Perspective: Employment Laws in India - Challenges, Changes and the Way Forward

Labour laws (also known as employment laws) mediate the relationship between workers, employing entities, trade unions, and the government. Labour Laws emerged when Employers tried to restrict the powers of Worker’s Organisations & keep labour costs low. Employment Laws in India have traditionally been governed by contract as well as various legislations, both at the central and state level. With the objective to simplify, modernize, rationalize and consolidate the various legislations with respect to employment, wages, industrial disputes and other relevant labour/employment related matters, Ministry of Labour and Employment (“Ministry”) introduced four bills in 2019 to amalgamate 29 central laws related to labour laws. These bills have been codified and enacted as:

  • The Code of Wages, 2019.
  • The Industrial Relation Code, 2020.
  • The Occupational Safety, Health and Working Conditions Code, 2020 and
  • The Code on Social Security, 2020.

The Indian Parliament passed these four labour codes in the 2019 and 2020 sessions. While the Parliament passed The Code on Wages in August 2019, the other three labour legislations, namely, The Industrial Relations Code, 2020, The Occupational Safety, Health and Working Conditions Code, 2020 and The Code on Social Security, 2020 were passed by the Parliament in September 2020. These four codes will consolidate 44 existing labour laws.  

According to sources in the Ministry of Labour, the new wage code had to be implemented from October 1, 2022, extended from the prior proposed date of July 1, 2022. The government has not decided on a deadline to ensure the implementation of the codes which were formulated almost two years back. 25 states have sent their drafts on the Industrial Relations code to the Centre, while 24 states have sent drafts related to Occupational Safety to the Centre. Drafts are yet to be sent by the states to the centre in all four labour codes. The central government wants all the states to implement this code simultaneously. 

Currently, many states have different codes. The majority of the states have sent the draft on the four labour codes to the Centre. But draft comments on the code are yet to come from some states. So far, a total of 31 states have sent draft rules on the new wage code. Rajasthan and Mizoram have sent drafts for each code only. So, West Bengal is the only state which has not drafted any code. Reports suggest, so far 23 states including Uttarakhand, Uttar Pradesh, Madhya Pradesh, Chhattisgarh, Odisha, Arunachal Pradesh, Haryana, Jharkhand, Punjab, Manipur, Bihar, Himachal Pradesh and UT of Jammu and Kashmir have framed rules under new labour laws.

 

Constitutional Provisions on Labour Laws

Article 21 promises the protection of life and personal liberty. Article 23 prohibits forced labour. Article 24 prohibits the employment of children below the age of fourteen years. Article 39(a) provides that the State shall secure to its citizens equal rights to an adequate means of livelihood.

 

Landmark Judgments on Labour Laws in India

 
  • Clarifying the concept of Lockout and Lay-off – Management of Kairbetta Estate, Kotagiri Po v. Rajamanickam, 1960 AIR 893, 1960 SCR (3) 371.
  • Settlement under Industrial Disputes Act – Bata Shoe Co. Ltd. v. D.N Ganguly, 1961 AIR 1158, 1961 SCR (3) 308.
  • By apex court for Equal Pay to Equal Work – Randhir Singh v. Union of India, 1982 AIR 879.
  • On Bonded Labour – Bandhua Mukti Morcha v. Union of India, 1984 AIR 802.
  • On Child Labour – C. Mehta vs State Of Tamil Nadu And Others, AIR 1997 SC 699, (1996) 6 SCC 756.

 

Features of New Labour Codes 2022

The new labour code deals with wages, social security, industrial relations and occupational safety. After the implementation of the new code, there will be changes in salary, holidays, PF, and working hours of the employees.

  • The take-home salary of the employees will be less credited to the account by increasing the HRA as well as the PF categories of the salary structure. There is a provision to change the Basic Salary as well. The government has made new rules regarding payroll. According to the new Wage Code, an employee’s basic salary should be 50 per cent or more of his total pay. An increase in basic salary will add more money to the employee’s PF, as a result, one can get a huge amount at the time of retirement.
  • Salaried employees will have the option of working four days a week and three days off. People who opt for three days off in a week will have to work 12 hours a day in the office. That means one must work 48 hours a week in any case. The ones who work for 8 hours a day will have only one week off. People who work for 12 hours a day in an organization will get three-week offs, and the ones that work 9 hours per day will be provided two-week offs. Under the Factories Act, a person working more than the daily limit of 9 hours or a weekly limit of 48 hours is entitled to wages that are twice the ordinary rate of wages. The new Codes retain this overtime wage rate in respect of any work extending beyond the limit of 8 hours per day or 48 hours per week.

 

The Code of Wages, 2019 (“Wage Code”)

The Wage Code has been notified on August 08, 2019, and received the assent of the President on September 28, 2020. The Wage Code focuses on simplifying the existing labour laws dealing with the payment of wages, overtime, bonus, minimum wages etc. The provisions of the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965 and the Equal Remuneration Act, 1976, have been rationalised and subsumed therein. The implementation of the Wage Code is expected to have wide implications for industries and it is, therefore, crucial to understand the key aspects of the Wage Code and how they differ from the previous regulations. One of the key changes is the introduction of a uniform definition of the term ‘wage’ across all the four Codes. The uniform definition of ‘wage’ includes all monetary payments and any benefits provided in kind except for the specified exclusions.

