Author: Neha Raj is pursuing BBA LLB (Hons.) from Amity University Chattisgarh an experienced and competent law student who is extremely enthusiastic about exploring the practical world of Law, and would welcome the opportunity to contribute to your ongoing success.
The past few months have been particularly tough for tech employees, not just in India. The most prominent of these woes have come from big tech companies like Twitter and Meta. It’s not just foreign corporations; Indian unicorns are also on a firing spree, with companies like Byjus, Unacademy, Ola, etc. The current labour law framework is quite vague in protecting the interests of IT sector employees. We have multiple laws dealing with terminations, each with different requirements and different terms. It can only be hoped that the consolidated labour laws, once implemented, will achieve their desired aim of unifying the Indian labour system.
INTRODUCTION
The past few months have been particularly tough for tech employees, not just in India but all over the world. The most prominent of these woes have come from big tech companies like Twitter and Meta (the parent company of Facebook) in the form of mass firings and layoffs. Twitter released nearly fifty per cent of its global workforce, which means nearly 3000 employees of the company lost their job positions overnight. Talking about the Indian scenario, Twitter announced that more than ninety per cent of the company’s total of 230 employees, working at offices located in Delhi, Mumbai, and Bengaluru, lost their jobs. Meta released nearly 11,000 employees from its global workforce, which is nearly four times that of Twitter. It’s not just the foreign corporations; Indian unicorns are also on a firing spree, with companies like Byjus, Unacademy, Ola, etc., doing away with thousands of employees, most of them techies. The reason behind such mass job terminations is linked to the bearish outlook of tech bosses regarding macroeconomic projections. Owing to such a scenario, it becomes imperative to ask: What are the rights and protections that Indian labour law bestows on the IT workers?
Laws Dealing with Job Terminations in India
Recently, 29 of the 44 archaic labour laws were merged and codified into 4 broad heads: the Code on Wages, the Industrial Relations Code (hereinafter referred to as the IR Code), the Code on Social Security, and the Occupational Safety, Health, and Working Conditions Code. The IR Code is the one that deals with the mode and manner of terminating employees. Even though the central government has finalised the laws governing these codes, all the states and UTs have yet to do so. As a result, the four labour codes have not yet been put into effect. Because of this, we will individually discuss the Industrial Disputes Act, 1947 (hereinafter referred to as the “IDA”) and the Industrial Employment (Standing Orders) Act, 1946 (hereinafter referred to as the “IESA”) that have historically dealt with the termination of jobs. It should be noted that IDA and IESA are two of the three laws that have been subsumed into the IR Code.
Under IDA, two kinds of dismissal are postulated: (a) layoff and (b) retrenchment. Chapter V-A of the IDA, titled layoffs and retrenchment, talks about requirements of layoffs and retrenchment.
Layoffs
According to Sec. 2(kkk) of the IDA, a layoff is “the failure, refusal or inability of an employer on account of a shortage of coal, power or raw materials or the accumulation of stocks or the breakdown of machinery [or natural calamity or for any other connected reason] to give employment to a workman whose name is borne on the muster rolls of his industrial establishment and who has not been retrenched.”[i] Furthermore, Sec. 2S defines ‘workman’ as “any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational……“[ii] But it doesn’t include those employees who are in managerial or administrative roles.
Usually, layoffs are temporary in nature because the employer is forced to do so in face of some exigencies and employer-employee legal relations are not vitiated during the term of the layoff but that is always not the case. Sections 25C to 25E[iii] cover the procedure and requirements for layoffs. In cases of layoffs, only those employees are entitled to compensation who have continuously worked in the establishment in the 12 months preceding the layoff. Those who meet this criterion get compensation equivalent to half of the basic pay and DA (dearness allowance) until their layoff period is over.
However, for the purpose of Secs. 25C to 25E, “industrial establishment” means only those establishments that are (I) defined under the Factories Act, 1948. (II) a mine as per the Mines Act, 1952; and (III) a plantation as per the Plantation Labours Act, 1951. This is given in Sec. 25A.[iv] So, Secs. 25C to 25E, are not applicable to, inter alia, IT and technology sector employees.
