India: The Employment Law Review – Edition 7

Last Updated: 22 September 2016
Article by Debjani Aich


The principal sources of law and regulations relating to employment relationships in India are the Constitution of India, 1950, labour statutes, judicial precedents and collective and individual agreements. The applicability of employment law in India is based on several factors, most of which relate to the function of the employee, the activity being performed by the employer and the number of persons employed in the organisation. Briefly, India's employment laws can be categorised as below:

  1. certain laws (such as the Factories Act, 1948 (Factories Act)) apply only to a factory that is engaged in
  2. apply to all manufacturing;
  3. certain laws apply to an individual who is a 'workman', regardless of the organisation in which they are working;
  4. certain laws employees working in an establishment, without distinguishing the category of employee.

Indian employment laws are highly protective of workmen, and it can be a challenge for employers to comply with all applicable laws, some of which date back to the 1940s, albeit with more recent amendments. The labour laws require an employer to act in accordance with multiple regulatory compliances, which relate to obtaining registrations, filing periodic returns, maintenance of various registers and physical display of extracts of specific laws. These compliances may be rather tedious and problematic, as the information can be voluminous and an employer may have specific internal formats to maintain the information. In addition, statutory notices may need to be provided by an employer to the workmen with intimation to the labour authorities, for various reasons such as change of service conditions, which would include changes to leave, remuneration, company privileges, etc.

i Legal framework

India is a federation of states. The Constitution of India demarcates the areas where central (federal) and state governments can legislate. Most employment laws are central pan-India legislations. These include laws relating to employment disputes, social welfare benefits, etc. States are generally empowered to pass amendments to these laws, with specific local applicability.

The Industrial Disputes Act, 1947 (ID Act) is the main central legislation dealing with 'workmen'. A workman would generally be any employee, inter alia, engaged to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, but would not include an employee engaged in:

  1. a managerial or administrative capacity; or
  2. a supervisory capacity, and drawing wages more than 10,000 rupees per month.

Typically, all employees who are not in a managerial or supervisory role would be considered as workmen.

A main type of legislation that is usually enacted by a state is the Shops and Establishments Act (SEA). This law deals with issues like working hours, leave, public holidays, overtime, etc.

ii Court procedure in labour disputes

Complaints involving industrial disputes fall under the ID Act, which provides for various adjudicatory bodies – including jurisdictional conciliation officers, labour courts and industrial tribunals – to hear and resolve disputes between workmen and management. An employer and workmen may also agree to refer an industrial dispute to arbitration under the ID Act. Further, the High Courts of the states1 and the Supreme Court of India2 (India's apex court) also have jurisdiction to hear certain labour disputes under the Constitution of India.

Under the ID Act, conciliation officers are government officials appointed to mediate and promote the settlement of industrial disputes. The government (central or state) also has the power to establish boards of conciliation for the settlement of any industrial dispute referred to it, which functions like an arbitral tribunal. Such a board would have either two or four members (nominated in equal numbers by the parties to the dispute) and would be headed by an independent chairman.

State-level labour courts adjudicate industrial disputes relating to matters specified in the Second Schedule of the ID Act, including the discharge or dismissal of workmen, withdrawal of any customary concession or the illegality of a strike or lockout. Industrial tribunals adjudicate industrial disputes relating to matters specified in the Second or Third Schedule of the ID Act. In addition, national tribunals have been set up that deal with industrial disputes that the government believes involve questions of national importance, or are of such a nature that industrial establishments situated in more than one state may be affected. In certain cases, the government (central or state) also has the power to constitute a 'court of inquiry' to examine any matter relevant to an industrial dispute.

Litigation in India is a long-drawn process and the duration of an industrial dispute is difficult to predict with certainty – it may range from six months to over two years.

The dispute process would vary for employees who are non-workmen. In this case, the remedy would be mainly for breach of the employment agreement, where the parties have the option to approach the jurisdictional civil court (which includes the state High Court) for relief or the appropriate authority under the applicable SEA.


India's current Central Government was formed in May 2014, lead by the BJP party majority. As part of its objective to make it easier to do business in India, it has proposed that the most important central labour laws be revised and possibly amalgamated into two or three labour codes. If this is implemented, substantive procedural requirements relating to compliance and filing will be streamlined.

Amendments have also been proposed to federal laws relating to factories and the use of apprentices. Drafts of the first codes merging the laws relating to industrial relations and wages have been released by the central government, though there has been reasonable pushback to the same from various quarters, including from the impacted employees. Depending on how the draft bills are implemented, it is expected that India will see major reforms to its employment laws during 2016.

As a precursor to pan-India changes, certain states in India (which have a BJP-led government) have implemented changes to their state laws. These include Rajasthan and Maharashtra, where the respective governments have amended or proposed amendments to laws relating to industrial disputes, factories and contract labour.

Another important change has been the concerted move towards e-governance in the labour law sector. A new web portal launched by the central government provides users with a unique labour identification number, facilitating online registration, the filing of self-certified and simplified online returns for specific central laws and a more transparent labour inspection scheme on risk-based criteria.

While not a law introduced in 2015, the 2013 Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013 (POSH Act) continued to retain and gain momentum as an important piece of legislation for corporate India. The POSH Act requires every employer to have a policy against sexual harassment, and to appoint a committee to handle sexual harassment complaints. The Central Government has been very active in issuing directives to have compliances met under the POSH Act.

To read this Review in full, please click here.

Originally published by Law Business Research Ltd.


1. Each State has a High Court with superintendence over all courts and tribunals in the state.

2. The Supreme Court of India exercises original and appellate jurisdiction in relation to employment laws.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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