Author: Mohammed Saud-ur-Rehman Siddiqui is a 4th-year law student at Dr B.R. Ambedkar National Law University, Haryana.
This article examines the legal status of law firms in India vis-à-vis labour legislation, with particular focus on the Code on Social Security, 2020. It critically analyses the judgment in Lalit Bhasin v. Appellate Authority, which excluded advocate offices from the ambit of “establishments” under the Payment of Gratuity Act. The article posits that post-liberalisation growth of law firms necessitates a reconsideration of this stance. It argues for a broader interpretation of “establishment” to include modern law firms, emphasising the position of clerical and support staff who may be denied social security benefits under current interpretations. The article contends that while the legal profession maintains its distinct character, the commercial nature of large law firms and the essential administrative roles of their support staff warrant inclusion under labour protections. It concludes that such an interpretation would align with the legislative intent of extending social security to all sectors, as outlined in the Code on Social Security, 2020.
Introduction
This article seeks to study the nature of law firms in India with respect to labour legislation, particularly in the light of the newly enacted Code on Social Security, 2020, as well as the case of Lalit Bhasin v. Appellate Authority Under Payment of Gratuity Act, 1972, 2010 SCC OnLine Del 1194. By exploring the relevant law and literature on the subject, this article seeks to make a case for the inclusion of law firms within the definition of the term ‘establishment’ as given under section 2(29) of the Code on Social Security, 2020.
Summarised Facts & Issues for Consideration
In the concerned matter, the respondent worked as a clerk in the office of Mr. Lalit Bhasin, i.e., the petitioner, who was an advocate practising in New Delhi. The respondent resigned after working in the petitioner’s office for nearly 23 years, and made a claim for gratuity under the Payment of Gratuity Act, 1956, which was promptly denied. The Controlling Authority as well as the Appellate Authority ordered in favour of the respondent, leading the petitioner to approach the Delhi High Court.
The High Court framed a single issue for adjudication that whether the office of an advocate is an establishment within the meaning of Section 1(3)(b) of the Payment of Gratuity Act, 1956.
Judgement & Reasoning of the Court
The Court ruled in favour of the petitioner and held that the office of an advocate, no matter how sizable the staff is, cannot be considered an establishment for the purpose of Section 1(3)(b) or any other provision of the Payment of Gratuity Act, 1956, for that matter.
The Court reasoned that an advocate’s office, regardless of the numerical strength of the staff, is essentially individual in nature, and the service rendered by clerks or menial workers has no direct bearing upon the advice which the advocate or a solicitor may render to their clients. Moreover, the Delhi Shops & Establishment Act, 1954, specifically excluded advocates offices from the definition of commercial establishments. The Court observed that though a solicitor may employee many menial employees, including clerks, their work is not directly connected with the service the solicitor renders to his client, failing the employer-employee co-operation test, no matter that these employees are a necessity for the efficiency of his office.
Law Firms as Commercial Establishments
Without any prejudice to the Delhi High Court’s opinion in Bhasin, regarding independent lawyers, who keep traditional engagements with both the Courts and the clients, the Courts’ view regarding law firms requires serious reconsideration. Post-liberalisation, growth of law firms in India has been toweringly exponential,[i] with major firms boasting of hundreds of partners, with armies of highly trained and specialised lawyers at their disposal, and naturally, countless paralegal assistants and clerks.[ii] In Organisation and Ethics of Bar and Bench by Frederick C. Hicks, it was observed that the attorney-client relationship is a trusted one, akin to master and servant in a dignified manner. It cannot be delegated without consent or exist between a corporate lawyer and a corporate client, as the lawyer would be accountable to the corporation or the firm, not the client. The corporation would control the litigation and earnings, with no contract owed by the lawyer to the actual litigant.[iii]
Hicks’ metaphorical nightmare has indeed materialised. The globalisation of legal practice, marked by specialised firms with high billing rates and comprehensive legal teams advising individual clients, is now a reality. The less glamorous yet indispensable clerical roles underscore this phenomenon. In a pragmatic view of the persisting situation, though traditional law practice is not going anywhere, the new-age firms are certainly here to stay for the foreseeable future, and wilful disregard for this reality must be viewed with great caution. Rule 49 of the Bar Council of India Rules, 1975, bars employment for advocates, and the other non-legal employees are not “employees” enough to avail benefits of social security legislation, making huge law firms with earnings comparable to major corporate houses, immune from the clutches of social justice and equitable labour policy.
Intent of Labour Legislation
The preamble to the Code on Social Security reads as following,
“An Act to amend and consolidate the laws relating to social security with the goal to extend social security to all employees and workers either in the organised or unorganised or any other sectors and for matters connected therewith or incidental thereto.”
