an alliance of employers counsel worldwide India

Transcription

1 Employment Law Overview 2017 India

2 Table of contents I. General 01 II. hiring practices 05 III. employment contracts 07 IV. working conditions 09 V. Anti-Discrimination Laws 12 VI. Social Media and Data Privacy 15 VII. Authorizations for Foreign Employees 16 VIII. Termination of Employment contracts 18 IX. Restrictive Covenants 21 X. RIGHTS OF EMPLOYEES IN CASE OF A TRANSFER OF UNDERTAKING 23 XI. TRADE UNIONS AND EMPLOYERS associations 25 XII. Other Types of Employee Representative Bodies 28 XIII. Social Security / Healthcare / Other Required Benefits 29

3 I. General 1. Introductory Paragraph The Constitution of India (the Constitution ) provides the basic framework within which all laws in India, including all laws relating to labour and employment, must operate. Social justice is one of the guiding principles of the Constitution. This principal has been emphasized by the Supreme Court of India on numerous occasions. 2. Key Points Labour and employment laws are listed under the Concurrent List, which means that the Parliament and State Legislatures have co-equal powers to enact laws relating to all labour and employment laws in India. The main principle in Indian labour and employment law is that they distinguish between those employees who are defined as workmen and those who are in management/ supervisory roles. Most legislations protect only the rights of employees who satisfy the definition of a workman whereas for all other employees, the employment contracts govern the relationship. The Indian Contract Act, 1872 envisages that agreements which restrain trade, business or profession of any kind are void. The Trade Unions Act, 1926, provides for registration of a trade union and the rights and liabilities of a registered trade union. The Equal Remuneration Act, 1976, provides for payment of equal remuneration to male and female workers. The objective of the Industrial Disputes Act, 1947 is to secure industrial peace and harmony by providing machinery, procedure and a platform for the investigation and settlement of disputes between an employer and its employees. 3. Legal Framework The Constitution guarantees certain fundamental rights, such as equality before the law and prohibition of discrimination in education and employment on the basis of religion, sect, gender and caste. Further, the Constitution envisages certain directive principles to guide the legislature towards social and economic goals. In an operational sense, the Constitution provides for a division of legislative powers between the Parliament (federal legislature) and State Assemblies (state legislatures). Labour and employment laws are listed under the Concurrent List, which means that the Parliament and State Legislatures have co-equal powers to enact laws relating to all labour and employment laws in India. Social justice forms the basis of a majority of labour legislations in India, a significant portion of which was enacted during the decades when Indian political thinking was aligned with socialism. Emancipation of workers is a cornerstone of legislations relating to factories, mines, plantations, shops, commercial establishments as well as those relating to payment of wages, regulation of trade unions, provision of social security, industrial safety and hygiene. There are as many as 165 (one hundred and sixty five) legislations relating to labour and employment in India, including around 50 (fifty) legislations enacted by Parliament. Most concern blue-collar employees or workmen as defined under these legislations. Due to the historical emphasis on social justice and improving working conditions for such employees, the legal structure relating to employees having managerial duties, white-collar employees and highly paid employees is not as comprehensive, and has evolved in recent decades mainly through judicial pronouncements. Below the Supreme Court of India, in hierarchy, are the High Courts of various states, and each High Court has precedential value within the state in which it is located. The Supreme Court and High Courts are designated as Constitutional Courts since they have the jurisdiction to adjudicate upon the adherence of legislation with the Constitution. The courts of first instance or trial courts are created by federal or state legislation. In the specific context of employment laws, the courts of first instance are either (i) courts designated to adjudicate upon civil matters (the Civil Courts ); or (ii) the Labour Court or Industrial Tribunal, both of which are constituted by the Industrial Disputes Act, 1947 (the ID Act ). The fundamental principle in Indian labour and employment law is that they distinguish between those employees who are defined as workmen and those who are in managerial roles and fall outside this 01

4 02 definition. Section 2(s) of the ID Act defines a workman as a person who is employed to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, excluding a person who is either (i) employed mainly in a managerial or administrative capacity; or (ii) who, being employed in a supervisory capacity, draws a salary exceeding Rupees Ten Thousand (INR 10, 000 only/-) per month. That said, the wage ceiling of INR 10,000 is not always the definitive criterion of classifying whether an employee is a workman. There have been multiple occasions when Indian courts have held that whether an employee is a workman depends on the exact nature of the job responsibilities and duties and the context of his role in the organization than merely his compensation package. Labour and employment legislation offers protection and benefits, for the most part, only to those employees who fall in the ambit of this definition. As an exception to the definition of workmen under Section 2(s) of the ID Act, the employees who are mainly working in managerial or administrative capacity are ordinarily governed either by the state specific S&E Acts (as defined below and if applicable) or by the terms and conditions of their contracts of employment. These employees are known as non-workmen. Since these employees fall outside the scope of applicability of the ID Act, the provisions of the ID Act do not apply to non-workmen. In addition, there are various judicial pronouncements, which have held that it was never the objective of the ID Act that non-workmen should be entitled to claim protection under this welfare legislation. The applicability of labour legislation also depends on the nature of activity that the employees are engaged in or the place of work, such as factories, plantations, mines, shops or commercial establishments. Certain legislations also take into account the number of employees engaged by a particular place of work, and the scope and applicability of various benefits under such legislation varies according to the employee position in the workplace. Labour and employment laws in India address two important themes, namely (i) employer-employee relations; and (ii) service or working conditions, such as wages, social security, working conditions, working hours and service conditions. Enactments such as the ID Act, the Trade Unions Act, 1926 (the TU Act ) and the Contract Labour (Regulation and Abolition) Act, 1970 (the CLRA Act ) are primarily focused on the employer employee relations. Whereas enactments such as the Factories Act, 1948 (the FA Act ), the Shops and Commercial Establishments Act of various states (the S&E Act ), the Industrial Employment (Standing Orders) Act, 1946 (the IESO Act ), the Payment of Wages Act, 1948 (the Wages Act ) and the Payment of Bonus Act, 1965 (the Bonus Act ) are primarily focused on the service conditions. In addition to the above, there are enactments such as the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (the EPF Act ) and the Payment of Gratuity Act, 1972, (the PGA Act ) which provide for social security benefits for employees. It may be noted that the legislations noted above are largely applicable only to workmen. Employment relations with a non-workmen are governed by individual contracts of employment with each such employee. Further, most employers in industries that typically employ a large number of skilled whitecollar employees, such as the technology industry and the banking and financial services industry, provide benefits under social security legislations regardless of whether their employees are workmen or otherwise. However, the unorganized sectors, such as agriculture or the construction industries, are largely unregulated and wages, benefits and working conditions made available to employees in these sectors is virtually at the discretion of the employers. The Industrial Disputes Act, 1947: The scope of this legislation, strictly speaking, restricted to workmen alone. However, the principles and processes laid down in this legislation have been replicated in other statutes with wider application or extended to some extent by judicial decisions to non-workmen as well. The scope of the legislation extends from industrial action, i.e. strikes and lockouts, to regulation of retrenchment, layoffs, closure, and transfer of undertakings, works committees and change in service conditions. Shops and Commercial Establishments Act: Each state in India has enacted its own S&E Act. The S&E Act ordinarily regulates service conditions of employees employed in shops and commercial establishments, which includes most private companies and firms. It further regulates hours of work, payment of wages, overtime, leave, holidays and other conditions of service. Payment of Wages Act, 1948: The Wages Act regulates the mode and method of payment of wages to certain employees, namely, those employees to whom the payable wages do not exceed Rupees Six Thousand Five Hundred (Rs.6,500 only/-) per month, and those employed in any factory and industrial establishments.

5 03 The Wages Act provides that the wages of an employee must be paid without deductions of any kind, except the deductions, which are authorised by or under the Wages Act, such as taxes on income, fines, or deductions owing to absence from duty. Minimum Wages Act, 1948: The Minimum Wages Act (the MW Act ) provides for payment of minimum rates of wages to specified employees. The MW Act defines the term employee to mean inter alia, any person who is employed for hire or reward to do any work, skilled or unskilled, manual or clerical, in a Scheduled Employment in respect of which minimum rates of wages have been fixed and also includes an employee declared to be an employee by the appropriate Government. If the total number of employees in any particular Scheduled Employment specified in the Schedule is less than 1,000 (one thousand) in the whole of the State, it is not necessary for the appropriate State Government to fix any minimum wage for such employment. Where the Government is required to fix minimum wages for any Scheduled Employment, it may fix (i) Minimum time rate for time work; (ii) Minimum piece rate for piece work; (iii) Guaranteed time rate for employees employed on piece work for the purpose of securing to such employees a minimum rate of wages on a time work basis; and (iv) Overtime rate in respect of any overtime work performed by the employees. Once minimum wages have been fixed, an employer is required to pay to every employee engaged in a Scheduled Employment under him, wages at a rate that is not less than the minimum rate of wages fixed by the concerned State Government for that class of employees. Industrial Employment (Standing Orders) Act, 1946: The IESO Act is applicable to every industrial establishment wherein 100 (one hundred) or more workmen are employed. The IESO Act requires employers in industrial establishments to formally define the conditions of employment, such as classification of workmen, manner of intimating wage rates, working hours, leave periods, recruitment, shift working, attendance, procedure for availing leave, transfer of workmen, termination of workmen, and inquiries for misconduct. Such conditions are referred to as the Standing Orders. The rules framed under the IESO Act provide for Model Standing Orders, which are a set of default conditions applicable to those industrial establishments that have not framed their own Standing Orders or those industrial establishments that are awaiting certification from the government on their Standing Orders. In most cases, the internal employee handbook/service regulations of the employers are generally customized and filed as the Standing Order of that establishment. The IESO Act however provides that while the Standing Orders adopted by an employer need not necessarily be a duplication of the Model Standing Orders, they should, as far as it may be practicable, be in conformity with the same. Trade Unions Act, 1926: The TU Act provides for registration of a trade union and the rights and liabilities of a registered trade union. A trade union is defined under the TU Act to mean any combination formed primarily for the purpose of regulating the relations between workmen and employers or between workmen and workmen, or between employers and employers, or for imposing restrictive conditions on the conduct of any trade or business. The minimum number of members required to register a trade union is 7 (seven); however, a trade union cannot be registered unless at least 10% (ten percent) of the workmen, or 100 one hundred) workmen, whichever is less, employed in an establishment are its members. While an employer is not legally bound to recognize a trade union or encourage collective bargaining, a registered trade union can enter into collective bargaining agreements with the employer for better wage and service conditions. Contact Labour (Regulation and Abolition) Act, 1970: The CLRA Act provides for regulation of employment of contract or temporary labour in certain establishments and provides for its abolition in certain circumstances. A workman is deemed to be a contract labour if he is hired in connection with the work of an establishment, by or through a contractor, with or without the knowledge of the principal employer. The term contractor is defined to mean a person who undertakes to produce a given result for an establishment through contract labour or who supplies contract labour for any work of the establishment. The manager or occupier of the establishment is defined to be the principal employer. Under the CLRA Act, every principal employer is required to make an application in the prescribed form for the registration of the establishment within the prescribed time. Every contractor under the CLRA Act must also be licensed and should undertake work through contract labour only in accordance with such license. The contractor is required to provide facilities for the welfare and health of the contract labour, which include rest rooms, canteens, wholesome drinking water, toilets, washing facilities, and first aid facilities in every establishment. These