 Highlights of the Code:

  • Definition of wage: – A uniform definition of ‘Wages’ is introduced, thus bringing standardization to multiple issues related to wages and streamlining them. Wages include salary, allowance, or any other monetary component. This does not include bonus payable to employees or any travelling allowance, among others. [1]
  • Floor wage: – As per the code, the Central Government will fix the floor wages considering the workers’ living standards. The floor wage may vary depending on the geographical location. The minimum wages decided by the central or state governments should be above the floor wages. In case the existing minimum wages are higher than the floor wages, the central or state governments cannot reduce the minimum wages. Before fixing the floor wage, the central government may obtain the advice of the Central Advisory Board and may consult with state governments.[2]
  • Minimum Wages: – Employers cannot employ people on less than the minimum wage. While fixing the minimum wages, the government should take into account the difficulty level of the work, and the workers’ skill levels also. Also, the minimum wage fixed will be reviewed by the government at least every five years. The central or state government shall not take 5 years period for revising minimum wages. [3]
  • Payment of wages: – Wages will be paid in (i) coins, (ii) currency notes, (iii) by cheque, (iv) by crediting to the bank account, or (v) through electronic mode. The wage period will be fixed by the employer as either: (i) daily, (ii) weekly, (iii) fortnightly, or (iv) monthly.[4]
  • Deductions: – Under the Code, an employee’s wages may be deducted on certain grounds including: (i) fines, (ii) absence from duty, (iii) accommodation given by the employer, or (iv) recovery of advances given to the employee, among others. These deductions should not exceed 50% of the employee’s total wage.[5]

 

The Industrial Relation Code, 2020 (“IR Code”)

The IR Code consolidates and amends the laws relating to Trade Unions, conditions of employment in industrial establishment or undertaking, investigation and settlement of industrial disputes. The code combines, simplifies and amends the 3 Central Labour Laws namely (i) The Industrial Disputes Act, 1947, (ii) The Trade Unions Act, 1926 and (iii) The Industrial Employment (Standing Orders) Act, 1946.

The IR Code provides a new concept for negotiating trade unions or negotiating councils in an industrial company. According to the stated provision: In the case of a single union in an industrial company, the employer recognizes that union as the sole bargaining union of the workers and as such the sole negotiating union shall be permitted to negotiate terms with the employer. The IR Code prohibits strikes and lockouts in all industrial establishments without notice. No unit shall go on strike in breach of contract without giving notice 60 days before the strike, or within 14 days of giving such a notice, or before the expiry of any date given in the notice for the strike. The IR Code provides that the provisions with respect to the standing orders shall apply to all industrial establishments with 300 workers in comparison to the earlier 100 workers. The IR Code includes other provisions related to retrenchment, layoffs, closure of an establishment, etc.

Highlights of the Code:

  • Timeline for the disciplinary process: The Industrial Employment Standing Orders Act did not specify a deadline for disciplinary actions to be taken. The Code, however, sets a 90-day deadline for concluding internal investigations into misconduct.[6]
  • Applicability of Standing Orders: Standing orders must be written on the subjects mentioned in a schedule to the Code, and they must be used by every industrial plant with 300 or more employees. These concerns relate to four different topics: (i) how employees are classified; (ii) how they are notified about working time, breaks, pay checks, as well as pay rates; (iii) how employment is terminated; and (iv) how they can lodge grievances.[7]
  • Employees on fixed-term contracts: It aims to enable employers to hire workers for any period. Fixed-term employees are those who are employed pursuant to a contract that establishes their limited lifetime of employment.
  • Reduced Threshold: Companies with fewer than 300 workers are exempt from having to develop codes of conduct for staff members who work in industrial facilities. Companies of a maximum of 100 employees are currently required to comply.
  • Dispute Resolution: It calls for the establishment of 2 tribunals (instead of a member), with the important cases being made the decision jointly and the less important civil matters by a single member, resulting in a timely response of cases.

 

The Occupational Safety, Health and Working Conditions Code, 2020 (“OSH Code”)

The OSH Code, 2020 received the President’s assent on September 28, 2020. It is a code to consolidate and amend the laws regulating the occupational safety, health and working conditions of the persons employed in an establishment. The field of occupational health and safety sets standards to mandate the elimination, mitigation, or substitution of jobsite hazards. OSH programs also include processes and procedures to minimize the consequences of workplace incidents. Occupational health and safety are a very broad umbrella. The goal of an occupational safety and health program is to foster a safe and healthy occupational environment. OSH also protects all the public who may be affected by the occupational environment.

The OSH Code consolidates 13 Acts regulating health safety and working conditions. The 13 Acts are; (i) Factories Act, 1948; (ii) Mines Act, 1952; (iii) Dock Workers (Safety, Health and Welfare) Act, 1986; (iv) Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996; (v) Plantations Labour Act, 1951; (vi) Contract Labour (Regulation and Abolition) Act, 1970; (vii) Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979; (viii) Working Journalist and other Newspaper Employees (Conditions of Service and Miscellaneous Provision) Act, 1955; (ix) Working Journalist (Fixation of Rates of Wages) Act, 1958; (x) Motor Transport Workers Act, 1961; (xi) Sales Promotion Employees (Condition of Service) Act, 1976; (xii) Beedi and Cigar Workers (Conditions of Employment) Act, 1966; and (xiii) Cine Workers and Cinema Theatre Workers Act, 1981. 

The OSH Code has amended some of the definitions such as Contract Labour, Employee, Employer, Establishment, Principal Employer, Wages and Workers.

Highlights of the Code:

  • The workplace ought to be free from any dangers that could endanger the health of the employees who work there, and any dangers should be disposed of responsibly. Workers who are impaired cannot be hired in the construction sector.
  • The code stipulates that employers must hold annual medical check-up camps as a requirement.
  • The appropriate Government may designate Inspector-cum-Facilitators who will exercise the authority granted with them throughout their jurisdictions and, in addition to other responsibilities to be fulfilled by them, may carry out an electronic web-based inspection and call of the information required by this Code.
  • According to the OSH Code, the Central Government shall establish a National Occupational Safety and Health Advisory Board (“National Advisory Board”), which shall have the authority to provide advice to the Central Government.
  • The employer must establish and maintain employee welfare programmes as may be required by the Central Government.