The Code’s consolidation of social security legislations aimed to broaden their scope, previously constrained for various reasons. Being a beneficial legislation, it is imperative that the same be interpreted in a liberal manner. The term ‘labour’ has evolved to include diverse worker types. Despite law practice’s noble perception, its commercial nature is undeniable, and this must not hinder lawyers or clerical staff from pursuing profitable post-employment opportunities.
Precedent Analysis
The Delhi High Court in Bhasin, mainly relied upon two rulings, the National Union of Commercial Employees v. M.R. Meher, 1962 SCC OnLine SC 132, and the Sakharam Narayan Kherdekar v. City of Nagpur Corporation, 1962 SCC OnLine Bom 99.
The Supreme Court in M.R. Meher ruled that there is no difference between a firm of lawyers and an individual advocate regarding labour legislations, effectively placing lawyer firms outside major labour laws. The Bombay High Court in Sakharam argued against including lawyers within labour legislations, reasoning that a lawyer’s profession does not rely on employee cooperation for professional expertise. It emphasized that the legal profession is a noble endeavour and should not be classified as a commercial establishment, thus excluding lawyers and law firms from labour legislation.
Even on a cursory look, both the cases are examples in antiquated notions of the legal profession, simply due to passage of time, and thus, must be construed as such when the rulings therein are applied. To condense the same, the courts have tried their best to keep the legal profession free of the metaphorical ‘taint of trade’, where monetary considerations take a backseat in favour of normative ideas of professional nobility and altruism. To extend such ideas to those who actually are engaged in the practice of law would be one thing, but to apply the same ideas to the staff employed by these professionals cannot be, in any sense of the word, reasonable, only if for the sole reason that these clerical professionals are not engaged in the practice of law themselves. They perform administrative, clerical, and support roles that are absolutely essential for the functioning of a law firm but do not require the same level of professional expertise or ethical considerations as the lawyers they support.
Establishment re-Defined
The plain meaning of the term ‘establishment’ as per Cambridge Dictionary is,
“A business or other organization, or the place where an organization operates.”
This definition, being dominantly all-encompassing, takes on strictures in legal parlance. Black’s Law Dictionary defines establishment as,
“2. An institution or place of business.”
While the Payment of Gratuity Act, 1956, does not expressly delineate what is an establishment, the interpretation clause of Code on Social Security, 2020, defines establishment in the following manner,
“2. … (29) “establishment” means— (a) a place where any industry, trade, business, manufacture or occupation is carried on;…”
In Section 2(29)(a), the term occupation must be construed by the company it keeps. The usage of terms like trade and business connote the intent of the legislation to have the clause deal with activities which are commercial in nature.
While it is often argued that the practice of law is a service rather than a trade or business, one look at reality must be sufficient to shake up the theoretical and normative backing for such an argument, for it exists in a vacuum detached from material conditions. In Bangalore Water Supply & Sewerage Board v. A. Rajappa, (1978) 2 SCC 213, the Supreme Court, while interpreting the term “industry” as used in Industrial Disputes Act, dealt with, inter alia, the matter of whether professional firms could be termed as industries. While the court did not affirm the proposition, it did not negate it categorically as well, giving a simple yet telling test, that a professional firm would not be categorised as an industry, unless their operations “take an organised and systematised form of a business or trade, employing a number of persons, in which disputes could arise between employers and their employees.”
It would be tantamount to wilful blindness if one does not observe the materialisation of this hypothesis propounded by the Court, which is evident in the modern-day operations of most law firms. These firms often function with a high degree of organization and systematization, employing numerous individuals in various capacities, from clerical staff to paralegals and junior associates, further underscoring the applicability of labour legislation to such establishments, especially for the clerical staff.
Conclusion
The foundation of law lies in its ability to evolve while maintaining core principles. The law must not restrict the definition of ‘establishment’, potentially depriving an entire profession of benefits guaranteed to other employees, based on the traditional view of law as a noble profession.
The landscape of legal practice in India has changed, especially with the rise of large law firms post-liberalization. This shift necessitates re-evaluating how labour laws apply to these entities. Modern law firms often operate as highly organized, profit-driven enterprises, unlike traditional views of law offices.
Excluding law firms from labour legislation creates a significant gap in social security coverage for a large workforce, particularly clerical and support staff. The interpretation of ‘establishment’ under the Code on Social Security, 2020, should be broadened to include law firms, given their commercial nature, systematic structure, substantial employee numbers, and potential for employer-employee disputes.
Such an interpretation aligns with the Code’s goal of extending social security to employees across sectors. It reflects modern legal practice without diminishing the profession’s ethical standards or individual practitioners’ autonomy. Recognizing law firms as establishments under labour legislation ensures all legal sector employees, especially clerical staff, receive deserved social security benefits and protections, balancing noble legal practice with commercial realities.
[i] RSG India Report, (2019).
[ii] Id.
[iii] Frederick C. Hicks, Organization and Ethics of the Bench and Bar: Cases and Other Materials (1932).
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