Article of the month
“MINIMUM WAGE CODE: LAUNCH OF LABOUR REFORMS”

Second Commission on Labour Laws in the year 2002 (“Commission”) recommended major changes in the prevailing labour regime in the country. Amid other proposals, the Commission proposed the division of labour laws under five broad segments i.e. a) industrial relations; b) wages; c) social security; d) safety; and e) welfare and working conditions. However, nothing could essentially materialize until recently when the cabinet finally gave assent to the new Labour Code on Wages (“Code”) which consolidates four laws pertaining to minimum wages, payment of salaries and benefits i.e. the Payment of Wages Act of 1936, the Minimum Wages Act of 1948, Payment of Bonus Act of 1965 and the Equal Remuneration Act of 1976 (“Enactments”). The Code was introduced in Lok Sabha on August 10, 2017. The Code is expected to significantly improve the ease of doing business as well as ensure minimum wage to all. The new Code will empower the central government to fix universal minimum wage applicable on all establishments and workers across the country.

Besides charting the key highlights of the Code, this article makes an attempt to evaluate the possible effects which the employers and employees may be subjected to on account of the implementation of the said Code.

KEY IMPACTS

  • Uniformity: For years, employers in India have struggled to understand the concept and ingredients of the term ‘wages’ on account of non-uniformity in the wordings of the said definitions used under various Enactments. In contrast to different definition of wages under the said Enactments, the Code provides for a uniform definition of wages which should do away with the said cobwebs concerning the interpretation of the term ‘wages’. Wages under the Code are defined as all remuneration (whether by way of salary, allowances or otherwise), expressed in terms of money or capable of being expressed which would be payable to a person employed in respect of his employment on fulfilment of terms of employment, whether express or implied and includes remuneration payable under settlement or award, remuneration in respect of overtime or holiday, additional remuneration called bonus or anythingsome payable by reason of termination, sum entitled under any scheme and house rent allowance. It, however, excludes bonus, value of any house-accommodation, or of the supply of light, water, medical attendance, contribution to pension and provident fund by the employer, travelling allowance and gratuity.
  • Applicability: The Code universalizes the provisions of minimum wages and ensures timely payment of wages to all employees. Presently, the laws governing wages in India are applicable for scheduled industries or establishments in the law and not to workers of all sectors. In order to kill this discrepancy, the Code will be applicable to workers of all sectors across states in India. One of the significant point to be noted is that the Code would be applicable to all workers irrespective of their pay (except in case of payment of bonus, which shall be paid to every employee drawing wages less than the threshold amount as to be notified by the Central Government). At present, the minimum wages fixed by the central government and the state governments of respective states, are only applicable to workers drawing up to INR 18,000 per month. With cabinet approval, workers receiving more than INR 18,000 per month would also be legally entitled to a minimum wage.
  • Threshold of Minimum Wages: Another change that the Code will bring post receiving the assent of the President of India is that the discrimination which was caused due to central government fixing minimum wages for its own sphere and the state governments fixing for their respective states would be over to an extent as the central government would be empowered to set minimum wages across all sectors in the country and though the states would be allowed to provide higher minimum wages in their respective area, it will be mandatory for them to follow the minimum wages that the central government has fixed.
  • Maintenance of Register and Filing of Annual Returns: The Code mandates every employer to maintain a single register, if possible in electronic form, containing the details with regard to persons employed, muster roll, wages and other details prescribed by appropriate Government. Further, the Code also requires the employers to file annual returns under the Code.
  • Appointment of Facilitators: Presently, the Payment of Bonus Act, 1965, the Payment of Wages Act, 1936, and the Payment of Bonus Act 1965 provides for the labour inspectors to conduct inquiry and investigation on the employers to check compliance with the said enactments, however, the Code shall introduce the concept of ‘Facilitators’ who shall perform the functions as prescribed for labour inspectors currently. Further, the said Facilitators shall be additionally empowered to provide the employers and workers with advice regarding effective means of complying with the provisions of the Code.
  • Common Authority: The Code also provides for a common authority to deal with the claims arising out of non-compliance of the said Enactments for e.g. non-payment of wages, discrimination in payment of wages and other entitlements to the employees.
  • Indulgence in acts of Sexual Harassment: The Code has introduced a clause for disqualification from receiving bonus in cases where the employee is dismissed from the services in case of conviction for the act of sexual harassment.
  • Change in Penalties: One of the core reason for poor implementation of the Enactments in India has been the insignificant amount of penalities prescribed therein, as the said insignificant amount of penalities were unable to cause any deterrence to the employers. However, the Code now has increased the penalties and fine amounts manifold and once the said amendment in the overall labour law regime is implemented, the employers are expected to take the compliance issues much more seriously. Further, the Code provides for common penalties for the non-payment of wages, non-payment of bonus, gender discrimination etc.