Retrenchment
According to Sec. 2(oo) of the IDA “retrenchment is the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but does not include voluntary retirement, retirement, termination on account of ill health etc.”[v] The SC has held that only when ‘discharge of excess of labour’ is done by the employer then retrenchment is said to occur.[vi] Furthermore, The Karnataka HC has held that a software engineer except the one rendering supervisory service will come under the definition of “workmen” given in the IDA.[vii]
The essential requirements of retrenchment have been given in Sec. 25F[viii], which says that at least one month’s notice is required before retrenchment. This first requirement of notice can be avoided by paying some amount in lieu of notice. Secondly, compensation equivalent to 15 days’ average pay (for every completed year of continuous service) or any part thereof in excess of six months needs to be paid. Thirdly, notice in the manner prescribed by the government should be given to the appropriate authority.
As Sec. 25A is not applicable to Sec. 2(oo) and we also have Karnataka HC’s precedent, as mentioned above, it is clear beyond doubt that this provision will be applicable to IT sector workers.
To put it simply, Retrenchment, as per clause (oo) of Section 2 of the IDA, means an employer terminating a worker’s employment for any reason mentioned in the clause. However, layoff refers to the employer’s failure, reluctance, or inability to hire due to the circumstances indicated in clause (kkk).[ix] The other big difference between them, for the purpose of this article, is that layoff clauses under the IDA are not applicable to IT workers but retrenchment clauses are.
Now talking about IESA, Sec. 13 of this act talks about termination of employment. According to this, “For terminating the employment of a permanent worker, notice in writing shall be given either by the employer or the workmen—one month’s notice in the case of monthly-rated workmen and two weeks’ notice in the case of other workmen; one month’s or two weeks’ pay, as the case may be, may be paid in lieu of notice.“[x] This act does not have any exemptions per se, but states have modified it to suit their needs. For example, in 2019, Karnataka exempted the IT sector from the ambit of this act.[xi]
When one looks beyond the IDA and IESA, another piece of legislation dealing with dismissals comes to the fore: the Shops and Establishments Act (hereinafter referred to as the SEA). Most of the Indian states have their own versions of this act with minor modifications, like the Bihar Shops and Establishment Acts. Under SEA, an employee who has been with a company for more than three months (in some states, it’s six months) must be given at least a month’s notice before being fired. The requirement of such notice is waived when the employee has been dismissed because of any misconduct, even though he was given a chance to put forth his point. Similarly, the definition of employee under SEA is also wide enough to encompass various working professionals. So, IT workers are also covered under the SEA.
CONCLUSION
The recent consolidation of labour laws has brought in many positive changes that, unfortunately, cannot be discussed here due to word restrictions. But because these new codes are yet to be implemented, it was necessary to discuss the current issue through the lens of existing labour laws, which, despite being archaic, are the ones that will constitute the labour law framework of India until the modified and amalgamated laws are put in place. Now, talking about the acts themselves, namely IDA, IESA, and SEA, after discussing their provisions related to termination and dismissal and exploring their ambit over IT workers, it can definitely be said that the current labour law framework is quite vague in dealing with and protecting the interests of IT sector employees. We have multiple laws dealing with terminations, each with different requirements and different terms. It can only be hoped that the consolidated labour laws, once implemented, will achieve their desired aim of simplifying and unifying the Indian labour law framework.
[i] The Industrial Disputes Act 1947 (14 of 1947) s 2(kkk).
[ii] The Industrial Disputes Act 1947 (14 of 1947) s 2(s).
[iii] The Industrial Disputes Act 1947 (14 of 1947) ss 25C, 25D and 25 E.
[iv] The Industrial Disputes Act 1947 (14 of 1947) s 25A.
[v] The Industrial Disputes Act 1947 (14 of 1947) s 2(oo).
[vi] Byram Pestonji Gariwala v Union Bank of India 1991 AIR 2234.
[vii] Commissioner of Income-Tax v Texas Instruments India Pvt. Ltd. 2021 SCC OnLine Kar 12167.
[viii] The Industrial Disputes Act 1947 (14 of 1947) s 25F.
[ix] Workmen Of M/S Firestone Tyre v Firestone Tyre & Rubber Company 1976 AIR 1775.
[x] Industrial Employment (Standing Orders) Act, 1946 (20 of 1946) s 13.
[xi] Sharath Srivatsa, ‘IT sector gets five more years of exemption from Standing Orders’ The Hindu (01 June 2021) <https://www.thehindu.com/news/national/karnataka/it-sector-gets-five-more-years-of-exemption-from-standing-orders/article27402107.ece> accessed 13 November 2022.
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