Legal Aspects in Human Resource Management CBMHR4T04

Syllabus topics (RTMNU)

• Concept of Labour Law: Overview, Scope, Importance and Significance
• Constitutional Provisions: Fundamental rights related to labour in India, particularly under Articles 14, 19, and 21
• Classification of Labour Laws: Industrial, commercial, and non-commercial laws
• Sources of Labour Laws: Constitution, statutes, case law, and conventions

Concept of Labour Law: Overview, Scope, Importance and Significance

Definition: Labour law is the body of laws that regulates the relationship between employers, employees and trade unions, and protects workers' rights on wages, working conditions, safety, welfare and social security.

Overview: labour laws in India grew after the Industrial Revolution, when workers faced long hours, child labour and unsafe factories. The first Factories Act came in 1881. After Independence, the Constitution and many Acts (Factories Act 1948, Minimum Wages Act 1948, ESI Act 1948) built a strong labour law system. Labour is in the Concurrent List of the Seventh Schedule (Entries 22, 23 and 24), so both Parliament and State Legislatures can make labour laws.

Scope of labour law:

1. Industrial relations: trade unions, disputes, strikes, lock-outs (Trade Unions Act 1926, Industrial Disputes Act 1947).
2. Working conditions: hours, health, safety (Factories Act 1948, Shops and Establishments Acts).
3. Wages: Payment of Wages Act 1936, Minimum Wages Act 1948, Payment of Bonus Act 1965.
4. Social security: ESI Act 1948, EPF Act 1952, Payment of Gratuity Act 1972, Maternity Benefit Act 1961, Employees' Compensation Act 1923.
5. Welfare and equality: Equal Remuneration Act 1976, POSH Act 2013, Child Labour law.

Importance and significance:

• Protects workers, who are the weaker party, from exploitation.
• Ensures fair wages and safe working conditions.
• Gives a legal way to settle disputes and keeps industrial peace.
• Gives social security in sickness, accident, old age and maternity.
• Raises productivity, because satisfied workers work better.
• Helps achieve social justice as promised in the Constitution.

Constitutional Provisions: Fundamental Rights of Labour (Articles 14, 19 and 21)

Article 14 – Equality before law: the State shall not deny any person equality before law or equal protection of laws. For labour, it means no arbitrary or unfair treatment by the State as employer. The principle of "equal pay for equal work" was read from Articles 14 and 16 with Article 39(d) by the Supreme Court in Randhir Singh v. Union of India (1982).

Article 19 – Freedoms:

• Article 19(1)(c): right to form associations or unions — the base for trade unions. The Supreme Court has held that there is no fundamental right to strike, though strike is a legal right under the Industrial Disputes Act, subject to its conditions.
• Article 19(1)(g): right to practise any profession or carry on any occupation, trade or business.
• These freedoms are subject to reasonable restrictions (Article 19(4) and 19(6)) in public interest.

Article 21 – Right to life and personal liberty: the Supreme Court has widened it to include the right to livelihood (Olga Tellis v. Bombay Municipal Corporation, 1985), right to health and medical care of workers, safe working conditions, and the right of women to work with dignity free from sexual harassment (Vishaka v. State of Rajasthan, 1997).

Other related provisions: Article 16 (equal opportunity in public employment), Article 23 (ban on forced labour/begar), Article 24 (no child below 14 in factories, mines or hazardous work). Directive Principles: Article 39 (adequate livelihood, equal pay for men and women), Article 41 (right to work and public help in old age and sickness), Article 42 (just and humane conditions of work and maternity relief), Article 43 (living wage), Article 43A (workers' participation in management).

Classification of Labour Laws: Industrial, Commercial and Non-commercial Laws

Classification by purpose (also asked in exams):

1. Regulatory laws: Trade Unions Act, Industrial Disputes Act.
2. Protective laws: Factories Act, Mines Act 1952.
3. Wage laws: Payment of Wages Act, Minimum Wages Act, Bonus Act.
4. Social security laws: ESI Act, EPF Act, Gratuity Act, Maternity Benefit Act.
5. Welfare laws: laws creating welfare funds, e.g. state labour welfare fund Acts.

