Indian employment law reforms: The lineup for 2018
The year 2017 was marked by a number of significant employment law changes — reforms that have been hailed by many as being both progressive and business-friendly. 2018, being the last year in the term of the current government led by Prime Minister Narendra Modi, is likely to witness even greater number of developments in the employment law landscape.
The article provides a brief round-up of significant employment law developments that took place in 2017 and focuses on the key employment law reforms lined up to be introduced in 2018.
2017: Key Developments
Increased maternity benefits: The Maternity Benefit Act, 1961, was amended in March 2017 to increase the mandatory maternity leave for women with less than two surviving children from 12 weeks to 26 weeks. The amendment also provided for adoption and surrogacy leave for up to 12 weeks. Pursuant to the amendment, employers having 50 or more employees are required to provide crèche facilities to their employees who return from maternity leave.
New law on rights of persons with disabilities: The Rights of Persons with Disabilities Act, 2016 (“RPWD Act”) was brought into effect on June 15, 2017, to replace the erstwhile disability law in India. The RPWD Act is applicable to private establishments and, inter alia, prohibits discrimination with respect to recruitment, employment, and promotion on the basis of a person’s disability. Private employers are also required to notify and publish an equal opportunity policy. The meaning and scope of ‘disability’ has been enhanced significantly to include 27 different types of disabilities as opposed to the erstwhile disability law which only covered 7 types of disabilities.
Increased coverage for mandatory employee insurance: The Employees’ State Insurance Act, 1948, a critical social security legislation, which provides statutory insurance to employees was amended to increase the wage limit for coverage from INR 15000 to INR 21000.
Simplified Employment Law Compliances: With a view to reduce the cumbersome compliance requirements under various legislations, the Government, in February 2017, introduced the Ease of Compliance to Maintain Registers under Various Labor Law Rules, 2017. The rules allow employers to maintain consolidated registers for 9 central employment laws, including the Payment of Wages Act, 1936, the Contract Labor (Regulation and Abolition) Act, 1970, Minimum Wages Act, 1948, and Equal Remuneration Act, 1976.
Model Shops Act and Maharashtra’s New Law for Shops and Commercial Establishments: The Government of India, in July 2016, introduced the Model Shops and Establishments (Regulation of Employment and Conditions of Service) Bill, 2016 (“Shops Bill”) with the objective of creating uniformity in state-specific legislations that are applicable to shops and commercial establishments. The aim of the Shops Bill was to create a framework in relation to terms of employment such as hours of work, leaves, overtime and weekly holidays that states could adopt. The state of Maharashtra was the first state to adopt the Shops Bill and passed the Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2017, which has replaced the erstwhile 1948 legislation.
Increased Trade Union Activity in the Information Technology Sector: 2017 witnessed a marked increase in trade union activity in the information technology sector. Traditionally, the role of trade unions has been limited to the manufacturing sector. Karnataka became the first state to have an information technology specific trade union registered under the Trade Unions Act, 1926 — the Karnataka State IT/ITES Employees Union. This trend has continued into 2018, with Forum for IT Employees (FITE) becoming a registered union in Maharashtra.
Introduction of a Common Platform for Complaints of Sexual Harassment: The Government has introduced an online platform known as SHe-Box (Sexual Harassment Electronic Box) to help women employees lodge complaints of workplace sexual harassment. Through this platform, women employees (including women employees in private establishments that have an internal complaints committee under applicable sexual harassment law) will have a common platform to raise complaints of workplace sexual harassment.
Line up for 2018
Enhancement of the gratuity ceiling: The Payment of Gratuity Act, 1972 (“Gratuity Act”) entitles employees who have been in continuous employment for a period of 5 years to gratuity at the rate of 15 days wages for every year of continuous service, capped at INR 10,00,000. The Payment of Gratuity (Amendment) Bill, 2017 (“Gratuity Bill”) was introduced in the Lower house of Parliament (Lok Sabha) on December 18, 2017 with a view to allow the Government the discretion to (i) prescribe the gratuity ceiling, and (ii) the period of maternity leave that would deemed to constitute continuous service. It is anticipated that the Gratuity Bill will be passed by the Lower house in the next session of Parliament and that the ceiling is likely to be enhanced from INR 10,00,000 to INR 20,00,000.
