmen are no longer required to seek prior government permission or give 3 months' notice to retrench workmen. Instead, the requirement to give 1 months' notice of retrenchment and only intimate the government under Chapter V-A of the ID Act would apply.
(b) Relaxed norms around closure of establishment: The requirement to seek prior government permission at least 90 days before the closure of the establishment would no longer be applicable to Covered Establishments engaging 100 to 300 workmen. Instead, such establishments would only need to provide 60 days' notice of closure to the government under Chapter V-A of the ID Act.
Threshold for applicability of Payment of Wages Act, 1936 (PW Act) removed in Haryana
The PW Act is a central statute that prescribes obligations around the mode and timeline for payment of wages, and imposes restrictions on an employer's ability to make deductions from an employee's wages. The PW Act, in the first instance, only applies to employees working in factories, railways, mines, plantations, motor transport services, air transport services, etc. and earning wages up to INR 18,000 per month. While this is a central statute, State governments have the ability to amend this legislation in relation to its applicability. Accordingly, the Haryana government has recently deleted the wage threshold for applicability of the PW Act to employees in Haryana. This amendment has been brought into effect from 15 September 2016.
Further, in some States, the PW Act has also been extended and made applicable to shops and commercial establishments. In Haryana, the Shops and Commercial Establishments Act (Haryana S&E Act) specifically states that restrictions relating to deductions from wages under the PW Act would be applicable to commercial establishments. Since the Haryana S&E Act does not prescribe any wage threshold for its applicability, it remained unclear whether all employees working in a commercial establishment, even if they earned more than INR 18,000 per month, would benefit from the provisions prohibiting/limiting wage deductions under the PW Act. Haryana's recent amendment deleting the wage threshold has helped clear this confusion, as it is now clear that an employer's obligations as well as limitations on deductions from wages under the PW Act would apply to all employees of commercial establishments in Haryana irrespective of their wages.
4. Amendments in the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (EPF Act) and Employees' Provident Funds Scheme, 1952 (EPF Scheme)
Instances for transfer of Provident Fund (PF) amounts to inoperative account amended
The Central government has amended the circumstances in which PF amounts of a member under the EPF Scheme are transferred to an inoperative account. Prior to the amendment, accumulation in respect of a member who had either ceased to be employed or died but not preferred a claim within 3 years was transferred to an inoperative account. With the amendment, transfer to the inoperative account is only permitted in respect of a member who has died or retired from service after attaining the age of 55 years or migrated abroad permanently. As a result, accumulations of members who merely 'cease to be employed' will not be transferred to such account. This amendment has been brought into effect from 11 November 2016.
To appreciate the intent behind this amendment, it is relevant to note that currently amounts in the inoperative account do not accrue interest. As a result, prior to the amendment, accumulations of any member who ceased to be an employee and did not claim such amounts within 3 years stopped accruing interest. However, through the amendment, the government has limited the circumstances in which such amounts would be transferred to the inoperative account and thereby stop accruing interest. This change will not have an impact on companies that make contributions to the Employees' Provident Fund Organization (EPFO) since the cost towards interest is borne by the EPFO.
Nepalese and Bhutanese nationals to be treated as Indian Workers for PF purposes
In 2008, the social security schemes provided under the EPF Act were extended to an 'International Worker' (IW). The definition of an IW includes a foreign national working for an establishment in India to which the EPF Act applies. Nepalese and Bhutanese nationals were therefore treated as IWs for the purposes of the EPF Act. However, through a recent amendment to the EPF Act, the government has introduced a deeming fiction, allowing Nepalese and Bhutanese nationals working in India to be treated as Indian workers for the purposes of the EPF Act. This amendment has been brought into effect from 2 November 2016.
The basic wages on which PF contributions for Indian workers are made is currently capped at INR 15,000. On the other hand, contributions in respect of IWs are not capped and have to be paid on the entire 'basic wages'. Therefore, as a result of this amendment, the contribution for Nepalese and Bhutanese nationals working in India can now be capped at 'basic wages' of INR 15,000 and will no longer have to be paid on the entire 'basic wages'.
Since a sizeable workforce in the country (largely blue collar) hails from Nepal and Bhutan, this change would go a long way in incentivizing Indian employers to continue to hire Nepalese and Bhutanese nationals. However, it is unclear as to why the government has introduced this amendment allowing Nepalese and Bhutanese nationals to be treated as Indian workers for the purpose of the EPF Act, while Persons of Indian Origin (PIOs) and Overseas Citizens of India (OCIs), who are in fact of Indian heritage, continue to be classified as IWs by the EPFO. In most situations organizations are unaware that an employee is in fact an OCI/PIO, since these individuals do not need an employment visa to enter and work in the country. Such organizations routinely face adverse assessments from the PF department for failing to contribute uncapped PF for OCIs/PIOs.
5. Amendment to the time period for filing returns under the Payment of Bonus Act, 1965 (Bonus Act)
The timeline for uploading annual returns under the Payment of Bonus Rules, 1975 has been amended. All employers are now required to upload annual returns in respect of the preceding year on the web portal of the Ministry of Labour and Employment before 1 February of each year. Prior to this amendment, employers were required to upload the returns within the time period specified for payment of bonus under Section 19 of the Bonus Act, i.e. within a period of 8 months from the close of the accounting year (30 November).
This amendment has been brought into effect from 6 December 2016.
6. Department of Personnel Training issues Guidelines on Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (SH Act)
The Department of Personnel Training (DoPT) has issued fresh guidelines on certain processes that are required to be complied with by government ministries and departments in connection with the SH Act. These guidelines recommend that an inquiry by the Internal Complaints Committee be completed within 30 days and in any case, within a maximum of 90 days from the date of the complaint. In addition to this, government ministries and departments are now required to submit monthly progress reports on the implementation of the SH Act to the Ministry of Women and Child Development. The guidelines also recommend including brief details of the implementation of the SH Act by the department/ministry in the Annual Report prepared under the SH Act. These guidelines are only applicable to ministries and departments of the government and not to private employers.