 

The Social Security Code, 2020 (“SS Code”)

The objective of the SS Code is to amend and consolidate the existing labour laws relating to social security with the goal to extend social security benefits to all employees and workers irrespective of belonging to organised or unorganised or any other sectors. The SS Code replaces nine laws related to social security. These include inter-alia The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, the Maternity Benefit Act, 1961, the Unorganised Workers’ Social Security Act, 2008, The Employees’ Compensation Act, 1923, Act, 1952, The Employees’ State Insurance Act, 1948, The Payment of Gratuity Act, 1972, etc.

The SS Code brings the unorganised sector, gig workers and platform workers under the ambit of social security schemes, including life insurance and disability insurance, health and maternity benefits, provident fund, employment injury benefits, housing and skill upgradation, etc.

 Highlights of the Code:

  • The Code seeks to protect as many workers and employees as possible. It offers a broad definition of “employee” that encompasses contract workers as well as those working in managerial, administrative, and supervisory positions. To determine an employee’s eligibility for different social security benefits, the Code makes distinctions based on the employee’s schedule of employment and/or wage ceiling.[8]
  • The definition of “inter-state migrant workers” as used in the Code has been expanded to include individuals who relocate from one State for recruitment in an organisation in a destination State and may effectively influence their organisation within the aforementioned destination State in accordance with an agreement or other employee arrangement. Such workers must earn a minimum of INR 18,000 per month to be considered interstate migrant workers.
  • The Code will replace the current employment transactions with career centres that offer career counselling through the enrolment of employers as well as job seekers as well as the collection and transmission of data specific to employment, in addition to offering vocational guidance, career guidance, and assistance with starting a business.
  • The Code stipulates enhanced and graded penalties for a variety of offences, some of which may be compensatory under certain circumstances. While the maximum penalty for a violation can reach INR 1,00,000 for some offences and even INR 3,00,000 for a subsequent violation, the maximum period of imprisonment for a violation can range from two months for the initial unlawful act to 3 years for a second or subsequent violation after a prior conviction.[9]
  • The regulations limit allowances to 50%, meaning that basic wages would make up half of the salary. The provident fund contribution is calculated as a proportion of basic wages, which includes basic pay as well as dearness allowance (DA).[10]

 

Delayed Implementation of the Codes

The new labour codes were passed by the ministry of labour and employment, and they were planned to come into effect on July 1, 2022. Since there is still no agreement among the states, the new code is yet to be put into practice.

Due to the concurrent nature of the subject of labour, both the federal government and the states must pass laws and regulations prior to the implementation of the labour codes. There are signs that the Centre is preparing for a delayed deployment with an initial implementation of two Codes with most states having pre-published the draft rules for at least the Code on Wages as well as the Code on Social Security.

Trade unions have alerted the Centre that if the government goes forward with the execution of the Codes, they will turn to protest actions. The four Codes, which have been promoted as reforms, are feared by the unions to weaken workers’ rights. Industry representatives all agreed that despite the fact that expenses like overtime pay and gratuities will rise, recognising and protecting employees’ rights even those that have a “fixed term” nature is a positive step. However, they remained adamant that once the process of implementation gets going, more difficulties might emerge. Participants concurred that in ensuring a smooth transition, the two crucial factors – cost to recruiters and take-home pay for employees must remain unaltered and not be adversely affected during this process.

Other obstacles that might materialise, according to various respondents, were:

  • No specific clause addressing the obligations of employers in pandemic-specific circumstances;
  • Concerns that merely raising the 300-worker cut-off point for the application of the permission precondition for retrenchment is insufficient of a change;
  • Concerns about dealing with unions and recognising them in industries like IT that don’t have much expertise on this front;
  • Employee social security is not specifically addressed in small businesses and MSMEs;
  • There are no concrete steps taken to help increase career opportunities.

The goal of centralization may not be met because the four codes still contain ambiguities. Therefore, the government should make every effort and issue all necessary regulations to ensure that the labour codes are implemented in the right spirit.

 

Conclusion

Given the above changes that the new labour codes have brought to the existing Employment Laws in India, it will be important for establishments to assess the implications and revisit the compliance requirements under each Code once it is brought into effect along with the final rules and state amendments. The new labour codes can be termed as much-needed improvements to the current labour regime in the country. The labour codes will ensure the creation of “One India & One Law”, reducing the number of laws with the often conflicting definitions of terms and provisions, to only four codes thereby ensuring tremendous ease in doing business. The “Final Goal” of Labour Laws is to bring both “Employer & Employee” on the same level, thereby mitigating the differences between the two ever- warring groups. The new labour reforms finally overtake the redundant existing labour law regime in terms of simplifying and modernising the labour system. But it is pertinent to note that these labour reforms are more employer-friendly. Although the new reforms have simplified various compliances, they have also created several confusions by not defining key terms in the Codes. Only time will tell how effective these Codes will be in the long run. 

References: 

[1] Sec 2(y), The Code of Wages, 2019

[2] Sec 9 (1) (2) (3) , The Code of Wages, 2019

[3] Sec 5, 6, 8, The Code of Wages, 2019

[4] Sec 15, 16, The Code of Wages, 2019

[5] Sec 18 (2), (3), The Code of Wages, 2019

[6] The Industrial Relations Code, 2020: Implications For Workers’ Rights by Ramapriya Gopalakrishnan, 24th October, 2021 https://www.livelaw.in/columns/the-industrial-relations-code-2020-implications-for-workers-rights-164921

[7] Section 28, 29, 30,  The Industrial Relation Code, 2019

[8] India: Evaluating The Code On Social Security, 2020 by Minu Dwivedi and Shreya Chowdhury on 04 November 2020, https://www.mondaq.com/india/employee-benefits-compensation/1001268/evaluating-the-code-on-social-security-2020

[9] Section 138 of the Code on Social Security, 2020

[10] 4-day work-week, change in salary: India’s new labour codes likely in FY 2022-23, Hindustan Times, Dec 20, 2021, https://www.hindustantimes.com/india-news/4day-work-week-change-in-salary-india-s-new-labour-codes-likely-in-fy-202223-101639970476730.html

 

Image Credits: Photo by Rubaitul Azad on Unsplash

The labour codes will ensure the creation of “One India & One Law”, reducing the number of laws with the often conflicting definitions of terms and provisions, to only four codes thereby ensuring tremendous ease in doing business. The “Final Goal” of Labour Laws is to bring both “Employer & Employee” on the same level, thereby mitigating the differences between the two ever-warring groups.