Consolidation of Labor Laws: As part of its election manifesto, the current Government had promised to review the Indian employment laws to reduce the multiplicity of employment legislations and keep the legislations in sync with the requirements of the evolving labor market. In furtherance of the same, the Government has sought to consolidate 44 central employment laws into 4 labor codes:
1. Labour Code on Industrial Relations — Consolidating the Industrial Disputes Act, 1947, the Industrial Employment (Standing Orders) Act, 1946 and the Trade Unions Act, 1926;
2. Labour Code on Social Security and Welfare — Consolidating social security laws such as the Employees Provident Funds and Miscellaneous Provisions Act, 1952, the Employees State Insurance Act, 1948, Maternity Benefit Act, 1961, the Employees Compensation Act, 1923, etc.;
3. Code on Wages — Consolidating the Minimum Wages Act, 1949, the Payment of Wages Act, 1936, Payment of Bonus Act, 1965 and Equal Remuneration Act, 1976; and
4. Labour Code on Occupational Safety, Health & Working Conditions.
The code that is likely to come into effect soon is the Code of Wages, 2017 (“Wage Code”). It is anticipated that the Government was working towards having the Wage Code passed in the lower house (Lok Sabha) of Parliament in the budget session and this might be taken up in the next session of Parliament.
National Employment Policy: The Government of India has proposed the introduction of a National Employment Policy to address the growing rate of unemployment in India. The proposed aim of the National Employment Policy is to create a comprehensive action plan to ensure that quality jobs are created across various sectors. It appears that this would be done by incentivizing employers to hire, by allowing relaxations in employment law compliances or bearing a part of the cost for social security payments.
LGBTIQ Rights: The Supreme Court of India, in its landmark judgment in August 2017, observed that the right to privacy and the protection of sexual orientation lie at the core of the fundamental rights guaranteed by Articles 14, 15 and 21 of the Indian Constitution. Further, the Supreme Court on January 8, 2018, stated that it would review its position on Section 377 of the Indian Penal Code, 1860, i.e., the criminalization of sexual intercourse between consenting adults of the same sex. With respect to transgender persons, the Transgender Persons (Protection of Rights) Bill, 2016, inter alia, seeks to prohibit the discrimination of transgender persons in terms of employment, healthcare services and access to facilities.
Law Governing Factories: Amendments to the Factories Act, 1948, has been in the pipeline for the past two years. The amendments are primarily aimed at allowing the state government to increase the number of overtime hours that employees can work and prescribe rules in relation to exemptions that could be given to various categories of employees. These measures would allow flexibility to State Governments to undertake initiatives to encourage the development of industries.
Changes to the Law on Contract Labor: The Government has released a draft bill for the amendment of the law governing the engagement of contract labor in India – the Contract Labor (Regulation and Abolition) Act, 1970 (“CLRA”). The bill primarily intends to exclude workers who are regularly employed in the establishment of the contractor from the definition of the term ‘contract labor’ for the purposes of the CLRA.
2018 Budget Proposals to Provident Fund Contributions: The Finance Minister in his 2018 Budget speech has proposed that the Government will make provident fund contributions of 12 percent of wages for new employees for a period of three (3) years and reduce the mandatory contribution limit from 12 percent to 8 percent for women employees for the first three (3) years of employment. We would, however, have to wait for amendments to be made to the Employees Provident Funds and Miscellaneous Provisions Act, 1952, and allied schemes, to understand the manner in which these proposals will be implemented.
Most Indian employment laws were drafted primarily for traditional models of workforce engagement in sectors such as manufacturing and infrastructure. These laws are failing to keep pace with the needs of new and emerging sectors that are driven by cutting edge technology, increased automation and creative forms of workforce engagement, including gig/on-call working. While the above reforms are much needed, standing at the threshold of the artificial intelligence revolution, India needs to relook at its employment laws to ensure that businesses are not constrained, innovation and entrepreneurship are encouraged and employee rights are not compromised.