6 04 obligations vary depending on the number of contract labour employed in the establishment. 4. New Developments The Bonus Act has mandated payment of bonus to employees receiving salary/wages up to Rupees Twenty One Thousand only (INR 21,000/-) per month in place of the previous financial benchmark of Rupees Ten Thousand only (INR 10,000/-) per month. Further, the Bonus Act also enhanced the ceiling from Rupees Three Thousand and Five Hundred only (INR 3,500/-) to Rupees Seven Thousand only (INR 7,000/-) per month for the purposes of calculation of bonus payable to an employee. The Bonus Act stipulates that the aforesaid amendments would take effect from April 1, However, the High Courts of Kerala and Karnataka, respectively, issued an interim order in two different writ petitions, for stay of the retrospective effect of the Bonus Act till the disposal of the writ petitions and have held that the Bonus Act shall have effect only from the financial year of The Central Government had, on February 10, 2016, notified amendments to the Employees Provident Funds Scheme under the EPF Act. These changes would have taken effect from May 1, 2016 and some of them were as follows: (a) members (i.e. employees) of the Provident Fund would have been allowed to withdraw their full Provident Fund accumulations at the time of retirement after attaining the age of fifty-eight (58) years; (b) members of the Provident Fund would have been permitted to withdraw up to ninety (90%) of their Provident Fund accumulations upon attaining the age of fifty seven (57) years or one (1) year before their actual retirement, whichever is later; (c) the employee would have been allowed to withdraw only an amount equal to such employee s contribution to the Provident Fund plus applicable interest; and (d) employee would not have been permitted to open a new Provident Fund account, but continue his/her existing account. Following protests from employees of various sectors, the Central Government withdrew these amendments to the Employees Provident Fund Scheme vide a notification dated April 19, Given that, the original provisions of the Employees Provident Fund Scheme remain valid and some of them are as follows: (a) the employee can still re-register with the Employees Provident Fund Organization as a new member upon taking a new employment; (b) employees who are migrating outside India or taking up employment abroad can still withdraw their full Provident Fund accumulations prior to leaving India; and (iii) employee can still, after two (2) months following the cessation of his/her employment, make a full withdrawal of all Provident Fund accumulations. The State Government of Tamil Nadu has permitted all shops and establishment to be open for a whole year i.e.365 days starting from February 25, 2016, by granting an exemption under the Tamil Nadu Shops and Establishment Act, This exemption shall be effective until February 24, However, this exemption has been granted subject to certain conditions which are as follows: (a) every employee has to be given one day holiday in a week; (b) wages including overtime wages have to be credited to the savings bank account of the employee; (c) an employee should be allowed to work only eight hours a day and forty eight hours a week, also the overtime hours should not exceed ten hours a day; (d) women employees should not work beyond 8:00 P.M; (e) transport facilities should be provided to women employees who work in shifts; (f) employees to be provided basic amenities like rest room, wash room, safety lockers, etc.; (g) sexual harassment committee to be formed by all shops and establishments; and (h) employer/manager shall be penalized under the aforementioned Act, if there is a violation of any of the above mentioned conditions. A labour court in Chennai reinstated an employee employed in the information technology sector by ruling that an employee in the information technology is a workman under the ID Act. The Court ruled on the simple interpretation of the definition of workman under the ID Act, which states that any person employed in any industry to do any manual, skilled, unskilled, technical, operational, clerical or supervisory work for hire or reward is a workman. The Court further, held that the job of an engineer is a technical one. In fact, the employer had not produced any evidence in the Court in support of its arguments that the employee had failed to improve the performance or to measure up to the expectations of the employer.

7 II. Hiring Practices 05 The Constitution, as specified above, grants the citizens of India with right to equality and also prohibits discrimination on grounds of religion, race, caste, sex or place of birth. Therefore, hiring practices in the country including background verifications and interview questions should be done keeping in mind these principles of the Constitution. The Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011 (the Rules ) provides the framework for data privacy in India, and would be applicable to the collection of employees personal information during background verification and interview questions as well. As per the Rules, the employer must inform the prospective employee of (i) the fact that information is being collected; (ii) the purpose for which the information is being collected, i.e. verification/interviewing of the employee s credentials; (iii) the intended recipients of the information, i.e. the employer or the third-party background verification services provider; and (iv) the name and address of the employer and/or the thirdparty background verification services provider. The Rules further state that where any Sensitive Personal Data or Information ( SPDI ) is being collected, then prior consent of the prospective employee is required, and such SPDI can be collected only for a lawful purpose connected with a function or activity of the company, and the collection of information must be necessary to achieve such purpose. This purpose must be notified to the prospective employee in the background verification form/during an interview. The consent given by any mode of electronic communication qualifies to be consent under the Rules. Companies in India, which provide services relating to collection, storage, dealing and handling of SPDI under contractual obligation with any legal entity located within or outside India need not adhere to the Rules stated herein above. If an employer engages companies which provide services relating to collection, storage, dealing and handling of SPDI to conduct background verification/during an interview of its prospective employees, then such companies can conduct the background investigation without (i) consent of the employee; or (ii) informing the employee of the same. The Rules provide that transfer of SPDI is permitted when (i) it is necessary for the performance of the contract between two (2) parties; and (ii) there is prior consent of the prospective employee. SPDI of the prospective employee can be transferred to (i) any company or person in India; and (ii) any company or person located in another country, provided that, the company or person to whom the SPDI is transferred adheres to the same level of data protection as specified under the Rules. Further, the Rules state that SPDI of the prospective employee collected by the company in a background verification/during an interview cannot be stored/retained by the company longer than required by the company for the purpose of the background verification, except that SPDI can be stored/retained by the company as long as it is mandatory under any applicable law. Please note any personal information that is not classified as SPDI that can be collected by an employer during an interview or background verification or third party background verification service provider with respect to the prospective employee can be transferred or stored in any manner without employee s consent, provided that the employee is informed of such storage or transfer. Consent is not required to collect information that is not classified as SPDI, but the company is required to inform the employee that such information is being collected and the purpose of collection. Failure to inform would attract monetary penalty as stated above. The Information Technology Act (the IT Act ) also grants the power to a court of law to confiscate all storage media on which information has been stored, which has been collected in contravention of the Rules. The IT Act further provides for extraterritorial applicability - i.e. even a non-indian person or company would be liable under the provisions of the IT Act and Rules. The Delhi High Court has held that a person whose privacy has been breached is entitled to an injunction against the violator, as well as damages, apart from the statutory monetary penalty. Please note that a blanket declaration and authorization provided by the employee on the background verification/during an interview would be applicable to all information collected through the use of the form, and a separate consent would not be required - unless the company requests the employee for additional information not covered under the form/

8 06 during an interview. Further, the company would need to inform the employee the name and address of the transferee, and the purpose of the transfer, in the event that data or information is being transferred - whether such transfer is to a person or entity located in India or abroad. Please note that the Rules permit the employee to withdraw consent at any stage after disclosure, in which case the company would be required to return data to the employee and not store or transfer such data any further. Please also note that in the case of SPDI, the employee s consent is valid only for the purpose stated at the time of obtaining consent, and only for so long as it takes to fulfill such purpose - therefore, if the purpose changes or a reasonable time expected for the purpose to be fulfilled has lapsed, then fresh consent needs to be obtained from the employee. Therefore, there is no comprehensive legal framework regulating employee background verifications/ interview questions in India. In fact, labour and employment laws are mostly silent as to the process of selection and hiring of employees by employers in the private sector. In any case, most employers in India conduct at least basic (education, job history, etc.) background verification of prospective employees or ask prospective candidates to disclose certain specific information as a condition precedent to the employment relationship. Data privacy law as it currently exists in India is applicable only to certain heads of information that are classified as SPDI, as discussed above, but a majority of information that is typically sought from prospective employees during a background verification process or during an interview is outside the tight controls expected to be imposed under data privacy laws - instead, mere information to the employee about the collection, storage and transfer of his personal information is sufficient to comply with the applicable law.