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Legal Framework for the Workforce of the Future

Every economic collapse paves the way to a transformative legacy, the pandemic is no exception. Globally, since 2020, the fluctuating and deliberate government-imposed lockdowns have forced the replacement of traditional work operations with automated labour platforms, virtual collaborations and digitized workforce interfaces[1]. According to International Labor Organization (ILO), the work from home arrangement has become an unexpected experiment that has managed to break the traditional barriers of working life and technology.

As the ‘new normal’ fixes its roots into the traditional office space, it is imperative to structure a regulatory legal framework that governs the ‘workforce of the future.’ Considering 96% of the organizations have successfully switched to work-from-home set-ups domestically since 2020, it is time for India to incorporate the new work culture into its legislative framework, in alignment with countries worldwide[2].

This article deliberates upon the exigency and structure of new work from the home regulatory regime, by mapping the work from home policies across the globe and analyzing the gaps in the present labour laws in the country that demand a more sincere reflection in the backdrop of the ‘new normal.’

Need of Comprehensive Legal Framework for Work from Home in India

 

          Fig: The economist[3]                                                              Fig: Statista[4]

The above two graphs illustrate two different statistics of work from home; graph 1 shows WFH working hours of employees per week in western countries, while graph 2 shows a survey of Indian millennials on lifestyle and work during a pandemic.

As per Graph 1, Britain has the highest percentage of work from home per week, with approximately 40% of the employees’ working-from-home for 5 or more days per week from 9 AM to 5 PM. In stark contrast, the Indian survey shows that work from home increased the office workload of 81% of employees which indicates that Indian employees are utilizing more energy than an average British employee. 

Additionally, 55% of Indian employees claim they do not enjoy work from home and 57% of employees say that work from home has pulled their career back. From these statistics, it appears that the issues outlined hereabove are the specific product of a lack of legislative or contractual conventions surrounding the treatment of employees participating through the Work From Home Model[5], and they indicate the urgent need to implement a compulsory legal framework in India governing work-from-home regime to prevent exploitation and loss of valuable human resource in the country, especially in the very important the service sector.

In this light, the Government of India has proposed to formalize work from home facilities for the service sector, leaving the manufacturing sector beyond the legislative scope. The parameters of the regulation are yet to be ascertained[6].  

Lacunas of the Extant Labour Codes in Dealing with the Work From Home Arrangement

 

  1. The draft Model Standing Orders for Service Sector 2020 – The policy is under the discretion of companies for implementation subject to the appointment of an employee. However, this is a very loosely framed guideline to build a sustainable framework for work from home. There needs to be a strong regulatory framework that recognises the need to work from home, protects the interest of the employees and the employers and deliver resolutions accordingly. However, the draft Model Standing Orders may get complicated with the individual state labour laws.
  2. Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code) – The OSH Code defines the working place of employees as “establishment” refers to the physical working place of employees[7]. The OSH does not recognize work from home as the working place of the employee.[8] This puts relevant questions of safety and health of workers working outside a physical establishment of a company. As work from home becomes the new norm, the term “establishment” shall have to be broadened to normalize and adapt for the workforce of the future. Further, the OSH Code needs to ascertain strict compliance to working hours and leave policy, including making the employer liable to pay double wages for any work done beyond working hours/shifts/during leaves, also, security to employer’s data, equipment, confidential information, reverse engineering, data theft, etc., along with strict provisions curbing moonlighting by employees may be included to protect the interest of all parties concerned in a work from home scenario.       
  3. Code on Social Security, 2020 (CSS) – under the CSS few key definitions of terms that are present significantly digress from the international definitions of ILO[9], for example –“home-based work”, “remote work”, “telework”, “work at home”, “information and communications technology” etc. Categorizing and defining such terms in a unified manner is crucial for policymaking and regulating. For instance, the ILO definition of “work at home” overlaps with “home-based work” defined under CSS, but both terms have different meanings, and they collectively exclude “work from home”. The definition of “establishment”, “employment injury”, and other related provisions may be aligned with the concept of work from home to provide security to the employees in a work from the home setup.
  4. Code on Wages, 2019 (CoW)[10] – Companies has cut the pay of their employees since the economic downturn, particularly during and after the second wave. Several other factors[11] affected the evaluation of wages and allowances of employees working from home. Therefore, it is important to amend the exclusive legal framework for WFH so that employees get the promised salaries, and companies are under the express liability to pay their employees with a contractual obligation.

Additionally, to ensure that the laws pertaining to work from home are effective and efficient, it is pertinent that issues specific to work from home set up, such as the ones detailed below, are thoroughly studied and understood, before framing the regulatory framework:

  • Measurement of the time of work and conduct of work by the employee in a remote environment – The approach legislature takes with respect to the same and how the same may be incorporated into the wage structure.
  • Measures to protect employees from injury, damages, losses, etc., in a work from home set up –  Requirement on employers to provide the necessary equipment, connectivity, seating arrangement, periodic risk assessment, etc.
  • Maintenance of equipment provided to employee in pursuit of work from home, and regulation of use thereof, with consideration to allied privacy concerns.
  • The manner in which misconduct and harassment of various degrees will be evaluated in the remote environment and the application of existing legislation to such scenario.
  • Maintenance of confidentiality, exclusivity and contained environment of the employees during working hours in such remote environment, including restriction on moonlighting, data theft, confidentiality breach, reverse engineering, etc.