Sources of Labour Laws: Constitution, Statutes, Case Law and Conventions

1. Constitution of India: the highest source — Fundamental Rights (Articles 14, 16, 19, 21, 23, 24), Directive Principles (Articles 38–43A) and the Concurrent List.
2. Statutes (Acts): laws passed by Parliament and State Legislatures, with rules and notifications made under them, e.g. Factories Act 1948 and the Maharashtra Factories Rules.
3. Case law (judicial decisions): judgments of the Supreme Court and High Courts explain and expand the law. Examples: Bangalore Water Supply v. A. Rajappa (1978) gave a wide meaning to "industry"; Vishaka (1997) laid down guidelines that later became the POSH Act, 2013.
4. International conventions: India is a founder member of the International Labour Organisation (ILO, set up in 1919). ILO conventions and recommendations on hours, equal pay, forced labour and child labour guide Indian laws once India ratifies them.
5. Other sources: customs and practices of industry, collective agreements, standing orders, awards of tribunals and Indian Labour Conference decisions.

Likely exam questions

1. (Long, 8/16 marks) What is labour law? Explain its scope, importance and significance.
2. (Long, 8/16 marks) Explain the fundamental rights of labour under Articles 14, 19 and 21 of the Constitution of India with case laws.
3. (Short, 4 marks) Explain the classification of labour laws.
4. (Short, 4 marks) State the sources of labour laws.
5. (Short, 4 marks) Write a short note on the role of ILO conventions in Indian labour law.

Syllabus topics (RTMNU)

• Industrial Disputes Act, 1947: Definition, types of disputes, and settlement procedures
• Trade Union Act, 1926: Formation and registration of trade unions
• Factories Act, 1948: Health, safety, welfare measures, working hours, and compensation
• Employment Contracts: Rights and obligations of employers and employees under contracts

Industrial Disputes Act, 1947: Definition and Types of Disputes

Object: to prevent and settle industrial disputes and to keep industrial peace.

Industrial dispute – Section 2(k): any dispute or difference between employers and employers, employers and workmen, or workmen and workmen, connected with employment or non-employment, terms of employment or conditions of labour of any person.

Workman – Section 2(s): a person employed in an industry to do manual, skilled, unskilled, technical, operational, clerical or supervisory work for hire or reward. It excludes persons mainly in managerial or administrative jobs, and supervisors drawing wages above ₹10,000 per month.

Types of disputes:

1. Interest disputes: about new terms, e.g. a demand for higher wages or bonus.
2. Rights (grievance) disputes: about existing rights under law, agreement or standing orders, e.g. wrong dismissal, unpaid overtime.
3. Recognition disputes: about which union the employer should recognise.
4. Forms of disputes: strike (workers stop work together – Section 2(q)), lock-out (employer closes the workplace – Section 2(l)), gherao, go-slow, work-to-rule.

Industrial Disputes Act, 1947: Settlement Procedures

The appropriate Government refers a dispute to a Labour Court or Tribunal under Section 10. The decision is called an award. An agreement reached in conciliation is a settlement and binds all workmen.

Trade Unions Act, 1926: Formation and Registration

Trade union – Section 2(h): any combination, temporary or permanent, formed mainly to regulate relations between workmen and employers (or among workmen or among employers), or to put restrictive conditions on the conduct of any trade or business.

Formation and registration procedure:

1. Minimum members (Section 4): any seven or more members may apply. Since the 2001 amendment, at least 10% or 100 workmen (whichever is less) of the establishment must be members at the time of application, subject to a minimum of seven.
2. Application (Section 5): to the Registrar of Trade Unions with names, occupations and addresses of members and office-bearers, the union's name and head office address, and a copy of its rules.
3. Rules (Section 6): must state the name, objects, use of general fund, membership list, subscription, office-bearers, method of changing rules, audit of accounts and dissolution.
4. Certificate (Section 9): the Registrar registers the union and issues a certificate of registration, which is conclusive proof of registration.

Benefits of registration: the union becomes a body corporate (Section 13) and can own property, sue and be sued; immunity from criminal conspiracy (Section 17) and from civil suits for lawful trade dispute acts (Section 18); can keep a general fund (Section 15) and a separate political fund (Section 16).