9 III. Employment Contracts Minimum Requirements While labour legislations in India do not require strictly that an employment contract should be in writing, the contract is nevertheless governed by the general law of contracts in India and it is a predominant market practice (with very rare exceptions) to have all the terms and conditions agreed and signed by both parties. A few states however have specific legislations that necessitate a written contract in order to establish an employeremployee relationship. From the perspective of certainty and enforceability, it is strongly recommended that all employment contracts are in writing, whether as a simple appointment letter or a fully detailed contract, setting out the terms and conditions of employment between the employer and employee. Contracts are governed by the Indian Contract Act, 1872 (the Contract Act ), and the provisions of the Contract Act dealing with the parties to a contract, consideration and validity are applicable to all employment contracts as well. In addition, employment contracts contain certain basic details of the employment, most of which can be derived from the IESO Act, which has been set out in Part 2.9 above. Some of the common provisions of an employment contract include: (i) location, description and title of job; (ii) date of commencement, duration (whether fixed term or unlimited term) and type (whether part-time or full-time) of the job; (iii) trial or probationary period; (iv) leave entitlement; (v) salary details and other benefits; (vi) terms governing termination of employment; (vii) restrictive covenants; and (viii) governing law. Further, for workmen to whom the ID Act applies, the terms of employment can be changed only with 21 (twenty-one) days prior written notice. If any such workman to whom the ID Act applies challenges any proposed change in the terms of employment before the prescribed labour courts, the proposed change will be suspended pending resolution of the dispute by the court. Employment contracts in India are generally considered to be unlimited term contracts, that is, contracts that are valid until termination or superannuation, unless specifically identified as a fixed term contract. 2. Fixed-term/Open-ended Contracts Fixed-term employment contracts are permitted in India, so long as the employer is employing such person for a short-term requirement, which has been interpreted to mean a maximum of 7 (seven) years. The Indian judiciary has consistently held the position that successive fixed-term contracts cannot be used as a substitute for employing the person on a permanent or unlimited term basis. Further, the Indian judiciary has set out that fixed-term employment is not to be used in job roles or functions that are of permanent nature, as far as the particular employer or industry is concerned. Fixed-term employment contracts may be signed directly between the employer and employee, or may be created through use of a contractor under the provisions of the CLRA Act. Typically, employees on a fixed-term employment contract may not be entitled to all the benefits of permanent employees, such as leave, allowances, perquisites and social security; unless such fixed-term employees have been engaged through a contractor, in which case it would be the obligation of the contractor to provide for such employees social security benefits. In the case of those employees who are workmen as defined under the ID Act, Section 2(oo) (bb) of the ID Act states that at the end of the fixed term contract, such workmen are deemed to be terminated. 3. Trial Period As per Indian law, it is permitted to place new employees on a trial or probation period. Such a period is meant to provide employers the opportunity to assess the abilities and suitability of the employee; and hence, by definition, allow the employer greater freedom to terminate the employment of such employees during the probation period. The IESO Act provides the broad framework for employees on probation, and these provisions are typically used even by employers to whom the IESO Act would not be applicable. The IESO Act provides for 3 (three) months of probation, which may be extended to a maximum of 1 (one) year involving successive terms of probation. During the period of probation, the employer will have the right to terminate the employment of the probationary employee without providing any notice; however, some state-specific

10 08 legislation such as the S&E Acts stipulate a short notice period prior to dismissal of probationary employees. At the end of the probation period, the employee may be confirmed as a permanent employee or dismissed. Please however note that the general market trend in India is to have a probation period between 3 (three) and 6 (six) months, especially in the technology and services sectors. 4. Notice Period Under Indian labour legislations, providing prior notice of termination of employment is mandatory in the case of employees who come under the definition of workman under the ID Act. The notice period for dismissal of workmen is either one month, or equivalent wages in lieu thereof, depending on the total number of workmen employed in the industrial establishment. Further, the employer would be required to make payment of retrenchment compensation to the workman, calculated at the rate of 15 (fifteen) days wages for every completed year of service. However, no notice period or payment of compensation is required in the case of workmen dismissed for misconduct, provided the employer conducts an internal inquiry prior to such dismissal. In the case of all other employees, there is no prescribed notice period; however, the Indian judiciary has held that termination of employment without providing prior notice would render the contract of employment as an unconscionable bargain thus rendering it illegal. For managerial employees who do not satisfy the definition of workman under the ID Act, the applicable jurisprudence allows any conditions in relation to the notice period to be addressed in the employment contract between the employee and the employer. There are no restrictions on any related condition and Indian law permits either party to terminate the relationship without providing any reason as well.

11 IV. Working Conditions Minimum Working Conditions The FA Act states that for industrial establishments where 250 (two hundred and fifty) or more workmen are employed, the employer shall provide for a canteen. Suitable shelters or rest rooms, lunchrooms with provision of drinking water are to be provided under the FA Act wherein 150 (hundred and fifty) workmen are employed. The factories wherein thirty (30) or more women workers are ordinarily employed, nurseries should be provided and maintained for the use of children under the age of 6 (six) years. The factories should have wholesome drinking water, toilets, washing places and spittoons, lighting in the workrooms, painting of the factory walls, doors and windows, cleaning of floors, effective removal of dirt and refuse and they must be kept clean and free from effluvia arising from any drain or other nuisance. Further, the factories should have temperature control mechanism, adequate ventilation, prevention of inhalation and accumulation of dust and fumes, regulation of artificial humidification, and prevention of overcrowding. The FA Act envisages certain precautions to be taken against explosives, inflammable gases, dangerous fumes and gases, fire and use of portable electric light. Under the CLRA Act, the contractor is required to provide facilities which include rest rooms, child nursery facilities, canteens, wholesome drinking water, toilets, washing facilities, and first aid. It is pertinent to note here that the onus is on the principal employer to provide the aforementioned facilities if the contractor does not provide the same. 2. Salary Although the words wages and salary are commonly used interchangeably, there is a subtle yet discernible difference between the two. Wages is a concept that is primarily used under labour/employment laws and determines employers and employee s rights and obligations therein; whereas Salary is a concept that is used under income tax law to denote the total taxable income received by a person from his employer. Under several labour/employment legislations, wages excludes allowances and cash-based benefits, but under income tax law, salary as defined under Section 17(1) of the Income Tax Act, 1961 (the ITA Act ) includes all forms of cash remuneration received from an employer. The concept of a basic wage or basic salary is a requirement under labour or employment laws, since it forms the basis for determining an employee s rights and employer s obligation under various social security legislations. The EPF Act is used by employers to determine an employee s basic wages. Section 2(b) of the EPF Act defines basic wages as follows: Basic Wages means all payments which are earned by an employee in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include: (i) the cash value of any food concession; (ii) any dearness allowance that is to say, all cash payments by whatever name called paid to an employee on account of a rise in the cost of living, house-rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment; and (iii) any presents made by the employer. The Wages Act defines wages as all remuneration (whether by way of salary, allowances, or otherwise) expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes: (i) any remuneration payable under any award or settlement between the parties or order of a Court; (ii) any remuneration to which the person employed is entitled in respect of overtime work or holidays or any leave period; (iii) any additional remuneration payable under the terms of employment (whether called a bonus or by any other name); (iv) any sum which by reason of the termination of employment of the person employed is payable under any law, contract or instrument which provides for the payment of such sum, whether with or without deductions, but does not provide for the time within which the payment is to be made; and (v) any sum to which the person employed is entitled under any scheme framed under any law for the time being in force.

12 10 However, the following do not qualify as wages under the Wages Act. They are the following: (i) any bonus (whether under a scheme of profit sharing or otherwise) which does not form part of the remuneration payable under the terms of employment or which is not payable under any award or settlement between the parties or order of a Court; (ii) the value of any houseaccommodation, or of the supply of light, water, medical attendance or other amenity or of any service excluded from the computation of wages by a general or special order of the State Government; (iii) any contribution paid by the employer to any pension or provident fund, and the interest which may have accrued thereon; (iv) any travelling allowance or the value of any travelling concession; (v) any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment; or (vi) any gratuity payable on the termination of employment. 3. Maximum Working Time Pursuant to the FA Act and certain S&E Acts, no employee shall be required to work in any establishment for more than 9 (nine) hours in a day or more than 48 (forty eight) hours in a week. However, certain states allow maximum working hours as only eight (8) hours in a day. 4. Overtime Pursuant to the FA Act and certain S&E Acts, any work performed over 9 (nine) hours a day or 48 (forty eight) hours a week is considered overtime. An employee working overtime becomes entitled to wages at the rate of twice his/her ordinary rate of wages or compensatory time off. 5. Holidays Weekly holiday: The FA Act and the various statespecific S&E Acts provide that every establishment shall remain closed on at least 1 (one) day of every week. Customarily, weekly holiday is every Sunday. However, a fair number of companies nowadays are in the habit of rotating their employees to ensure there is full operational efficiency during the course of a week. Given that, no company would be in breach of any applicable law as long as an employee is being provided at least a single holiday at any point of time in the week. National and Public holidays: Across India, there are 4 (four) days designated as national holidays, on which all establishments must provide a holiday to all employees, namely (i) Indian Republic Day (26th January); (ii) May Day (1st May); (iii) Indian Independence Day (15th August); and (iv) birth anniversary of Mahatma Gandhi (2nd October). In addition to these, every employee would be entitled to at least 5 (five) holidays every year declared by the respective state government as public holidays, which shall be exclusive of the national holidays described above. 6. Employer s Obligation to Provide a Healthy and Safe Workplace Pursuant to FA Act, the factories should have temperature control mechanism, adequate ventilation, prevention of inhalation and accumulation of dust and fumes, regulation of artificial humidification, and prevention of overcrowding. The FA Act envisages certain precautions to be taken against explosives, inflammable gases, dangerous fumes and gases, fire and use of portable electric light. The FA Act states that for industrial establishments where 250 (two hundred and fifty) or more workmen are employed, the employer shall provide for a canteen. Suitable shelters or rest rooms, lunchrooms with provision of drinking water are to be provided under the FA Act wherein 150 (hundred and fifty) workmen are employed. The factories wherein thirty (30) or more women workers are ordinarily employed, nurseries should be provided and maintained for the use of children under the age of 6 (six) years. The factories should have wholesome drinking water, toilets, washing places and spittoons, lighting in the workrooms, painting of the factory walls, doors and windows, cleaning of floors, effective removal of dirt and refuse and they must be kept clean and free from effluvia arising from any drain or other nuisance. The FA Act also mandates the construction, maintenance and obstruction-free location of floors, stairs, passages, etc. for ensuring safety of the workers. Further, factories are required to provide for suitable striking gear or appliances, driving belts and other safety devices mechanisms. The workmen in the factory are to be provided with goggles for protection of eyes wherein the manufacturing process is of such a nature that it is risky for the eyes. The employer has to appoint safety