With the above concerns in mind, it would be pertinent to explore instances in which comparative jurisdictions where such concerns were addressed.

A Comparative Overview on Formulated and Implemented “Work from Home” Laws Across the World

 

In the recent pandemic “work from home” emerged as a pragmatic approach for employers of most sectors across the world making work feasible for individuals primarily involved in white-collar jobs. However, it did bring major challenges and inconsistencies for employees who were made to work after office hours were overburdened and sometimes exploited. Observing the changing workplace scenario, governments were proactive in finding solutions to make employees dependable and employers accountable.

Spain: Spain legislated on remote work in September 2020. Remote work must be voluntary and reversible, and formalized in a written agreement without prejudice to general employment legislation or existing collective bargaining agreements. The law clarifies whom it applies to, i.e., those under an employment contract, and who have rendered “remote work” for a minimum period of three months, for at least 30% of an employee’s working day, or an equivalent percentage based on the contract. It also differentiates between “telework” and “work from home”. Companies are to provide resources, equipment and consumables necessary to perform and maintain work remotely. Further, employees have a right to payment and compensation for expenses on equipment, the right to privacy and data protection, and a right to digital disconnection, amongst others. At the same time, the law empowers employers to ensure that remote employees fulfil their duties well.

Finland: Finland has provided flexible working opportunities for years. This is partly because of legislation, allowing employees the right to adjust their working hours for maximum flexibility, since the mid-1990s. The Finnish Working Time Act, 2019 was recently amended[12] to introduce key changes towards creating adaptive working arrangements on flexible work hours, flexible working arrangements and the introduction of ‘working time accounts’. The Act has several features affording flexibility. Employers and employees may agree to flexible working hour arrangements, subject to regular working time not exceeding 40 hours and adjustment of excess hours worked. The Act also permits individual flexible work arrangements where employees decide on placement and performance at least half of the working time, setting out a number of aspects such an arrangement must cover (such as days on which working hours may be allocated, weekly rest periods and fixed working hours). The Act enables agreements on working time accounts, where working hours, earned time-off and monetary benefits can be exchanged for time off. Agreements on working time accounts must cover certain elements.

The United Kingdom: Flexible Working Arrangements (FWAs) were allowed via a process of proposal and negotiation in 2002, to assist employees with care-taking responsibilities in requesting FWAs. The UK’s approach to flexible work is predicated on three main pillars viz. qualifying employees proposing changes in relation to hours, time and location of work; an employer’s duty to consider such application in a “reasonable manner” with refusal only on pre-specified grounds (such as additional costs and inability to re-organise work amongst existing employees); and escalation to employment tribunals by employees, in limited circumstances. The UK’s approach is considered “light-touch regulation”, and is based on a foundation of dialogue and negotiation between employers and employees. Australia and New Zealand have also adopted similar legislation.

The European Union: The European Union (EU) has a “Work-Life Balance Directive” adopted in 2019, which provides FWAs for parents and caregivers.

Singapore: Singapore has an interesting alternative to the rights-based approach to FWAs adopted in the UK. Through a set of voluntary “Tripartite Standard on Flexible Work Arrangements” formulated in consultation with multiple stakeholders, employers can adopt practices that assist employees better managing work-life needs, while enhancing productivity. Such employers are employers of choice, and can use a logo-mark in recruitment and marketing.

Re-evaluation of Laws Necessary to Accommodate the New Work Culture

 

In a nutshell, the present labour and employment laws in India are incapable of addressing the concerns of work-from-home regime. Hence, re-evaluation of the present laws is important to amalgamate the “Work From Home” model into legislation to ensure welfare of the employees, workers and other relevant stakeholders. The above discussed international legislations aim to sustain a healthy and safe working environment for the employees within and outside the “establishment”. Finland and Singapore’s legislation provides flexible working hours and arrangements. The UK approach of “light touch regulation” is also innovative and promotes healthy relations between employees and employers. Taking que from the regulatory frameworks of countries across the world, India should aim to formalize “Work From Home” policies that benefit the employees while balancing the burden on employers. Worker and employee rights should be the central focus of development in the country, in order to fully reap the gains of this transformative legacy!

References: 

[1] https://www.ilo.org/wcmsp5/groups/public/—ed_protect/—protrav/—travail/documents/publication/wcms_765806.pdf

[2] https://pib.gov.in/PressReleseDetail.aspx?PRID=1607997

[3] https://www.economist.com/briefing/2020/09/12/covid-19-has-forced-a-radical-shift-in-working-habits

[4] https://www.statista.com/chart/23845/wfh-millennial-survey-india/

[5] https://www.ilo.org/wcmsp5/groups/public/—ed_protect/—protrav/—travail/documents/publication/wcms_765806.pdf

[6] https://www.financialexpress.com/industry/govt-proposal-to-formalise-wfh-facility-for-services-sector/2163381/

[7] https://labour.gov.in/sites/default/files/OSH_Gazette.pdf

[8] One may refer to the following guidelines: https://www.osha.gov/enforcement/directives/cpl-02-00-125
 Where the OSHA of the United States has endeavored to include aspects of the home and home office within the meaning of a workplace and ascribe employee liability to injuries and accidents that may occur in that environment.

[9] https://labour.gov.in/sites/default/files/SS_Code_Gazette.pdf

[10] https://prsindia.org/billtrack/the-code-on-wages-2019

[11] https://www.econstor.eu/bitstream/10419/196124/1/1664534202.pdf

[12] New Working Time Act in a nutshell – Ministry of Economic Affairs and Employment (tem.fi)

 

 

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The present labour and employment laws of India are incapable of addressing the concerns of the work-from-home regime. Hence, re-evaluation of the present laws is important to amalgamate the WFH model into legislation to ensure the welfare of the employees, workers and other relevant stakeholders.