Factories Act, 1948: Health, Safety and Welfare

Factory – Section 2(m): premises where 10 or more workers work with the aid of power, or 20 or more without power, and a manufacturing process is carried on.

• Health (Sections 11–20): cleanliness, disposal of waste, ventilation and temperature, dust and fumes control, no overcrowding, lighting, drinking water, latrines and urinals, spittoons.
• Safety (Sections 21–41): fencing of machinery, care of young persons on dangerous machines, safe hoists and lifts, pressure plants, protection of eyes, precautions against fire (Section 38), safety officers in factories with 1,000 or more workers (Section 40B).
• Welfare (Sections 42–50): washing facilities, sitting arrangements, first-aid boxes (one per 150 workers) and ambulance room where more than 500 workers, canteen where more than 250 workers (Section 46), rest rooms and lunch rooms where more than 150 workers, crèche where more than 30 women workers (Section 48), welfare officer where 500 or more workers (Section 49).

Factories Act, 1948: Working Hours and Compensation

• Weekly hours: an adult worker shall not work more than 48 hours in a week (Section 51).
• Daily hours: not more than 9 hours a day (Section 54).
• Rest interval: at least half an hour after 5 hours of work (Section 55).
• Spread-over: not more than 10½ hours a day (Section 56).
• Weekly holiday: one day off in a week, normally Sunday (Section 52).
• Children: no child below 14 years may work in a factory (Section 67).

Compensation under the Act: overtime work is paid at twice the ordinary rate of wages (Section 59). Annual leave with wages: a worker who has worked 240 days or more in a year gets one day's leave for every 20 days worked (Section 79). Compensation for injury from an accident at work is paid under the Employees' Compensation Act, 1923 (or ESI where it applies).

Employment Contracts: Rights and Obligations

Meaning: an employment contract is an agreement between employer and employee that states the terms of the job — post, pay, hours, leave, probation, notice period and duties. It must have all features of a valid contract under Section 10 of the Indian Contract Act, 1872 (free consent, competent parties, lawful object and consideration). In industrial units, the Industrial Employment (Standing Orders) Act, 1946 also fixes service conditions.

Remember: a clause stopping an employee from working for a competitor after leaving the job is generally void under Section 27 of the Indian Contract Act (agreement in restraint of trade), though confidentiality clauses are valid.

Likely exam questions

1. (Long, 8/16 marks) Define industrial dispute. Explain the types of industrial disputes and the machinery for their settlement under the Industrial Disputes Act, 1947.
2. (Long, 8/16 marks) Explain the provisions relating to health, safety and welfare of workers under the Factories Act, 1948.
3. (Short, 4 marks) Explain the procedure for registration of a trade union under the Trade Unions Act, 1926.
4. (Short, 4 marks) State the provisions regarding working hours of adult workers under the Factories Act, 1948.
5. (Short, 4 marks) What are the rights and obligations of employer and employee under an employment contract?

Syllabus topics (RTMNU)

• Payment of Wages Act, 1936: Minimum wages, deductions, and payment process
• Bonus Act, 1965: Eligibility, calculation, and payment of bonus
• Gratuity and Provident Fund Laws: The Payment of Gratuity Act, 1972, and the Employee Provident Fund Act, 1952
• Maternity Benefits Act, 1961: Rights related to maternity leave and benefits

Payment of Wages Act, 1936: Minimum Wages, Deductions and Payment Process

Object: to make sure that wages are paid to employees on time and without unauthorised deductions.

Coverage: factories, railways and other notified industrial and commercial establishments, for employees earning wages up to the limit notified by the Central Government (currently ₹24,000 per month).

Minimum wages: the amount of wages is fixed by the Minimum Wages Act, 1948. Under it, the appropriate Government fixes and revises minimum rates (basic rate plus a cost-of-living allowance) for scheduled employments; paying less is an offence. The Payment of Wages Act then ensures that these wages are actually paid in full and on time. (Both are now merged in the Code on Wages, 2019.)

Payment process:

1. Responsibility (Section 3): the employer, or the manager of a factory, is responsible for paying wages.
2. Wage period (Section 4): fixed by the employer, but not longer than one month.
3. Time of payment (Section 5): before the 7th day after the wage period ends where fewer than 1,000 persons are employed; before the 10th day in other cases. A terminated employee must be paid before the end of the second working day after termination.
4. Mode (Section 6): in current coins or currency notes, or by cheque or bank transfer (with written authorisation where needed).

Authorised deductions (Section 7): fines, deduction for absence from duty, loss or damage to goods caused by the employee's neglect, house accommodation and amenities given by the employer, recovery of advances and loans, income tax, deductions ordered by a court, provident fund contributions, insurance premium, and payments to co-operative societies.

Limit on deductions: total deductions in a wage period cannot be more than 50% of wages (75% where payments to co-operative societies are included). Fines cannot be more than 3% of wages in a wage period (Section 8).

Payment of Bonus Act, 1965: Eligibility, Calculation and Payment

Applicability: every factory and every establishment employing 20 or more persons on any day in an accounting year.

Eligibility (Sections 2(13) and 8): an employee drawing salary or wages up to ₹21,000 per month who has worked at least 30 working days in the accounting year.

Disqualification (Section 9): an employee dismissed for fraud, riotous or violent behaviour on the premises, or theft, misappropriation or sabotage of the employer's property loses the bonus.

Calculation:

• Minimum bonus (Section 10): 8.33% of salary or wages, or ₹100, whichever is higher — payable even if there is no profit.
• Maximum bonus (Section 11): 20% of salary or wages, depending on the allocable surplus (a share of profits computed as per the Act).
• Calculation ceiling (Section 12): where salary is more than ₹7,000 per month, bonus is calculated as if salary were ₹7,000 or the minimum wage for that employment, whichever is higher.

Illustration: Ramesh earns ₹15,000 per month. The minimum wage for his job is ₹12,000 per month. He worked the full year. Calculate minimum and maximum bonus.

Payment (Section 19): within 8 months from the close of the accounting year, in cash or by bank transfer.

Payment of Gratuity Act, 1972

Meaning: gratuity is a lump-sum amount paid by the employer to an employee at the end of service, as a reward for long service.

• Applicability: factories, mines, oilfields, plantations, ports, railways, and shops or establishments with 10 or more employees.
• Eligibility (Section 4): payable on superannuation, retirement, resignation, death or disablement, after at least 5 years of continuous service. The 5-year condition does not apply on death or disablement.
• Formula: Gratuity = 15 ÷ 26 × last drawn monthly wages (basic + DA) × completed years of service. A part of a year above 6 months counts as a full year.
• Ceiling: ₹20 lakh (from 2018).
• Payment: within 30 days from the date it becomes payable; delay attracts simple interest.

Illustration: Sunita retires after 12 years 7 months of service. Last drawn basic + DA = ₹26,000 per month. Service counted = 13 years (7 months is more than 6). Gratuity = 26,000 × 15 ÷ 26 × 13 = ₹1,95,000.

Employees' Provident Funds and Miscellaneous Provisions Act, 1952

• Applicability: establishments employing 20 or more persons; it is compulsory for employees whose basic pay + DA is up to ₹15,000 per month.
• Schemes: Employees' Provident Fund Scheme 1952, Employees' Deposit Linked Insurance (EDLI) Scheme 1976, Employees' Pension Scheme (EPS) 1995.
• Contribution: employee 12% of basic + DA; employer 12%, of which 8.33% (on wages up to ₹15,000, i.e. up to ₹1,250 per month) goes to the pension scheme and the rest to the provident fund. Example on wages of ₹15,000: employee ₹1,800; employer ₹1,800 (₹1,250 to EPS + ₹550 to EPF).
• Administration: Employees' Provident Fund Organisation (EPFO) under a Central Board of Trustees. Each member has a Universal Account Number (UAN). Interest rate is declared every year — check the latest EPFO figure.

Maternity Benefit Act, 1961: Maternity Leave and Benefits

Applicability: factories, mines, plantations, and shops or establishments with 10 or more employees.

Eligibility: a woman who has actually worked for at least 80 days in the 12 months before the expected date of delivery.

Benefits (as amended in 2017):

1. Paid maternity leave of 26 weeks, of which not more than 8 weeks before delivery; 12 weeks for a woman who already has two or more surviving children.
2. 12 weeks for a woman adopting a child below 3 months of age and for a commissioning mother.
3. Paid at the rate of the average daily wage.
4. Leave for miscarriage (6 weeks) and a medical bonus where free pre-natal and post-natal care is not given by the employer.
5. Crèche facility in establishments with 50 or more employees, with four visits a day allowed.
6. Work from home may be allowed after the leave, if the nature of work permits.
7. No dismissal or change of service conditions to her disadvantage during maternity absence (Section 12).

Likely exam questions

1. (Long, 8/16 marks) Explain the provisions of the Payment of Wages Act, 1936 regarding wage period, time and mode of payment and authorised deductions.
2. (Long, 8/16 marks) Explain the provisions of the Payment of Gratuity Act, 1972. Calculate gratuity for an employee who retires after 20 years 8 months of service with last drawn basic + DA of ₹39,000 per month.
3. (Short, 4 marks) State the eligibility and disqualification for bonus under the Payment of Bonus Act, 1965.
4. (Short, 4 marks) Explain the contributions under the Employees' Provident Funds Act, 1952.
5. (Short, 4 marks) What benefits are given to women employees under the Maternity Benefit Act, 1961?

Syllabus topics (RTMNU)

• Labour Welfare Legislation: National and state-level laws on worker welfare
• Social Security: Employees State Insurance Act (ESI), 1948, and the Employees' Provident Fund (EPF) Act, 1952
• Discrimination and Harassment Laws: Prevention of Sexual Harassment at the Workplace (POSH) Act, 2013
• Termination of Employment: Laws regarding termination, retrenchment, and lay-offs under the Industrial Disputes Act, 1947

Labour Welfare Legislation: National and State-level Laws

Meaning: labour welfare legislation means laws that require employers or the Government to provide facilities for the comfort, health, safety and better living of workers.

National (central) laws:

1. Factories Act, 1948: welfare facilities — canteen, crèche, rest rooms, welfare officer.
2. Mines Act, 1952 and Plantations Labour Act, 1951: health, housing, medical and welfare in mines and plantations.
3. Contract Labour (Regulation and Abolition) Act, 1970: canteen, rest rooms, drinking water and first aid for contract workers; the principal employer is responsible if the contractor fails.
4. Building and Other Construction Workers Act, 1996 and the Welfare Cess Act, 1996: a cess on construction cost is collected and spent by state welfare boards on construction workers.
5. Beedi and Cigar Workers (Conditions of Employment) Act, 1966 and welfare fund Acts for beedi, mica, limestone and cine workers.
6. Unorganised Workers' Social Security Act, 2008: welfare schemes for unorganised workers. The e-Shram portal (2021) registers unorganised workers.

State-level laws (Maharashtra examples):

• Maharashtra Labour Welfare Fund Act, 1953: the Maharashtra Labour Welfare Board runs welfare centres, sports, education and cultural activities funded by contributions from employers and employees.
• Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2017: hours, holidays, leave and facilities in shops and offices.
• Maharashtra Mathadi, Hamal and Other Manual Workers Act, 1969: welfare boards for head-load workers.
• Maharashtra Building and Other Construction Workers' Welfare Board: schemes for construction workers.

Social Security: Employees' State Insurance Act, 1948

Meaning: social security is protection given by society to its members against risks like sickness, maternity, injury, disablement, old age and death.

• Applicability: non-seasonal factories employing 10 or more persons, and other establishments notified by the Government.
• Coverage: employees earning up to ₹21,000 per month (₹25,000 for persons with disability).
• Contribution (from July 2019): employer 3.25% and employee 0.75% of wages. Low-paid employees below the notified daily wage are exempt from their own share.
• Administration: Employees' State Insurance Corporation (ESIC), which runs ESI hospitals and dispensaries.

Benefits under the ESI Act:

1. Medical benefit: full medical care for the insured person and family.
2. Sickness benefit: cash at 70% of wages for up to 91 days in a year.
3. Maternity benefit: full wages for 26 weeks.
4. Disablement benefit: for employment injury — temporary and permanent.
5. Dependants' benefit: monthly payment to dependants if the worker dies due to employment injury.
6. Funeral expenses and unemployment allowance under special schemes.