13 11 officers in factories wherein 1000 (thousand) or more workmen have been employed. The Employees State Insurance Act, 1948 (the ESI Act ) and the Employees Compensation Act, 1923 (the ECA ) provide for certain benefits which the employer has to give to the employees in contingencies such as maternity, temporary or permanent physical disablement due to employment injury resulting in loss of wages or earning capacity, death due to employment injury, as well as medical care to workers and their immediate dependents. As a general rule, the various state S&E Acts provide that female employees cannot be made to work beyond 8.30 PM. However, in some cases, the local governments have exempted whole industries, most notably the Information Technology industry from the provisions dealing with opening and closing hours. However, the employers who have been granted such exemption have to comply with certain conditions. Most notably, such conditions usually provide for the protection of and grant of various facilities to female employees who are required to stay late such as: (i) Special arrangement should be made for protection of female employees working before 6.00 AM and after 8.30 PM, including the provision of transport; (ii) Female employees should be provided jobs jointly or in groups; and (iii) Arrangement for restrooms and lockers should be made for female employees.

14 V. Anti-Discrimination Laws Brief Description of Anti- Discrimination Laws India does not, in the context of private sector employment, have a comprehensive specific legislation that addresses discrimination and harassment at the workplace, except in relation to sexual harassment. The Indian judiciary has, over the years, taken steps to protect employees in India in instances of discrimination and harassment. While there is no specific legislation that addresses general discrimination and harassment issues in the workplace, please note that most newage employers in India already cover all these subjects comprehensively as part of their internal policies. The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redress) Act of 2013 provides for a detailed mechanism to enforce by all employers in the matter of sexual harassment claims at the workplace. Several legislations, in a cumulative fashion, however address workplace discrimination issues in the private sector, by prohibiting acts such as (i) refusal of employment solely on the grounds of a person s membership of a socially backward community; (ii) deducting salaries or dismissing pregnant/recently delivered women employees; (iii) payment of unequal wages to men and women employees performing similar tasks; and (iv) discriminating against persons with disability. The recent trend is that most companies, irrespective of size, have far more strict internal policies with reference to the workplace discrimination issues than what is statutorily required. It is pertinent to note here that the ID Act prohibits commission of unfair labour practices, which includes prohibition of discrimination against any workman filing charges or testifying against an employer in any inquiry or proceeding relating to any industrial dispute or discriminating against workmen by reason of them being members of a trade union. The Constitution permits the creation of mandatory quotas in employment for certain socially backward communities. However, these quotas are mandatory only for employment in Government bodies, public sector companies and State-run institutions. Although the Government has attempted on several occasions to extend mandatory quotas to the private sector, it is not expected that this will happen in the near future due to the sensitivity of such an issue in contemporary political and sociological circumstances. 2. Extent of Protection While the law protects certain rights of women employees, such as equal pay, working hours and maternity benefits, a number of issues still remain which affect gender equality at the workplace. For example, Indian law does not recognize childcare leave, which would allow both parents to spend more time in the upbringing of a child. The law only provides for maternity leave and benefits, while paternity leave is offered as a benefit only by companies at their own discretion, as opposed to a statutory obligation. Further, the law is silent on issues such as a work from home policy, which would allow both men and women employees to divide their time between the workplace and home. The Equal Remuneration Act, 1976 (the ERA Act ) stipulates that male and female employees who perform similar tasks must be paid equal wages, and also contains provisions that prohibit employers from discriminating against women in matters of recruitment, promotions and transfers. Further, women employed in primarily physical labour, such as in factories and construction sites, are legally entitled to lesser working hours than male employees. The Companies Act, 2013 (the CA Act ) has made it mandatory for listed companies and large public companies to have at least one female director. The Government has, for a long time, promised a mandatory quota for women employees across all forms of employment, but this has never been given any formal shape as yet. Most laws are focused towards prohibition and punishment of obscenity, indecent portrayal

15 13 of women and acts of violence against women; but there is no law that promotes the employment and empowerment of women at the workplace. The Maternity Benefits Act, 1961 (the MB Act ) was enacted with respect to employment of pregnant women in establishments and to provide for maternity and related benefits. The MB Act protects women from dismissal while on maternity leave. The ID Act provides for prohibition of discrimination against any workman filing charges or testifying against an employer in any inquiry or proceeding relating to any industrial dispute or discriminating against workmen by reason of them being members of a trade union. 3. Protections Against Harassment In general, the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redress) Act, 2013 (the SHWW Act ), prohibits sexual harassment at the workplace. The SHWW Act defines sexual harassment to include any of the following unwelcome acts or behavior: (i) Physical contact and advances; or (ii) A demand or request for sexual favors; or (iii) Making sexually colored remarks; or (iv) Showing pornography; or (v) Any other unwelcome physical, verbal or nonverbal conduct of a sexual nature. The SHWW Act also identifies certain circumstances which, if occurring in conjunction with sexual harassment as defined in the SHWW Act, would be significant evidence that an offence has been committed. The circumstances are: (i) Implied or explicit promise of preferential treatment in employment; or (ii) Implied or explicit threat of detrimental treatment in employment; or (iii) Implied or explicit threat about present or future employment status; or (iv) Interference with work or creating an intimidating or offensive or hostile work environment; or (v) Humiliating treatment likely to affect one s health or safety. The sweeping breadth of new protections provided by the SHWW Act is exemplified by some of its key definitions, which go beyond the parameters of the traditional employment relationship. For example, an aggrieved woman entitled to seek redress under the SHWW Act is a woman of any age, whether employed or not, who claims to have been subjected to any act of sexual harassment. Thus, the employer s obligations are not restricted to female employees but instead extend to all women who may be subjected to sexual harassment at the workplace. Similarly, an employee under the SHWW Act is defined as a person employed at a workplace for any work on a regular, temporary, ad hoc or daily wage basis, either directly or through an agent, including a contractor, with or without the knowledge of the principal employer, whether for remuneration or not, working on a voluntary basis or otherwise, whether the terms of employment are express or implied. The definition includes co-workers, contract workers, probationers, trainees, apprentices, or persons called by any other such name. Finally, the SHWW Act defines workplace to include not only the usual place of employment, but any place visited by the employee arising out of or during the course of employment including transportation provided by the employer for undertaking such journey. However, if the employer fails to constitute a committee under the SHWW Act to deal with sexual harassment complaints or contravenes or attempts to contravene or abets contravention of other provisions of SHWW Act or any rules made thereunder, the employer shall be punishable with fine which may extend to INR 50,000/- (Rupees Fifty Thousand only). If any employer is convicted of the same offence twice under the SHWW Act, it shall be liable to twice the punishment, which might have been imposed on a first conviction, subject to the punishment being maximum provided for the same offence. Further, the punishment can even be cancellation of license of the employer, which is required by the employer to run its business. The IESO Act and the standard industry practice, typically, define the following acts as harassment : (i) acts of sexual harassment, other than sexual harassment of women; (ii) forcing an employee to become a member of a trade union; (iii) forcing an employee to join a strike or similar disruptive activity; (iv) denial of promotion, pay raise or salary increment to an employee solely on the basis of such employee s gender, race, religion, caste, community, colour, marital status, pregnancy status, disability, etc.; and (v) transfer of an employee solely on the basis of such employee s gender, race, religion, caste, community, colour, marital status, pregnancy status, disability, etc. The IESO Act specifically requires an employer to provide for appropriate means of redress for complaints of workmen against discrimination and harassment. A disciplinary committee has to be formed which investigates into the complaints of discrimination and harassment against the accused workmen keeping in mind the principles of natural justice.

16 14 4. Employer s Obligation to Provide Reasonable Accommodations In the context of private sector employment, there is no comprehensive legislation governing the employer s obligation to provide reasonable accommodations to employees based on religious practices or disability. However, many employers already have in place internal policies wherein the employee is given an option to choose two holidays a year which are of his choice with due consideration being given to his/her religion. Further, many companies have provided ramps and parking lots specially dedicated to disabled persons. In a recent decision of the Indian judiciary, it has been noted that a company has a duty to treat all persons with disabilities with dignity and respect and any discrimination against or harassment of such persons with disabilities shall result in a fine imposed on or other action being taken against the company. 5. Remedies Under the ID Act, the workmen can approach the Labour Court, Industrial Tribunal or Courts of Inquiry for any industrial dispute in relation to unfair labour practices. Under the IESO Act, the victims of discrimination or harassment can approach the employer who in turn will form the disciplinary committee, which investigates into the complaints against the accused workmen keeping in mind the principles of natural justice. Under the SHWW Act, female employees can approach the employer who in turn will set up the Internal Complaints Committee to look into the complaints of sexual harassment and accordingly, award punishment.

