WELCOME TO OUR EMPLOYMENT LAW NEWSLETTER
We are pleased to share the latest edition of our Employment Law newsletter, sharing important updates, key developments, and practical insights on employment law, all tailored to help you stay ahead in an ever-changing regulatory environment.
We hope you find this newsletter useful and informative, and we look forward to your continued engagement.
Temporary Employment Practices are Meant for Short-term Requirements
The Supreme Court in a case involving termination of employment of temporary workers employed by the Central Water Commission has called for the government departments to lead by example in providing fair and stable employment to workers.
The court highlighted that prolonged use of temporary workers in essential roles not only demoralizes workers but also violates international labour standards. The court stated that the foundational purpose of temporary contracts may have been to address short-term or seasonal needs; and Government institutions, tasked with upholding fairness and justice, must avoid practices that exploit workers or circumvent long-term obligations.
The court, after considering the facts of the case, observed that long and uninterrupted service by the workers beyond 10 years cannot be brushed aside as a contractual appointment, and directed the reinstatement of the temporary workers with immediate effect.
Ten years of service is not set as a benchmark by the Supreme Court. It emphasized that any prolonged engagement of temporary workers without a rationale or justifiable grounds will not be permitted and can lead to recognition of such temporary workers as full-time employees of the establishment.
Confidentiality and Non-Compete Claim Denied
The plaintiff, an event management company, approached the Delhi High Court seeking an ad-interim ex-parte injunction against its former employees and the entity formed by them for breach of confidentiality and non-compete obligations.
The court was required to determine whether such an injunction is warranted to restrain the former employees and the entity formed by them from engaging in competing business activities, including the organization of events for the plaintiff's clients, which are allegedly intended to harm the plaintiff's business interests.
The central issue, which arose on the basis of arguments addressed before the court, was whether the client list of a business can be protected through an injunction, particularly when it concerns employees who have acquired knowledge of the company's clients during their employment.
The court said that a client list, by itself, is not automatically protected as confidential information simply by virtue of its existence. To qualify a trade secret or confidential information, the list must have economic or business value that requires safeguarding against competitors, and such a list is compiled through proprietary methods.
If the details about clients, business operations, event types, etc., are available to the public at large through news or social media and disclosure of such information would not materially harm the plaintiff, then they are not confidential or proprietary information. About noncompete restrictions, the court reaffirmed that the post-termination noncompete obligations are unenforceable.
This judgement underscores that, while the employer may claim that its client list is confidential, the courts would scrutinize whether such information is truly proprietary or whether it simply reflects business relationships that are already in the public domain.
Delayed Gratuity Payments Attract Interest of 10% p.a.
The Jharkhand High Court in its recent decision has held that the concerned employers are liable to pay 10% interest per annum on the outstanding gratuity amount payable to their employees.
This ruling reinforces the statutory requirement under the Payment of Gratuity Act, 1972, ensuring timely payments of gratuity to the employees.
A claim of financial loss against an employee and withholding of gratuity requires initiation of recovery proceedings
The Karnataka High Court in its recent judgement held that initiating recovery proceedings (in the court of law) against an employee for the loss suffered by the employer is necessary for withholding his gratuity.
The facts of the case involved dismissal of an employee of a government enterprise after holding disciplinary proceedings for misappropriation of funds and withholding his gratuity against the financial loss estimated to have suffered by the employer to a tune of INR 1,71,68,033 (~US$ 200,000). The employee claimed gratuity from the employer after 7 years, and the dispute was recently heard by the Karnataka High Court.
The court condoned the delay in filing the application by the employee on medical grounds and directed the payment of the gratuity amount of INR 7,88,165 (~US$ 9,120) withheld by the employer with interest at 10% p.a. stating that employer is obligated to follow the due process, which includes initiating recovery proceedings. The court said, in the absence of such proceedings, any claims of financial loss remain unverified and cannot justify withholding the employee's gratuity.
The court did not cite or rely on any prior rulings. The judgment appears to be flawed, as the Supreme Court had observed that the employer can forfeit gratuity after quantification of actual loss by the employer and furnishing the particulars of the loss to the employee for his representation and by providing him an opportunity of hearing. The decision of Supreme Court does not specify the requirement for recovery proceedings for forfeiture of gratuity. Further, the recovery of gratuity through courts in India is a lengthy process and not feasible in all cases, as the legal cost and time taken would outweigh the amount to be recovered.
POSH Act Mandates Complaints in Writing
The Kerala High Court emphasized that an oral complaint about sexual harassment cannot replace a written complaint when initiating an inquiry under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 ("POSH Act").
The court observed that the complainant could write a complaint, and in the facts and circumstances of the case, the oral complaints made by the complainant cannot be a substitute for the complaint in writing contemplated by Section 9 of the POSH Act. The inquiry conducted by the local committee was therefore held illegal.