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The football transfer: How the Barcelona – Messi matter turned murky

“In Barcelona, on 14 December 2000 and the presence of Messrs Minguella and Horacio (Gaggioli), Carles Rexach, Director of Football of F.C.B., hereby agrees under his responsibility and regardless of any dissenting opinions, to sign the player Lionel Messi, provided that we keep to the amounts agreed upon.”

 

Carles Rexach, the then Director of Football of F. C. Barcelona, scribbled this on a napkin to sign up a young Argentinian wonder kid, Lionel Messi, as he had never seen such a talent before and did not want to lose out on him. Thus, began the fairytale journey of Messi’s tryst with Barcelona and as history suggests this gamble that played out 20 years ago, turned out to be the most profitable for the club and rewarding for Messi.

Messi has been the Messiah for the club on several occasions, wriggling the club out of tough situations with his magic touch. With Messi on their side, Barcelona established itself as a formidable force that won everything that world football could offer. As all good things inevitably come to an end, this fairytale match appeared to have come to an end when Messi formally notified the club of his intention to unilaterally terminate his contract.

The events that transpired after the news broke out of Messi’s intention to leave highlight some troubling issues that are currently plaguing the football transfer market; in particular, the breakdown of relationships between a club and a player at the instance of their squabbling over better wages and contracts. Messi’s dispute with Barcelona revolves around the unique nature of a football contract and the role relationships play in such contracts.

 

In order to understand the dispute better, one must first have a formal understanding of the football transfer market.

 

What is a football transfer? Generally, a transfer in football is like any other business transaction that takes place between two football clubs and involves the transfer of a player who is under a contract with one club to another club in consideration of a fee known as a transfer fee.

 

A transfer is considered complete when the buying and selling clubs agree on the terms of sale and when the buying club enters into a contract with the player.

 

 

How does football transfer work?

If a transfer has to take place, the buying club must first approach the selling club and inform in writing before entering into negotiation with the player. This is legally mandated under Article 18(3) of the FIFA Regulations on the Status and Transfer of Players (the ‘Transfer Regulations’).

 

It is important to note however that the ultimate bargaining power in a transfer still lies with the selling club.

 

 

What is a transfer request?

A player, who is dissatisfied with his current club and finds himself in a position wherein the club has rejected all transfer bids from other clubs, may put in an official transfer request to the club. The only drawback is that such a request has no legal bearing and the club may choose to reject the plea.

 

 

When can a football transfer happen?

A transfer can take place during the “registration periods” which are provided by the governing bodies of the respective national associations.

In Europe, there are officially two periods during which transfers can take place – summer (July 1st – August 31st) and winter (January 1st – 31st) transfer window.

 

What is the duration of contracts between the players and the clubs?

The duration of a contract entered into by a player with the club may vary from short term to long-term depending on a variety of factors such as the age of the player, their skill, commercial value, potential growth and injury risk of the player. The term of a contract is determined mostly by these factors.

According to Article 18 (2) of the Transfer Regulations, the minimum term of a contract shall be from its effective date until the end of the season, while the maximum term of a contract shall be five years. Players under the age of 18 may not sign a professional contract for a term longer than three years.

 

Having garnered a basis of what and how a football transfer works, it is necessary to understand the terms of the contract between Messi and FC Barcelona that enables him to leave Barcelona on a free transfer and the reason behind the current situation between two.

 

What enabled Messi to leave Barcelona for free? Messi extended his contract with Barcelona in 2017 for a duration of 4 years, which was a deal that would enable him to retire at the club. However, on the insistence of Messi, an additional clause was added in the contract, which granted Messi the right to unilaterally terminate the contract at the end of each season and leave for free, provided that he notified the club prior to June 10th.

 

 

What was the legal issue involved in their dispute?

The legal issue involved the interpretation of the terms of the unilateral termination clause in light of the unprecedented COVID–19 pandemic that led to the interruption and the subsequent extension of the season.

 

Messi claimed that since the pandemic had suspended the season temporarily and it restarted only after June 10th (La Liga re-started on June 11th, 2020), it was impossible for him to exercise such a right before June 10th. Messi thus wished for the terms of the contract to be viewed liberally in light of the unprecedented events.

 

The Barcelona Board however contested that the terms of the contract strictly mentioned June 10th, hence Messi could not unilaterally terminate the contract post that date. The issue therefore would depend on whether the terms of the contract specifically mention a “specific date” or whether it is termed as the “end of the season”. In any case, according to Article 16 of the Transfer Regulation, a contract cannot be unilaterally terminated during the course of a season.

 

 

Relationship v Contract: what matters more?

The reason behind this issue turning unpleasant is largely due to the long-standing relationship that Messi had with Barcelona ever since he was a young boy. On a deeper analysis, the issue throws light on an important question – what is the nature of a football contract; is it purely a business transaction or does it involve the building of a relationship of trust, faith and respect?

 

Generally, the nature of any football contract is such that a player is associated with a club for a period of 3-4 years. It is unlike a business transaction of sale wherein it involves a single transaction. Instead, football contracts bind a player to the club for a considerable period of time and hence building a definitive relationship with the club is essential for the success of the contract. While the contract may describe the legal relationship, the true essence of the deal is the personal relationship.

 

Therefore, if a football contract failed to build a human connection between the player and the club, it would only increase the chances of the player leaving mid-contract and create a hostile environment for both parties.

 

 

Conclusion

In this case, Barcelona should have gauged the reasoning behind Messi’s intention to include a clause to unilaterally terminate his contract at the end of each season. Adding to the misery, the club management seems to have created a situation, which ultimately drove him to the point of making a decision to leave.