17 VI. Social Media and Data Privacy Can the employer restrict the employee s use of Internet and social media during working hours? There is no comprehensive legal framework under the Indian labour legislations to govern the employees usage of Internet and social media by the employer during working hours. Most internet-related transactions and communication are governed by the IT Act and various sub-legislations and guidelines notified under it. Further, existing civil and criminal laws would apply to acts committed on the internet and social media, such as defamation, breach of contract, divulging trade secrets and so on. Privacy laws and data protection are governed by the Rules, which provide a broad framework for the storage, handling and transmission of information over networks including security thereof. The Rules define requirements for companies handling sensitive personal data such as credit card information, biometric information, passwords and medical records. In addition, the judiciary has, from time to time, recognized a nebulous right to privacy, in relation to state-organized surveillance and integrity of physical space. However, employers are gradually defining policies that affect their employees participation on social media during working hours. Several companies, especially technology and outsourcing companies, have also installed firewalls that prevent employees from accessing social media sites at the workplace, whereas several other companies have defined social media usage policies that educate employees on the implications of misuse of social media. In a few recent decisions of the Indian judiciary, employers have been held to be vicariously liable for the acts of their employees in social media networks. 2. Employee s use of social media to disparage the employer or divulge confidential information As mentioned above, there are no specific laws under Indian labour legislations governing employees use of social media to disparage the employer or divulge confidential information. However, employers are gradually defining policies that affect their employees participation on social media during working hours. Several companies, especially technology and outsourcing companies, have also installed firewalls that prevent employees from accessing social media sites at the workplace, whereas several other companies have defined social media usage policies that educate employees on the implications of misuse of social media. In a few recent decisions of the Indian judiciary, employers have been held to be vicariously liable for the acts of their employees on social media networks. The employer is entitled to include provisions in employment contracts for ensuring that confidential information, trade secrets and proprietary information are protected from disclosure, and towards this end, many employers retain, via employment contracts or company policy, the right to monitor employees activities on social media. Indian courts, typically, take claims of confidentiality breaches and disclosure of sensitive information very seriously. It is an established principle of Indian jurisprudence that an employer has full and exclusive ownership of the information that the employee comes in contact with during the course of employment, including any and all information contained in the employee s official accounts. Given that, it is very convenient for employers to structure stringent policies in this context as they are enforceable in a court of law.

18 VII. Authorizations for Foreign Employees 16 At the time of setting up a business in India, a fair number of foreign employers generally prefer to appoint their employees from their home country or headquarters for the management and control of the business. This is done mainly for the convenience of co-ordination with the parent company in terms of decision-making, financial management and other business matters. Secondment of employees to India by a foreign entity has often been a subject of scrutiny by regulatory authorities, thus leading to litigation. Indian revenue authorities tend to take a view that rendition of services by seconded employees is taxable as fees for technical services and/or constitutes a service permanent establishment of the foreign entity in India. An individual is taxed in India on the basis of their residential status under the ITA Act. The residential status is determined on the basis of the physical presence of the individual in India during that particular financial year (1st April to 31st March). Foreign nationals may be exempt from taxes in India if their stay does not exceed 90 (ninety) days, as prescribed in the ITA Act, or the number of days prescribed [generally 183 (one hundred and eighty three) days] under various double taxation avoidance agreements (the DTAA ) which India has entered into with other countries. To the extent that an individual qualifies for relief in terms of the dependent personal services under the provisions of the applicable DTAA, there will be no tax liability. However, this exemption will not apply if the Indian entity is the individual s economic employer. In addition, any salary or local benefits received in India are also not eligible for relief. Business visas are given strictly to those who make business related trips to India, such as sales or establishing contact on behalf of the company outside India. However, like most other jurisdictions, business visas in India cannot be used for any direct revenue generating work or employment. Employment visas are issued to foreigners who are working in India, for an Indian entity. Employment visas are usually granted for 1 (one) year, or the term of the contract, whichever is shorter. It can be extended in India. Foreign nationals transferring to India for employment in an establishment registered in India or for execution of a project in India by a foreign establishment can obtain an employment visa, provided they are sponsored for an employment visa by their employer and they draw a salary in excess of Twenty five Thousand U.S. Dollars (USD 25,000) per annum. Compensation received by foreign nationals working in India is generally assessable under the head salaries and is deemed to be earned in India. Irrespective of the residence status of an expatriate employee, the salary paid for services rendered in India is liable to tax in India. There are no special exemptions or deductions available to foreign nationals working in India. Where salary is payable in foreign currency, the salary income must be converted to Indian rupees. Foreign nationals, including their family members, who intend to stay in India for more than 180 (one hundred and eighty) days, must register with the Foreign Regional Registration Office (the FRRO ) within 2 (two) weeks of arrival in India. For the purposes of registration, the individual is required to make an application in the prescribed form and be present in person at the time of registration. The tax obligations relating to employees on secondment with Indian companies or firms would depend upon various factors such as the residential status the employee acquires while working in India, place where services are rendered, and receipt of salary in India. The income of the foreign company in respect of the seconded employee may be subject to Indian income tax if (i) the foreign company retains the direct supervision and control over the seconded employees; (ii) the work being performed by the employee is on behalf of the foreign company; and (iii) the foreign company is receiving a fee or amount from the Indian company or firm which is over and above mere reimbursement of the salary of the seconded employee. It is also pertinent to note that by virtue of certain notifications, the Provident Fund Scheme and Pension Schemes under the EPF Act are applicable to all foreign

19 17 nationals except those who are expressly excluded by virtue of social security agreements (the SSA ) that India has entered into with foreign countries on a reciprocity basis. The SSA is a bilateral instrument to protect the social security interests of foreign nationals seconded in another country and since it is a reciprocal arrangement, it generally provides for avoidance of double coverage. Foreign nationals, seconded to India from countries with which India has signed the SSAs, who enjoy the status of detached worker under the provision of detachment of SSA and contribute on a reciprocity basis to the host country s social security schemes are excluded from the requirement of contributing to social security schemes in India. As an example, paragraph 4 of Article 9.3 of CECA between India and Singapore provides that Natural persons of either Party who are granted temporary entry into the territory of the other Party shall not be required to make contributions to social security funds in the host country. India has signed SSAs with various countries and some of them are: Belgium, Germany, Switzerland, Denmark, Luxembourg, France, South Korea and the Netherlands.

20 VIII. Termination of Employment contracts Grounds for Termination An employee may be terminated due to several factors including: Breach of employment contract Closure of business due to change of market situations Organizational restructuring Employee s inability to fulfill material obligations Misconduct Inefficiency/ poor performance Loss of confidence by management Abandonment of employment Continuous absenteeism Any other breach of employer policy. There are different modes of termination of employment. The termination of employment can be completed in any of the following ways: Mutually by both the employer and employee; or By the employee voluntarily; or By the employer either for misconduct by the employee or for a reasonable cause; or Due to expiry of fixed term contracts between the employee and employer; or Due to retirement or superannuation of an employee. 2. Collective Dismissals Collective Dismissals of employees is permitted under Indian labour legislations, subject to certain conditions. In the case of employees who come under the definition of workmen under the ID Act, such terminations may be either layoffs or retrenchment. Layoff is permitted only where the employer is suffering from financial losses or other reasons, which are beyond the reasonable control of the employer. The employer must make an application before the Labour Department for a layoff, following which the Labour Department will provide an opportunity for the employees to be heard. If the application is successful, the Labour Department will confirm the layoff. If possible, employees subject to layoff should be informed of the nature of the layoff and the foreseeable duration of the layoff, whether shortterm or indefinite. In determining which employees will be subject to layoff, the employer may take into account, among other things, operation and requirements, the skill, productivity, ability, and past performance of those involved, and also, when feasible, the employee s length of service. In the case of collective dismissal, the employer would be required to provide notice period and retrenchment compensation in accordance with the provisions of the ID Act. In the case of both layoff and mass retrenchment, the employer is required to follow the last in, first out principle, which means that the shortest-serving employees will be the first to be dismissed. In the case of all other employees, there is no express statutory provision, which prohibits collective dismissal of employment. 3. Individual Dismissals Under Indian labour legislations, providing prior notice of termination of employment is mandatory in the case of employees who come under the definition of workmen under the ID Act. The notice period for dismissal of employees is either one (1) month or three (3) months, or equivalent wages in lieu thereof, depending on the total number of employees. However, no notice period or payment of compensation is required in the case of employees dismissed for misconduct, provided the employer conducts an internal inquiry prior to such dismissal. In the case of all other employees, there is no prescribed notice period. However, the Indian judiciary has held that termination of employment without providing prior notice would render the contract of employment as an unconscionable bargain thus rendering it illegal. For employees who are in a managerial cadre and do not satisfy the definition of a workman under the ID Act, the applicable jurisprudence allows any conditions in relation to the notice period to be addressed in the employment contract between the employee and the employer. There are no restrictions on any related