This judgement emphasizes the requirement for a written complaint of sexual harassment from the aggrieved woman as prescribed under Section 9 of the POSH Act.
If such a complaint cannot be made in writing, the Internal Committee (IC) shall render all reasonable assistance to the complainant for making the complaint in writing.
Jharkhand High Court Stays Local Employment Mandate
The Jharkhand High Court has temporarily halted a state law, the Jharkhand State Employment of Local Candidates in Private Sector Act, 2021, mandating 75% local employment in certain private sector jobs. The court found that this law unfairly restricts private employers' right to hire employees from the open market, which is a constitutional right.
The court relied on Article 19 of the Indian constitution (freedom to practice any profession or to carry on any occupation, trade or business) and Article 16 (prohibition on discrimination by the state on place of birth). The court also relied on the decision of the Supreme Court relating to the domicile of citizens, which held that there is no separate state domicile. The decision of the High Court of Punjab and Haryana holding the state-specific local employment mandate as unconstitutional was also referred. However, the decision of the Punjab and Haryana High Court is appealed against in the Supreme Court of India, and the case is pending adjudication.
Employers in Jharkhand can continue with their existing hiring practices for now but should monitor developments in this case and the pending case before the Supreme Court.
Leave Encashment is a Matter of Right
The Gujarat High Court reaffirmed that employees are entitled to encash accumulated leave as a matter of right. The court emphasized that leave encashment is akin to salary and cannot be withheld without a valid statutory provision.
The Pilot Project under the PM Internship Scheme enters Phase 2
The Ministry of Corporate Affairs (MCA) has recently extended the pilot project of the Prime Minister Internship Scheme to an additional 220 companies in Phase 2 of the pilot project. The scheme aims to provide internship opportunities for youth with a duration of 12 months and prescribes age and other eligibility criteria for the candidates.
Under the scheme, the interns are paid a stipend of INR 5,000 (~US$ 60), out of which INR 4,500 (~US$ 52) is paid by the government. The government also pays a one-time grant for incidentals of INR 6,000 (~US$ 70) upon the joining of the intern at the internship location. In addition, the interns are covered under the insurance schemes, Pradhan Mantri Jeevan Jyoti Bima Yojana and Pradhan Mantri Suraksha Bima Yojana, the premium amount for which will be borne by the government.
The press release dated December 3, 2024, restated that the top 500 companies in India have been identified by the Ministry of Corporate Affairs on the basis of their average CSR expenditure of the last three years. Apart from these, any other company/ bank/ financial institution desirous of participating in the Scheme, may do so with the approval of the MCA, which would take a view keeping in view underrepresented sectors and areas in the above mentioned 500 companies. Additionally, investments by companies are being sought by the Ministry of Statistics and Program Implementation under the Collection of Statistics Act, 2008, which appears to be related inter alia to identifying companies that should participate in this scheme.
The list of the partner companies is available on https://pminternship.mca.gov.in.
The Pilot Project is also being reviewed by the government, and based on the input from the various stakeholders, the scheme is likely to be revisited by the government.
Year-End Review: Key Developments in the Area of Labour and Employment
The Ministry of Labour and Employment's year-end review highlights initiatives and reforms introduced in 2024 to improve worker welfare and ease of doing business. Below are key developments as per the year-end review:
i) e-Shram Platform: A One-Stop Solution for Unorganized Workers - Launched in October 2024, eShram provides access to 12 welfare schemes for over 30 crore unorganized workers, enabling streamlined benefits and targeted delivery of social security schemes.
ii) National Career Service Portal Achievements: The NCS portal mobilized 3.89 crore vacancies since inception and now integrates with employment and private job portals across 30 States/UTs.
iii) Building and Construction Workers MIS Portal: A centralized system was launched for managing construction workers data. Ten states have integrated their databases with e-Shram, and coverage under welfare schemes like PMJJBY and PMSBY is being expanded.
v) EPFO: Enhanced Services and Reforms: Central Board of Trustees of EPFO approved proposal for a Centralized Pension Payment System and an Amnesty Scheme for employers to encourage employers to voluntarily disclose and rectify past non-compliance or under-compliance without facing penalties or legal repercussions. Other initiatives include IT upgrades, streamlined claim and withdrawal processes, and extended insurance benefits.
v) Labour Code Implementation Meetings: Regional meetings with States/UTs aimed to finalize draft rules under the new Labour Codes. Key reforms proposed includes single registration and licensing processes to enhance ease of doing business.
vi. Social Security Framework for Gig Workers: The Ministry is developing a social security framework for gig and platform workers, with input from stakeholders and studies by the ILO to assess business models and scheme viability.
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.