 

Barcelona’s actions, post Messi’s notification to leave, has been criticized as a tactical move to ensure that Messi had no other option but to stay at the club or could only leave provided the Club received his hefty release amount of € 700 million.

 

While Messi decided not to take the matter to Court, Barcelona seems to have made a big commotion out of it by forcing him to change his decision and stay with the club, perhaps until next June, thereby destroying the long-standing relation between the two.

 

Image Credits: Photo by Connor Coyne on Unsplash

If a football contract failed to build a human connection between the player and the club, it would only increase the chances of the player leaving mid-contract and create a hostile environment for both parties.

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A New Era of Labour Laws Beginning With The Code of Wages, 2019

 

Over the last few years, there have been talks by the government to reform the existing labour laws, which are mostly archaic, to make them compatible with current issues and needs of the labour market. In the Union Budget 2019, the Government has pushed ahead with such reforms and proposed to streamline over 44 central laws and over 100 State laws pertaining to labour into 4 major Labour Codes, with the objective of increasing the ‘ease of doing business’ and ‘Make in India’ initiatives. The Government hopes that by standardizing definitions, registrations, and filings, there would be less conflict and fewer reasons for disputes.

The proposed Labour Codes are as follows:

 

  1. Code of Wages – The Code of Wages is set to combine and subsume the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965 and the Equal Remuneration Act, 1976.

 

  1. Code of Industrial Relations – The Code of Industrial Relations seeks to replace the Industrial Disputes Act, 1947, the Trade Unions Act, 1926 and the Industrial Employment (Standing Orders) Act, 1946.

 

  1. Labour Code on Social Security – Labour Code on Social Security is intended to create a comprehensive social security system to provide retirement, health, old-age, disability, unemployment and maternity benefits to a vast majority of the population.

 

  1. Small Factories (Regulation of Employment and Conditions of Services) Bill – This Bill had initially been proposed to exempt small factories with less than 40 employees from the applicability of 14 labour legislations. However, this bill is most likely to be shelved on account of issues pertaining to rights of employees.

 

Further, the Government has allocated INR 11,184.09 crores to the Ministry of Labour and Employment which is a significant boost in comparison to the average budget allocation to the Ministry over the past 5 years.

 

Code of Wages, 2019

 

The first in the series of Codes to be approved by the Parliament is the Code of Wages, 2019[i] (“Code of Wages”). The Code of Wages (initially proposed in 2015), which amalgamates and subsumes 4 major legislations, namely the Payment of Wages Act, 1936[ii], the Minimum Wages Act, 1948[iii], the Payment of Bonus Act, 1965[iv] and the Equal Remuneration Act, 1976[v], was passed by the Lok Sabha on 30th July, 2019 and the Rajya Sabha on 2nd August, 2019 and has received the President’s assent on 8th August, 2019 and published in the Official Gazette for general information.

 

The Code of Wages, while not changing the provisions of the law themselves substantially has certainly reduced the ambiguity and multiplicity of definitions and compliances as well as broadened the scope of the beneficiaries under the existing laws thus providing benefits to around 50 crore employees. The Code comprises 9 chapters, with minimum wages, payment of wages, equal remuneration and bonus being covered under different chapters.

 

 

 

Salient Features of the Code of Wages

 

This section points out some of the key provisions in the Code of Wages which are different from the existing laws or a welcome clarification of the same.

 

  1. Applicability and Beneficiaries – The Code of Wages is applicable to all establishments regardless of industry. Further, all employees are eligible to be paid minimum wages and paid salary in a timely fashion. This is a vast difference from the existing law, where Minimum Wages Act, 1948 was applicable to only scheduled employments which were approximately 1750 in number and Payment of Wages Act, 1936 which was applicable only to those employees earning INR 24,000 or less per month.

 

  1. Uniform Definition of Wages – One of the most vexing aspects for employers over the years has been the multitude, 12 at present, of definitions for the term ‘wages’. This has led to difficulty in the setting of salary structures as well as determining various payments, contributions and deductions to be made. The current definition of wages provides more clarity on inclusions and exclusions specifically with respect to allowances. Wages now include all remuneration except for certain specific allowances such as conveyance, HRA, overtime, commission, bonus and the consistent social security contributions and gratuity. This definition makes the long paid special allowance a part of wages. Further, the Code of Wages also mandates that the excluded components cannot exceed 50% of the total salary paid. Any exclusions in excess of 50% shall be treated as wages. It will be interesting to see whether this definition remains consistent under the other proposed Labour Codes.

 

  1. Distinction between ‘Employee’ and ‘Worker’ – The Code of Wages makes a distinction between ‘Employee’ and ‘Worker’ with the definition of Employee covering all persons employed, except for apprentices, while ‘Worker’ is defined as similar to the existing ‘workman’ under the Industrial Disputes Act, 1947. Worker is essentially all employees except for those employees in a managerial or administrative capacity or employees in a supervisory capacity earning more than INR 15,000 a month. The Code of Wages references ‘Worker’ mostly in the context of minimum wages.

 

Although the definition encompasses all kinds of workers across industry sectors, uncertainties still remain regarding whether the Code would bring within its purview people working in gig-economy, where there is no fixed place of employment and flexible timings. The apex court has held, in Officer-In-Charge, Sub-Regional Provident Fund Office v Godavari Garments (2019)[vi], that women who worked from home doing piece work would be considered “employees” of the company which had engaged them to do so, for the purposes of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act), even if there was no direct contract of employment between the two. If the same is applied to the Code, it would definitely lead to uncertainties regarding the applicability of provisions in accordance with the nature of the job and lead to unnecessary litigations.

 

  1. Determining Minimum Wages – As it was under the existing laws, both the Central Government and the State Governments have the right to set the applicable minimum wages for central and state establishments.