21 19 conditions and Indian law permits either party to terminate the relationship without providing any reason as well. a. Is severance pay required? Yes, severance payment is required to be paid by the employer. Severance pay procedure is different in each circumstance and the circumstances are enlisted below: Voluntary resignation: If the employee voluntarily resigns (as in the cases of retirement/resignation/ absconding/failure to report to work without notice for three (3) consecutive days, then the resignation has to be accepted by the employer. Upon the acceptance of the resignation by the employer, the employee has to serve a notice period as specified in the employment contract, unless the same is waived by the employer. The employer upon resignation has to pay the employee: All accrued and unpaid wages; Wages in lieu of accrued and unpaid leave; Gratuity in accordance with PGA Act; and Any other contractual dues. Termination initiated by employer: For the termination initiated by the employer for misconduct by the employee, the scope of misconduct should be set out in the employment handbook, policies or employment contract. A disciplinary enquiry needs to be conducted for the misconduct and the procedure for the same should be set out in either of the employment handbook, policies or employment contract. The various labour legislation provides for examples of misconduct which can include damage to employer s property, sexual harassment, theft, insubordination, habitual negligence, taking or giving bribes, habitual absence without leave, gambling within employer s premises, drunkenness or riotous behaviour at the employer s premises, violent behaviour, illegal strike or unauthorized possession of lethal weapon in the employer s premises. The internal disciplinary enquiry needs to prove the act of misconduct by the employee. The employer upon termination has to pay the employee: All accrued and unpaid wages; Wages in lieu of accrued and unpaid leave; Gratuity in accordance with PGA Act; and Any other contractual dues. An employee is entitled to payment of gratuity on termination of his employment, provided he has rendered continuous service for not less than 5 (five) years (except in the case of death or disability), under any of the following circumstances, namely: On his superannuation, Retirement or resignation, or Death or disablement due to accident or disease. The gratuity payable to an employee is calculated as 15 (fifteen) days wages payable multiplied by the number of years of service (with part of a year in excess of 6 (six) months counted as 1 (one) year). The maximum amount of gratuity that an employee is entitled to under the PGA Act is INR 10, 00, 000 (Rupees Ten Lakhs only). However, there is no restriction on any employer to pay over and above the statutory limit. 4. Separation Agreements (i) Is a Separation Agreement required or considered best practice? While a Separation Agreement is not mandatory, it is increasingly considered as a necessity from a best practice perspective as the separation agreement addresses the scenario where both parties are releasing each other of all present and future liabilities with reference to the employment relationship and the conditions of confidentiality for the proposed course of action. (ii) What are the standard provisions of a Separation Agreement? There will be some standard legal provisions and some key provisions in a Separation Agreement. It is important for the Agreement to review the identity of the involved parties, the fact of the termination, the reason for severance, the terms of any severance, the release of claims, non-solicitation, return of employer s equipment, the right of the employee to consult an attorney, confidentiality requirements regarding the terms, and some common clauses like the applicable law and enforceability of the agreement. The two key provisions are the severance pay, if any, and the release of claims. The terms of severance would include the amount (if any), the time of payment, and a statement that applicable tax withholding will be deducted. If certain

22 20 benefits are being given in addition to or in lieu of a cash severance payment, the terms and conditions of these benefits need to be specified in the Separation Agreement. Loss of wages Out of pocket expenses including but not limited to attorney s fees Loss of benefits (iii) Does the age of the employee make a difference No. Indian labour legislation does not include restrictions on the age of the employee. However, the Separation Agreement is governed by the Contract Act. Under the Contract Act, the employee should not be a minor i.e. an individual who has not attained the age of majority i.e. 18 (eighteen) years in normal case and 21 years if guardian is appointed by the Court. (iv) Are there any additional provisions to consider? Yes, Separation Agreements can be customized based on the circumstances of each situation. Here are some of the questions to consider: Is the termination part of a workforce reduction? Is the termination part of transfer of undertaking? Is the termination part of a disciplinary proceeding? Is there company information or equipment the employee needs to return? Do invention and intellectual property rights of the company need to be established or reiterated to the employee? Are there some stock options or securities vesting questions to be addressed? If confidentiality of any particular invention has to be maintained? What kind of intangible information will the employee carry to his next employer? Is there a possibility of the employee disparaging the employer and its other employees? Should the employee be offered garden leave? If the answer is yes to any of these questions, corresponding provisions should be added to the Separation Agreement. 5. Remedies for employee seeking to challenge wrongful termination The remedies available for employee seeking to challenge wrongful termination are enlisted below: Reinstatement of employment Back pay

23 IX. Restrictive Covenants Definition of Restrictive Covenants Companies in the knowledge industry place a high value on their intellectual and human capital. Key employees as well as employees who have close interaction with customers, such as sales staff, are critical to the growth and development of the company, and on many occasions, the company may be reliant on the personal attributes and market knowledge of such employees in order to reach its market base. Therefore, companies look to protect their business interests by placing certain restrictive conditions on its employees, such as non-compete and non-solicit clauses. Such clauses which place restrictions on the employees, either during or after their employment with an employer, are referred to as restrictive covenants. 2. Types of Restrictive Covenants (i) Non-Compete Clauses A non-compete clause is typically a personal restriction placed by the employer on the employee so that the employee does not indulge in any activity that would be in competition with the business of the employer. In nearly all employment contracts, such restrictions would be applicable for as long as the employee is employed by the company, whereas some employment contracts may also contain clauses, which will prevent the employee from joining a competitor company, or start a competing business after leaving his/her employment with the company. (ii) Non-solicitation of customers A non-solicitation clause is intended to ensure that an employee does not induce the company s customers or clients away from the company, typically after such employee leaves his/her employment with the company. Further, a non-solicitation clause may also prevent an ex-employee from inducing any current employees to resign from the employment of the company and join the company where such ex-employee is currently employed. (iii) Non-solicitation of employees Another form of a restrictive covenant is nonsolicitation of employees, which implies a restriction on a former employee from inducing or encouraging any employees of his or her former employer to terminate his or her employment with or to accept employment with any competitor, supplier or customer of the former employer. In other words it is a covenant, which essentially prohibits either party from enticing and/ or alluring each other s employees away from their respective employments. 3. Enforcement of Restrictive Covenants process and remedies The laws in force in India are not in favor of restrictive covenants. The guiding principle behind such a position is that the law presumes the employer to be in a stronger bargaining position in comparison to the employee, who would typically have to accept the employer s terms. Therefore, the law offers some protection to the interests of the employees. Article 19(1) (g) read with Article 19(6) of the Constitution guarantees all citizens of India the fundamental right to practice any profession and carry on any occupation, trade or business, subject to any reasonable restrictions which may be imposed by law. Further, Section 27 of the Contract Act states that any contract which restrains trade, business or profession of any kind, shall be void. While a plain reading of the Constitution as well as the Contract Act may seem to suggest that all restrictive covenants would be void and unenforceable in law, the Indian judiciary has provided certain avenues for employers to protect their legitimate business interests, by way of allowing some reasonable restrictions in an employment contract. The Supreme Court through its various judgements has specifically pronounced that: A restrictive covenant extending beyond the term of the contract is void and not enforceable; The doctrine of restraint of trade does not apply during the continuance of the contract for employment and it applies only when the contract comes to an end; and The doctrine of restraint of trade is not confined only to contracts of employment, but is also applicable to all other contracts.

24 22 However, the Supreme Court has provided for certain benefits to employers, for example, employers are permitted to contractually restrict their employees from misusing or disclosing the employer s trade secrets or confidential business information and practices. Similarly, where the employee has a motive to cheat or cause irreparable harm to the employer, a restrictive covenant beyond the term of employment would be enforceable. In relation to non-solicit clauses in employment contracts, various High Courts in India through their judgments have held that: Merely approaching customers of a previous employer does not amount to solicitation until orders are placed by such customers based on such approach; and Such non-solicitation clauses may be valid if reasonable restrictions such as distance, time limit (reasonable time frame), protection and non-usage of trade secrets and goodwill are imposed on former employees. enforce garden leave it is helpful to be able to rely on the following express contractual provisions: An express right for the employer to withdraw the employee s duties and not permit them onto the premises; This will prevent the employee from resigning and claiming constructive dismissal when the garden leave clause is implemented; An express restriction on other business activities during employment; This will draw to the employee s specific notice the nature of the restraint and allow an order enforcing the restraint to be more precisely framed. 4. Use and Limitations of Garden Leave A Garden leave provision is one wherein the employer pays the employee a fixed sum of money to not join a competitor for a reasonable period of time. Garden leave describes a situation where an employee gives notice or is given notice of termination of employment and is directed to stay away from work for the duration of the notice period, whilst continuing to pay the employee s remuneration. The courts have ruled that, while it is not possible to stop an employee from leaving, he can be restricted from joining a competitor during the term of employment. The aim of garden leave is to keep the employee out of the market place long enough for any information they have to go out of date, or to enable that employee s successor to establish themselves, particularly with customers, so as to protect goodwill. Operating garden leave may help deter a competitor from poaching employees in the first place. The uncertainty of the judicial decisions over the non-compete clauses has resulted in the corporate sector developing and taking recourse to a concept called garden leave, under which employees are paid their full salary during the period in which they are restrained from competing. To