Social Security: Employees' Provident Fund (EPF) Act, 1952

The EPF Act (contribution details in Unit III) gives three types of social security:

Discrimination and Harassment Laws: POSH Act, 2013

The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 is called the POSH Act. It is based on the Supreme Court guidelines in Vishaka v. State of Rajasthan (1997).

Sexual harassment – Section 2(n): unwelcome acts such as physical contact and advances, a demand or request for sexual favours, sexually coloured remarks, showing pornography, or any other unwelcome physical, verbal or non-verbal conduct of a sexual nature.

Main provisions:

1. Internal Committee (IC) – Section 4: every employer with 10 or more employees must form it. Presiding Officer: a senior woman employee; at least two employee members; one external member from an NGO or a person familiar with women's issues. At least half the members must be women.
2. Local Committee – Section 6: formed by the District Officer for workplaces with fewer than 10 employees, or where the complaint is against the employer.
3. Complaint – Section 9: in writing within 3 months of the incident (can be extended by another 3 months).
4. Conciliation – Section 10: at the woman's request, before inquiry; no money settlement allowed.
5. Inquiry – Section 11: to be completed within 90 days.
6. Employer duties – Section 19: safe workplace, display of penal consequences, awareness programmes, help to the woman to file a police complaint if she wishes.
7. Penalty – Section 26: fine up to ₹50,000 on an employer who does not form the IC or follow the Act; higher penalty and cancellation of licence for repeat offences.

Other anti-discrimination laws: Equal Remuneration Act, 1976 (equal pay for men and women), Rights of Persons with Disabilities Act, 2016, and Transgender Persons (Protection of Rights) Act, 2019.

Termination of Employment: Retrenchment and Lay-off under the Industrial Disputes Act, 1947

Lay-off – Section 2(kkk): the employer's failure or inability to give work to a workman on the muster roll because of shortage of coal, power or raw materials, piling up of stock, breakdown of machinery or natural calamity. It is temporary; the employment continues.

Lay-off compensation – Section 25C: 50% of basic wages + DA for the days of lay-off, normally up to 45 days in a year, to a workman with at least one year of continuous service.

Retrenchment – Section 2(oo): termination of service for any reason other than punishment through disciplinary action. It does not include voluntary retirement, superannuation, non-renewal of a fixed-term contract, or termination due to continued ill-health.

Conditions for retrenchment – Section 25F (workman with at least one year of continuous service):

• One month's written notice with reasons, or wages for the notice period in lieu.
• Retrenchment compensation = 15 days' average pay for every completed year of service (or part over 6 months).
• Notice to the appropriate Government.
• Last come, first go (Section 25G) and priority in re-employment (Section 25H).

Illustration: a workman with 9 years 8 months of service (counted as 10 years) and average pay ₹18,000 per month is retrenched. Compensation = 18,000 × 15 ÷ 26 × 10 = ₹1,03,846 (rounded), plus one month's notice pay of ₹18,000 if notice is not given.

Large units – Chapter V-B: in factories, mines and plantations with 100 or more workmen, prior permission of the Government is needed for lay-off (Section 25M), retrenchment (Section 25N) and closure (Section 25-O). (Under the Industrial Relations Code, 2020 this limit is raised to 300 workers.)

Dismissal for misconduct is a punishment, not retrenchment; it must follow natural justice — charge-sheet, show-cause notice and a fair domestic inquiry.

Likely exam questions

1. (Long, 8/16 marks) What is social security? Explain the benefits available to employees under the Employees' State Insurance Act, 1948 and the Employees' Provident Fund Act, 1952.
2. (Long, 8/16 marks) Explain the main provisions of the POSH Act, 2013 regarding the Internal Committee, complaint and inquiry procedure.
3. (Short, 4 marks) Name any four national and two state-level labour welfare laws.
4. (Short, 4 marks) Distinguish between lay-off and retrenchment.
5. (Short, 4 marks) State the conditions for a valid retrenchment under Section 25F of the Industrial Disputes Act, 1947.