 

  • The Code of Wages proposes for the Central Government to set a national minimum wage or floor wage, which may change based on regions. Any State Governments fixing their minimum wages shall ensure that the wages are equal to or greater than the floor wage. This would bring some uniformity in the minimum wages across the country and would make all states almost equally attractive from the point of view of labour cost for investment as well as reduce distress migration. However, the floor wage concept might diminish the minimum wage as it only states the lowest possible end of the spectrum and some states might opt to stick to it.

 

  • State Governments while determining the minimum wages shall use only 2 factors – (a) skill level of the employees, namely unskilled, semi-skilled, skilled or highly skilled, and (b) the geographical location. In addition, the arduousness or the danger level of the work may also be considered for the setting of minimum wages.

 

  • The Code of Wages mandates that the minimum wages be revised once every 5 years.

 

  • The Code does not provide any formula for fixation of minimum wages. For calculation of minimum wages, the 15th Indian Labour Conference (ILC) had adopted per capita food intake of at least 2,700 calories for a worker’s family comprising three units (2 adults and 2 children) for the calculation of minimum wages which has also been approved by the Supreme Court. A similar formula would have found more acceptability.

 

  1. Digitization – Payment through electronic and digital means have been introduced as a valid payment mode under the Code of Wages.

 

  1. Overtime – Overtime is fixed at twice the daily rate of wages for any work beyond the prescribed hours. This is similar to the position under various State laws. However, there is no provision for any compensatory off.

 

  1. Appellate Authority – Code of Wages provides for an appellate authority between the claims’ authority and judicial forums for speedier dispute resolution.

 

  1. Inspections – An Inspector-cum-Facilitator shall be appointed by the appropriate governments and the Code of Wages allows for a more structured inspection scheme which shall also include web-based inspections and request for information / documents through electronic means.

 

  1. Documentation – The Code of Wages requires employers to maintain a register containing the details of the persons employed, muster roll, wages and other prescribed information. Employers are also required to display a notice containing the abstract of the Code of Wages, wage rates, wage period, payment dates/days and contact details of the jurisdictional Inspector cum Facilitator.

 

  1. Penalties – Under the previous law the penalties for non-compliance were quite paltry and further was uniform regardless of the offence. The Code of Wages has imposed greater penalties as well as proportioned the said penalties pertaining to the degree of non-compliance. The Code of Wages prescribes the following penalties:

 

  • A maximum fine of INR 50,000 for non-payment of any applicable amounts. Simple Imprisonment of up to 3 months and a maximum fine of INR 1,00,000 for subsequent offences committed within a span of 5 years.

 

  • A maximum fine of INR 20,000 for other non-compliances. Simple Imprisonment of up to 1 month and a maximum fine of INR 40,000 for subsequent offences committed within a span of 5 years.

 

  • A maximum fine of INR 10,000 for incorrect maintenance of records.

 

Companies are also to be given an opportunity to rectify any non-compliances before prosecution at the discretion of the Inspector-cum-Facilitator. There is also an option for compounding of offences in the first instance.

 

  1. Limitation Period – The limitation period for claims by workers has been increased to 3 years, thus offering workers more time to exercise their statutory rights.

 

  1. Discrimination – While the Equal Remuneration Act, 1976, prohibited discrimination in wages, recruitment, promotion, training, and transfer for workers performing the same work and required the constitution of a board to promote employment opportunities for women, the Code of Wages prohibits gender-based discrimination only in terms of wages and recruitment. However, the gender-neutral approach has broadened the scope to a certain extent.

 

  1. Bonus – The Payment of Bonus Act, 1965 was applicable only to workers earning wages up to INR 21,000 per month. However, this statutory threshold has not been incorporated in the Wages Code, leaving it up to the discretion of the appropriate government to prescribe the wage ceiling for eligibility of payment of bonus. Further, conviction for sexual harassment has been added as a ground for disqualification from payment of bonus.

 

Most other provisions are the same as under existing laws.

 

Implications of the Code of Wages

 

As stated earlier, the substantive law itself has not seen much amendment under the Code of Wages and for the most part, companies will not see a vast difference in the actual provisions. The Code of Wages is mostly a consolidation of existing laws rather than a true reform of labour laws. However, it is a huge boon in terms of removing the multiplicity of definitions as well as authorities which would improve the ease of compliance and maintenance of records and filings.

 

Further, one of greatest advantages of the Code of Wages is that the benefits contemplated under the legislation is now available to a much larger portion of the workforce with very few categories of employees excluded from the scope. The introduction of a national minimum wage may also help reduce differences between States and skillsets and provide a basic standard of living for all employees across the country.

 

The lack of change in substantive law may be seen as a lost opportunity since the legislature has not truly taken the effort to analyse the need to retain archaic provisions.

 

Specific rules and notifications under the Code of Wages are also awaited before more insight can be gathered on whether the codification will actually improve the ease of compliance and doing business.

References:

[i]  http://egazette.nic.in/WriteReadData/2019/210356.pdf

[ii] https://labour.gov.in/sites/default/files/ThePaymentofWagesAct1936_0.pdf

[iii] https://labour.gov.in/sites/default/files/TheMinimumWagesAct1948_0.pdf

[iv] https://labour.gov.in/sites/default/files/ThePaymentofBonusAct1965.pdf

[v] https://labour.gov.in/sites/default/files/equal_remuneration_act_1976.pdf

[vi] SCC OnLine, SC, 903.

 

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The substantive law itself has not seen much amendment under the Code of Wages and for the most part, companies will not see a vast difference in the actual provisions. The Code of Wages is mostly a consolidation of existing laws rather than a true reform of labour laws. However, it is a huge boon in terms of removing the multiplicity of definitions as well as authorities which would improve the ease of compliance and maintenance of records and filings.

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