25 X. RIGHTS OF EMPLOYEES IN CASE OF A TRANSFER OF UNDERTAKING 23 The ID Act, mainly determines transfer of undertakings in India. The workmen are protected in the event of the business transfers but non-workmen cannot have the same remedy where the undertaking of a business or business in itself is getting transferred. 1. Employees Rights Under the section 25FF ID Act, compensation has to be paid to workmen in case of transfer of undertakings. The transfer of undertaking can either be by an agreement or by operation of law between the old employers and the new employers and in either case, every workman who has been in continuous service for not less than 1 (one) year in that undertaking immediately before such transfer, shall be entitled to notice and compensation in accordance with the provisions of the ID Act, as if the workman had been retrenched. However, Section 25 FF of the ID Act, shall not apply to workmen, if: The service of the workmen has not been interrupted by such transfer; The terms and conditions of service applicable to the workmen after such transfer are not in any way less favourable to the workmen than those applicable to them immediately before the transfer; and The new employer is, under the terms of such transfer or otherwise, legally liable to pay to the workmen, in the event of their retrenchment, compensation on the basis that their service has been continuous and has not been interrupted by the transfer. Section 25F of ID Act, elaborates that in the case of transfer of undertaking, workmen who have been in continuous service for not less than 1 (one) year under an employer shall not be retrenched by the new employer until; The workmen have been given 1 (one) month notice in writing indicating the reasons for retrenchment or the workmen have been paid in lieu of such notice, wages for the period of the notice; The workmen have been paid, at the time of retrenchment, compensation which shall be equivalent to 15 (fifteen) days average pay for every completed year of continuous service or any part thereof in excess of 6 (six) months; and Notice in the prescribed manner is served on the appropriate Government or such authority as may be specified by the appropriate Government. These benefits are payable to the employees in addition to the normal terminal benefits payable by the employer such as gratuity, provident fund, etc. 2. Requirements for Predecessor and Successor Parties When the services of an employee are interrupted due to transfer of an undertaking, Section 25 FF of the ID Act, provides that notice and compensation by the old employer has to be provided to the employee in accordance with Section 25F of the ID Act, since this condition qualifies to be a retrenchment. However, in case of uninterrupted services of the employee during the transfer of undertaking, if the conditions of the provisos under Section 25FF are met, the liabilities of salary and post-retirement benefits which the employees were earlier entitled to under the employment of the old employer, are transferred in favour of the new employer. Further, Section 25B of the ID Act, provides for the definition of continuous service which is applicable to section 25FF of the ID Act. In terms of Section 25B of the ID Act, a workman shall be said to be in continuous service for a period if he is, for that period, in uninterrupted service, including service which may be interrupted on account of sickness or authorized leave or an accident or a strike which is not illegal, or a lock- out or a cessation of work which is not due to any fault on the part of the workman. The Supreme Court has held that the proviso to section 25FF of the ID Act, provides that payment of compensation on the transfer of an undertaking will not be applicable where employment has not been interrupted, if the terms and conditions of service are as favorable as they were before such transfer, and

26 24 the acquirer is committed to pay the employees their dues as if their employment had been constant and uninterrupted by the transfer. Given the above, the Company has to give notice and pay adequate compensation if the employment of the employees of the department is interrupted while transfer of undertaking. The successive employer shall have to bear the liabilities of salary and post-retirement benefits which the employees of the company were earlier entitled to when the employment of the employees of departments are uninterrupted. The following provide the liabilities of the successive employer: The successive employer may have to pay gratuity to the employees in accordance with PGA Act, if the employees have completed five years of continuous service, which includes the number of years served by the employees under the company. When the terms and conditions of service applicable to the employees are less favorable than those, which were applicable immediately before the transfer of an undertaking, Section 25 FF of ID Act, provides that notice and compensation by the old employer has to be provided to the employee in accordance with Section 25 F of the ID Act, since this condition qualifies to be a retrenchment. If the services of employees are interrupted or the terms of employment are changed during the transfer of undertaking, it may become a potential ground for dispute, exposing the company to litigation.

27 XI. TRADE UNIONS AND EMPLOYERS ASSOCIATIONS Brief Description of Employees and Employers Organizations The TU Act defines a trade union as any combination, whether temporary or permanent, formed primarily for the purpose of regulating the relations between workmen and employers or between workmen and workmen, or between employers and employers, or for imposing restrictive condition on the conduct of any trade or business, and includes any federation or two or more trade unions. While an employer is not legally bound to recognize a trade union or encourage collective bargaining, a registered trade union can enter into collective bargaining agreements with the employer for better wage and service conditions. Works Committee needs to be formed, if the respective state government notifies, the requirement of the same. Works committee is formed by industrial establishments, which employ 100 (hundred) or more workmen. The main responsibility of the Works Committee is to promote measures for securing and preserving amity and good relations between the employer and workmen and to achieve that, the Works Committee can comment upon matters of their common interest or concern and endeavor to compose any material difference of opinion in respect of such matters. Grievance redressal committee shall be constituted when notified, for every establishment, which employs twenty (20) or more workmen. Such committee shall resolve disputes arising out of individual grievances. The setting up of this committee shall not affect the right of the workmen to raise industrial disputes on the same matters under the provisions of ID Act. The workman who is aggrieved by the decision of this committee may prefer an appeal to the employer against such decision and the employer shall, within one (1) month from the date of receipt of such appeal, dispose off the same and send a copy of his decision to the workman concerned. In the state of Gujarat, Joint Management Council has to be formed in industrial establishments employing 500 (five hundred) or more workmen, as compared to the threshold of 100 (hundred) workmen under the ID Act. The purpose, functions and selection of the Joint Management Council are substantially similar to those of the Works Committee. An industrial establishment where 250 (two hundred and fifty) or more workmen are employed, shall if notified by the respective state government provide for a canteen. Further, it states that such canteen must be managed by the Canteen Committee. The duties of the Canteen Committee include making arrangements for adequate supply of raw materials and cooking materials, deciding the menu for everyday meals, and so on. 2. Rights and Importance of Trade Unions The rights of trade unions in an establishment are enlisted below: Immunity is granted to members and office bearers of registered trade unions from criminal conspiracy in relation to trade disputes. The trade unions can keep a separate fund for political purposes from which payments may be made, for the promotion of the civic and political interests of its members. The trade unions have the right to amalgamate with other trade unions. The trade unions can enforce performance of contracts. An agreement between the members of a registered trade union shall not be void or voidable merely by reason of the fact that any of the objects of the agreement are in restraint of trade. No suit or other legal proceeding shall be maintainable in any Civil Court against any registered trade union or any office-bearer or member thereof in respect of any act done in contemplation or furtherance of a trade dispute to which a member of the Trade Union is a party on the ground only that such act induces some other person to break a contract of employment, or that it is in interference with the trade, business

28 26 or employment of some other person or with the right of some other person to dispose of his capital or of his labour as he wills. A registered trade union shall not be liable in any suit or other legal proceeding in any Civil Court in respect of any tortious act done in contemplation or furtherance of a trade dispute by an agent of the trade union if it is proved that such person acted without the knowledge of, or contrary to express instructions given by, the executive of the trade union. The importance of trade unions in an establishment are enlisted below: Help in the recruitment and selection of workers Inculcate discipline among the workforce Enable settlement of industrial disputes in a rational manner Help in social adjustments. Workers have to adjust themselves to the new working conditions, the new rules and policies. Workers coming from different backgrounds may become disorganized, unsatisfied and frustrated. Unions help them in such adjustment. Trade unions are a part of society and as such, have to take into consideration the national integration as well. Some important social responsibilities of trade unions include: Promoting and maintaining national integration by reducing the number of industrial disputes Incorporating a sense of corporate social responsibility in workers Achieving industrial peace. 3. Types of Representations The TU Act provides for registration of a trade union and the rights and liabilities of a registered trade union. 4. Number of Representatives There may be a trade union, which is composed neither of workmen nor masters although it may be a combination of both to regulate the relations between workmen and workmen or workmen and employers or employers and employers. What matters is the object of the union and not its composition. However, a trade union cannot be registered unless at least 10% (ten percent) of the workmen, or 100 (one hundred) workmen, whichever is less, employed in an establishment are its members. Works Committee is a body consisting of representatives from workmen and management in such a manner that the representatives of the workmen are not less than the representatives of the management. Grievance redressal committee shall consist of an equal number of members from the employer and the workmen. The total number of members constituting the committee should not exceed six (6). Canteen Committee consists of representatives of workmen and management personnel in a manner similar to the Works Committee. The State Government may make rules requiring that in any specified factory wherein more than two hundred and fifty workers are ordinarily employed, a canteen or canteens shall be provided and maintained by the occupier for the use of the workers. Joint Management Council the State Government may make rules and require the employer to constitute in the prescribed manner and within the prescribed time limit a Joint Management Council consisting of such number of members as may be prescribed, comprised of representatives of employers and workmen engaged in the establishment, so however that the number of representatives of workmen on the Council shall not be less than the number of representatives of the employers. 5. Appointment of Representatives The representatives of the employees on the works committee must be chosen from amongst the employees, either by way of popular vote or as recommended by any registered trade union in the industrial establishment. The respective State Government may make rules regarding the constitution of a managing committee for the canteen and representation of the workers in the management of the canteen. The chairperson of the Grievance Redressal Committee shall be selected from the employer and from among the workmen alternatively on rotation basis every year. The total number of members of the Grievance Redressal Committee shall not exceed more than six. There shall be, as far as practicable, one woman member

29 27 if the Grievance Redressal Committee has two members and in case the number of members is more than two, the number of women members may be increased proportionately. The representatives of the workmen on the Joint Management Council shall be elected in the prescribed manner by the workmen engaged in the establishment and from amongst themselves. One of the members of the Council shall be appointed as Chairman in accordance with rules made in this behalf. 6. Tasks and Obligations of Representatives The task and obligations of the employee representatives include: Representing members fairly and effectively in relation to matters arising within the undertaking or establishment in which they work and which concern employment and conditions of employment Participating in negotiation and grievance procedures as provided for in employer/trade union agreements or in accordance with recognized custom and practice in the undertaking or establishment in which they work Co-operating with the management of the undertaking or establishment in ensuring the proper implementation and observance of employer/trade union agreements, the use of agreed dispute and grievance procedures and the avoidance of any action, especially unofficial action, which would be contrary to such agreements or procedures and which would affect the continuity of operations or services Acting in accordance with existing laws and regulations, the rules of the union and good industrial relations practice; liaising with and seeking advice and assistance from the appropriate full-time trade union official Having regard at all times to the safe and efficient operation of the undertaking or establishment Subject to any other arrangements made between an employer and a trade union, employee representatives should conform to the same job performance standards, company rules, disciplinary conditions and other conditions of employment as comparable employees in the undertaking or establishment in which they work. 7. Employees Representation in Management The representatives of the employees on the works committee must be chosen from amongst the employees, either by way of popular vote or as recommended by any registered trade union in the industrial establishment. The number of elected workers of the Canteen Committee shall be in the proportion to the number of elected representatives of the workmen. The total number of members of the Grievance Redressal Committee shall not exceed more than six. Employee representation in the Grievance Redressal Committee shall be equal to the number of employer representatives in the Committee. The representatives of the workmen in the Joint Management Council shall be equal to the number of representatives of employers.