IMPACT OF THE CODE

The Code is receiving mixed reactions from different sectors of the industrial fraternity. On one hand, it is speculated that the Code will help in improving the standard of living for many workers. On the other hand, it is expected to impede the formal job creation in the country which would largely affect the hiring scenario. The universalization of wages will also compel the industries to switch to automation at a faster rate which will eventually reduce the number of available job opportunities in the market. Further, universalization of minimum wages across the country with varied demographics and different roles is considered to be unfair by the experts as presently, the state governments decide the minimum wages on the basis of cost of living index of each state. Uniform minimum wages decided by the Central Government may play an active role in shrinking up of industries in states where the cost of living index is not too high, as the threshold of INR 18,000 fixed by the Central Government would act as a cost burden on the employers in such states. Critics have also pointed out that the only agenda of any labour reform in country should be to create formal jobs and not universal minimum wage. Moreover, the states who used to allure more investors due to lower wage rates may now not be able to do so. Disqualification of an employee from receiving the bonus in cases of conviction for sexual harassment is a welcome step and signifies that the act of sexual harassment will not be taken for granted and the employee will have to bear the cost for it.

CONCLUSION

No doubt that the Code is a positive and a much awaited labour law reform for the upliftment and benefit of the workers across the country. The Code will no doubt bring more transparency and the wage system in the country can be monitored easily. However, it may not be out of place completely to say that the Code will attract a few downsides as well. There are chances that the workers would end up losing job security, in spite of the increase in other privileges.

Despite the aforeasaid evaluation, the true impact of the Code will only be known after it is fully implemented and practical issues come for consideration before the authorities.
 

Firm News

PRESENTATION AT MAHINDRA’S OFFICE

Mr. Raunak Singh (Partner, Employment Laws) & Mr. Sidhartha Srivastava (Partner, Dispute Resolution) presented a session on ‘Termination of Employment àLegal Issues & Challenges’ to the legal, compliance, industrial relations and HR teams of Mahindra and Mahindra Group in Mumbai on August 09, 2017. The session was attended by a few local participants in person and various others (from several geographies across the country) by way of video conferencing.

Reactions received from key members of Mahindra & Mahindra:

“I am very happy that the session was really engaging and the quality of the interaction that happened with our team who were present in the room as well as those who had connected through VC.”

“We have received feedback from the participants (from different locations in India) that the session was indeed very useful. They have requested us for more sessions on this topic and we look forward for more interactions with you on this.”
 
Contact Details:
Raunak Singh, Partner
E: raunak.singh@linklegal.in
M: +91 99107 73419
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ACQUITAL OF BANK OFFICIAL LONG AFTER HIS DEMISE BY BOMBAY HIGH COURT

High Court of Bombay in famous case of Harshad Mehta stock scam of 1992, has posthumously exonerated a bank official dismissed for his alleged involvement in the case, directing the bank official as in service till his death or superannuation and that his terminal benefits, including provident fund, gratuity and pension with the arrears be paid to his wife and three children who fought the legal battle to exonerate his name within three months. In B.P.D. Pai and Ors. v. The Sydicate Bank and Ors., is a one of its kind of judgment delivered on July 13, 2017, wherein the High Court has once again upheld the principles of natural justice.

DRAFT FOR STANDARD OPERATING PROCEDURE (SOP) FOR EFFECTIVE ENFORCEMENT OF THE CHILD AND ADOLESCENT LABOUR (PROHIBITION AND REGULATION) ACT, 1986

Consequent upon enactment of the Child Labour (Prohibition and Regulation) Amendment Act, 2016 (35 of 2016) with effect from September 01, 2016 and notification of the Child Labour (Prohibition and Regulation) Amendment Rules, 2017 on June 02, 2017, the Ministry of Labour & Employment has prepared a draft for Standard Operating Procedure (SOP) and has placed on its website vide its notification dated July 18, 2017. The Ministry has invited comments / suggestions from all stake holders including members of general public on the SOP, with the objective of effective enforcement of the Child and Adolescent Labour (Prohibition and Regulation) Act, 1986.

SELF-DECLARATION FORM FOR INSURED WOMAN RELATING TO MATERNITY BENEFIT UNDER ESI SCHEME INTRODUCED

Employees’ State Insurance Corporation (ESIC) vide its circular dated July 18, 2017 has introduced a Self-Declaration Form for the insured woman for number of her surviving children as on date of presenting the maternity benefit claim to avoid undue benefits due to variation in family particulars of insured women from those available in the IP portal. In cases of inconsistency between the declaration and the particulars on the portal, 12 week of maternity benefit would be paid immediately from the ESIC branch. Remaining payment, if any, will be made to insured woman within 14 days subject to verification. Any false statement for the purpose of obtaining maternity benefit will be punishable with imprisonment for a term which may extend to six months or with a fine of Rs  2000/- or with both.

COMPLIANCE IN RESPECT OF MULTIPLE UNITS OF ESTABLISHMENT

Employees’ Provident Fund Organisation (EPFO), vide its circular dated July 21, 2017 has issued instructions to the employers (for use of facility) to furnish compliance in respect of multiple unit establishments. Now, an employer can declare for each employee the period for which the employee has worked at a particular branch/location by utilizing the facility provided for this purpose under the employer’s tab at unified portal. It is now mandatory for all such multiple location establishments to fill the location wise details of the employees so as to enable the concerned regional offices of EPF to view the location of the employees in the ECR through field office interface of unified portal.

CHIEF INFORMATION COMMISSIONER (CIC) ORDERED NATIONAL COMMISSION FOR WOMEN (NCW) TO PAY COMPENSATION TO EX- EMPLOYEE

CIC in the matter of Nammi Bano v. PIO, National Commission for Women has directed NCW to pay Rs. 50,000 compensation in fifteen days, to their ex-contractual research assistant who was sexually harassed by its Deputy Secretary vide its order dated July 26, 2017. Further, CIC also imposed cost of Rs. 25,000 on NCW and the ex-CPIO for denying the ex-contractual research assistant the information sought by her under RTI Act for over a year.

AUTOMATIC TRANSFER OF PROVIDENT FUND ACCOUNT

With the aim to address the problem of premature closure of accounts due to change of job by the subscribers, EPFO is trying to bring in place the system of automatic transfer of provident fund, without any application. However, to avail the facility of automatic transfer, the provident fund account holder is mandatorily required to have a verified aadhaar ID.

 
Did you know?

Whether the investigation report can act as a substitute for enquiry in cases of termination on the ground of misconduct?

Hon’ble Punjab and Haryana High Court in the matter of Uttar Haryana Bijli Vitran Nigam Ltd. v. Presiding Officer, Industrial Tribunal-Cum-Labour Court, Panipat and Another (2017 LLR 198), while holidng the termination of workman illegal observed that before extending punishment upon the employee, it is must to conduct a regular enquiry, giving the employee so concerned an opportunity to participate in the process of investigation. Any termination merely on the basis of investigation report (without proper regular enquiry) will not be sustainanble, being arbitrary and illegal.

Whether an appeal challenging the order passed by EPF Authority be tenable without depositing the amount so determined by the EPF Authority?

Hon’ble Bombay High Court in the matter of Shirpur Shetkari Sahakari Sakhar Karkhana Ltd. through its Chairman M.A. Patil v. the Regional Provident Fund Commissioner- II, Nasik and Another (2017 LLR 205), while observing that since EPF Act is a beneficial piece of legislation, seeking blanket stay (i.e. by not depositing any amount) is not justified, has held that an appeal challenging the order passed by EPF Authority shall not be entertained unless 75% of the amount so determined is deposited. The High Court also held that the EPF Appellate Tribunal may, for reasons to be recorded in writing, waive or reduce the amount to be pre-deposited.

Whether past record of a workman is important in imposition of punishment?

Hon’ble Delhi High Court in the matterof Delhi Transport Corporation v. Jasmer Singh & Another (2017 LLR 678), while disposing off the petition has held that any adverse past record of an employee is an important factor to support the quantum of punishment to be imposed upon him. The Court in this case allowed the petitioner’s application under Section 33(2)(b) of the Industrial Disputes Act, 1947 by granting approval to remove the respondent from services.

Whether an employer is responsible to recover the employees share of provident fund contribution?

In the matter of The Bihar State Scheduled Caste Co-operative Development Corporation Limited v. The Employees’ Provident Fund Organisation etc. (2017 LLR 761), the Hon’ble Patna High Court while observing that the employer cannot be given benefit on the grounds which have not been envisaged in the EPF Act has held that the lack of knowledge of law is no ground for seeking relief from the court. The court in this case rejected the relief sought by the appellant as the recovery of employees’ share from their wages at the relevant point of time is responsibility of the employer.

Whether transfer of an employee amounts to change in conditions of service?

Hon’ble Bombay High Court in the matter of Castrol India Limited, Mumbai v. Mumbai Port Trust and General Employees Union, Mumbai (2016 LLR 695), while noting that there was no service condition in employment contract that the job is transferable or there is prohibition on transfer of the employee out of Mumbai, whereas the petitioner has been having its branch offices throughout the country, has held that transfer is an implied condition of service when the employer is having branches throughout the country and transfer does not amount to change in conditions of service.

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