30 XII. Other Types of Employee Representative Bodies 28 The FA Act, states that the occupier shall, in every factory where a hazardous process takes place, or where hazardous substances are used or handled, set up a Safety Committee consisting of an equal number of representatives of workers and management to promote cooperation between the workers and the management in maintaining proper safety and health at work and to review periodically the measures taken in that behalf. Mine Rules, 1995 states that for every mine wherein more than 100 (hundred) persons are ordinarily employed, the owner, agent or manager shall constitute a Safety Committee for promoting safety in the mine. SHWWA Act requires every employer to set up an Internal Complaint Committee to conduct enquiry regarding sexual harassment complaints. The Internal Committee shall consist of the following members to be nominated by the employer, namely a Presiding officer who shall be a woman employed at a senior level at the workplace, two members from the employees and one member from Non- Governmental Organization or associations committed to the women s cause. Every factory wherein five (5) hundred or more workers are ordinarily employed the occupier shall employ in the factory such number of welfare officers as may be prescribed. The State Government may prescribe the duties, qualifications and conditions of service of officers employed.

31 XIIi. Social Security / Healthcare / Other Required Benefits Legal Framework Employee State Insurance Act, 1948 Benefits of this act extend to employees whether working in a factory or establishment or elsewhere or they are directly employed by the principal employer or through an intermediate agency, if the employment is incidental or in connection with the factory or establishment. It applies to all the factories including Government factories (excluding seasonal factories), which employ 10 (ten) or more employees and carry on a manufacturing process with the aid of power and 20 (twenty) employees where manufacturing process is carried out without the aid of power. All employees including casual, temporary or contract employees drawing wages less than INR 15,000 (Rupees Fifteen Thousand only) per month. Employees Provident Fund and Misc. Provisions Act, 1952 The EPF Act primarily governs the provision of social security benefits for employees in India. The Indian government has framed three schemes under the EPF Act, namely: The Employees Provident Fund Scheme, 1952 (the Provident Fund Scheme ); The Employees Pension Scheme, 1995 (the Pension Scheme ); and The Employees Deposit Linked Insurance Scheme, 1976 (the Deposit Linked Insurance Scheme ). An employee whose monthly basic wages exceeds INR 15, 000 (Rupees Fifteen Thousand only) is not mandatorily included under the EPF Act, and hence is not required to become a member of the Provident Fund. However, the employee draws basic wages of INR 15, 000 (Rupees Fifteen Thousand only) or less, the EPF Act will be applicable to the employee even after his monthly pay exceeds the same but all contributions will be computed as though the monthly pay of the employee is capped at INR 15, 000 (Rupees Fifteen Thousand only). Payment of Gratuity Act, 1972 The PGA Act provides for a scheme for payment of gratuity to all employees (whether workmen or not) employed in inter alia factories, shops or other establishments, in which 10 (ten) or more persons are employed. An employee is entitled to payment of gratuity on termination of his employment, provided he has rendered continuous service for not less than 5 (five) years (except in the case of death or disability), under any of the following circumstances, namely: On his superannuation, Retirement or resignation, or Death or disablement due to accident or disease. The gratuity payable to an employee is calculated as 15 (fifteen) days wages payable multiplied by the number of years of service (with part of a year in excess of 6 (six) months counted as 1 (one) year). The maximum amount of gratuity that an employee is entitled to under the PGA Act is INR 10,000,000 (Rupees Ten Lakhs only). 2. Required Contributions Employee State Insurance Act, 1948 An Employees State Insurance Fund (the Insurance Fund ) has been created under the ESI Act and the eligible employees are entitled to avail of benefits from the accumulations in the Insurance Fund in the following way: The employer contributes Four point Seven Five percent (4.75%) of the employee s wages; and The employee contributes One point Seven Five percent (1.75%) of the said wages to the Insurance Fund.

32 30 Employees Provident Fund and Misc. Provisions Act, 1952 Provident fund: The employer is required to deduct from the wages of an employee an amount equal to 12% (twelve percent) of the basic wages, dearness allowance and retaining allowance payable to an employee, and deposit the same in the provident fund as the employees contribution (the Provident Fund ), in respect of every employee. In addition, the employer must make a matching contribution of 12% and deposit the same in the Provident Fund as the employer s contribution. Pension Scheme: Under the Pension Scheme, the employer is required to segregate a part of the contribution representing approximately 8.33% of the employees wages from and out of the employer s contribution under the Provident Fund Scheme, and remit the same to the pension fund (the Pension Fund ) established under the Pension Scheme. Deposit Linked Insurance Scheme: Similar to the Pension Scheme, under the Deposit Linked Insurance Scheme, employers are required to segregate 0.5% of the total contribution every month towards premium for the said scheme. The fund accumulations under the Deposit Linked Insurance Scheme are payable to the family of the employee in the event of death of such employee. Payment of Gratuity Act, 1972 For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of 15 (fifteen) days wages payable multiplied by the number of years of service (with part of a year in excess of 6 (six) months counted as 1 (one) year). The maximum amount of gratuity that an employee is entitled to under the PGA Act is INR 10,000,000 (Rupees Ten Lakhs only). 3. Insurances The ESI Act, provides for certain benefits to the employees in contingencies such as maternity, temporary or permanent physical disablement due to employment injury resulting in loss of wages or earning capacity, death due to employment injury, as well as medical care to workers and their immediate dependents. The ESI Act applies to all employees earning INR 15,000 (Rupees Fifteen Thousand only) per month or less. An Insurance Fund has been created under the ESI Act and the eligible employees are entitled to avail of benefits from the accumulations in the Insurance Fund. The employer is required to contribute an amount equal to 4.75% the employee s wages and the employee is required to contribute 1.75% of the said wages to the Insurance Fund. 4. Required Maternity/Sickness/ Disability/Annual Leaves The following are the types of leave and they are typically governed by the state specific S&E Acts: a. Privileged Leave or Earned Leave: subject to the respective state laws, Privileged Leave ( PL ) or Earned Leave is provided for planned long leaves for the purpose of travel, vacation, etc. PL has to be applied for at least fifteen (15) days in advance and cannot be applied for more than three (3) times in a period of twelve (12) months. In calculating leave, a fraction of leave of half a day or more shall be treated as one full day s leave, and a fraction of less than half a day shall be omitted. Non-availed PL at the end of year can be accumulated and carried forward to the subsequent year, subject to a maximum of number of days in each state. b. Sick Leave: Sick Leave ( SL ) can be availed of by employees during illness and other medical emergencies. In calculating leave, a fraction of leave of half a day or more shall be treated as one full day s leave, and fraction of less than half a day shall be omitted. SL shall be credited to employees at the beginning of the year. Non-availed SL in a given year cannot be accumulated and carried forward to the subsequent year. Such non-availed SL shall lapse. At the time of cessation of employment, an employee shall be entitled to encashment of any non-availed SL. c. Casual Leave: Casual Leave ( CL ) can be availed for emergency and unforeseen situations, subject to the approval of an organization. In calculating leave, a fraction of leave of half a day or more shall be treated as one full day s leave, and a fraction of less than half a day shall be omitted. Such CL shall be credited to employees at the beginning of the year. Non-availed CL in a given year cannot be accumulated and carried forward to the subsequent year. Such non-availed CL shall lapse. At the time of cessation of employment, an employee shall be entitled to encashment of any nonavailed CL.

33 31 d. Maternity Leave: All female employees, on production of a medical certificate provided by a registered medical practitioner, are eligible for 12 (twelve) weeks of Maternity Leave ( ML ) with wages. ML may be availed of as per the convenience of the concerned employee during the prenatal and postnatal periods of childbirth; however, such leave shall not exceed 12 (twelve) weeks in all. Weekly holidays occurring during the period of ML will also be counted towards ML. A female employee will be eligible for ML if she has worked for not less than 80 (eighty) days in the 12 (twelve) month period immediately preceding the date of her expected delivery. A company may at its sole discretion waive this condition while granting ML. In case of a miscarriage or medical termination of pregnancy, a female employee shall, on production of a medical certificate provided by a registered medical practitioner, be entitled to leave with wages for a period of 6 (six) weeks immediately following the day of her miscarriage or medical termination of pregnancy. In case a female employee undergoes a tubectomy operation, such employee shall, on production of a medical certificate provided by a registered medical practitioner, be entitled to leave with wages for a period of 2 (two) weeks immediately following the day of her tubectomy operation. A female employee suffering from illness arising out of pregnancy, premature birth, delivery, miscarriage, or medical termination of pregnancy, shall, on production of a medical certificate provided by a registered medical practitioner, be entitled, in addition to the aforementioned period of leave allowed to her, to leave with wages for a maximum period of 1 (one) month. superannuation pension, retiring pension or permanent total disablement pension to the employees of any establishment or class of establishments to which the EPF Act applies; and widow or widower s pension, children pension or orphan pension payable to the beneficiaries of such employees. e. Government declared Holidays: These are a set of holidays, which are mandatory to be given to employees. An employee who is made to work on these holidays may be paid double the rate of his daily wages and given a compensatory leave on some other day. 5. Mandatory and Typically Provided Pensions Pension Scheme: Under the Pension Scheme, the employer is required to segregate a part of the contribution representing approximately 8.33% of the employees wages from and out of the employer s contribution under the Provident Fund Scheme, and remit the same to the pension fund (the Pension Fund ) established under the Pension Scheme for the purpose of providing for: