India: Employment 2021

During the 18 months since the start of the global pandemic, the Indian employment sector, like its global counterparts, has witnessed several measures aimed at alleviating the hardships of its stakeholders. As the country continues its fight against the catastrophic effect of the pandemic, the central government and multiple state governments in India have fortified their efforts towards facilitating ease of doing business, besides ensuring protection to the workforce.

Work from Home

The rampant COVID-19 cases and multiple lockdowns and transportation restrictions across several states have made continued functioning from traditional workplaces extremely difficult for most employers. Given that incumbent labour legislations generally envisage the existence of a fixed and common workplace, several legal concerns have become apparent with the adoption of the work from home arrangement.

For instance, keeping track of working hours, overtime and leaves, the onus of ensuring safety of workers and the applicability of workplace sexual harassment and other labour laws, has added to the complexities of a work from home scenario for employers. By way of example, a number of employers experimented with various monitoring structures, with some asking their employees to work with their laptop cameras switched on during working hours. One can very well argue that this amounts to an invasion of the employee's personal space, although the law does not explicitly qualify this practice as an infringement of the employee's legal privacy rights.

Indian labour laws, unfortunately, have not yet made any significant statutory progress in recognising the rights of persons working from home. However, traces of potential statutory recognition of work from home may be found in the recently released Draft Model Standing Order for the Service Sector, 2020. Applying to industrial establishments having more than 300 workers, it will permit employers to allow workers to work from home, although the draft order does not yet define "work from home" and neither does it confer any enforceable right to work from home.

Work from home policies

Multiple surveys suggest that an overwhelming majority of employers in India have adopted the work from home model. In this regard, employers have been increasingly introducing various work from home policies that clearly define the rights and liabilities of both parties.

Given that the current statutory regime does not contemplate a work from home arrangement, it is imperative for employers to have robust provisions as a part of their policies. Such policies should expressly set out the reporting office of the employees along with its location, even though these employees are working from their home states. This would aid in determining the applicable state laws. Separately, HR policies such as those concerning annual leave, return of company property, code of conduct and prevention of sexual harassment should also expressly contemplate the work from home arrangement.

The issue of data protection has also been heavily featured in work from home arrangements. The contractual terms generally aim (as they should) at positing the distinction between personal and work-related data, regulating modes in which official communications may be made, access and usage of confidential information/trade secrets, etc. Furthermore, most employers also require their employees to only work on company-issued devices and, consequently, various terms and conditions regulating the usage of such devices are now very common.

Investigations and standard operating procedures

Conducting workplace investigations in a work from home arrangement appears to be fraught with difficulties. Gathering relevant data or evidence in a physical form appears to be increasingly difficult and procurement of digital evidence has often become onerous, given that it can be easily tampered with. There have also been several instances of employees illegally downloading confidential information onto their personal devices; in such instances, employers are compelled to require access to personal devices/digital accounts of employees, which has its own set of legal challenges.

The process of interviewing relevant employees has also been testing for the investigator. Persons attending an online interview may record such interview without consent and it is likely that remote interviews will undermine most interviewers' ability to make apt credibility assessments. Furthermore, remote interviews are vulnerable to repeated (technical or social) disruptions, adding to the overall problem of conducting seamless interviews.

Employers now have no option other than to devise an appropriate standard operating procedure which governs online interviews, presentation of evidence and other communications, and establish safeguards for preventing leakage of sensitive information.

Exit formalities

"Offboarding" an employee from a remote working arrangement is a novel concept for most employers. It is not an exaggeration to state that handing over of company property such as laptops, mobile phones, documents containing confidential information, etc, are proving to be a test for existing employer systems.

In order to ensure the smooth completion of exit formalities, a significant degree of vigilance is often required from an employer. Care must be taken to ensure that the employee has not misappropriated confidential information and that her or his access to digital resources has been removed. The employer must further remind the employee of her or his confidentiality and other post-employment obligations, ensure that all relevant exit documents are executed, and efficiently carry out the full and final settlement of the employee's accounts.

Employee Vaccinations

The federal Ministry of Health and Family Welfare (MoHFW) has clarified that receiving the COVID-19 vaccine must be entirely voluntary. Consequently, employers would have a negligible legal basis for making vaccinations mandatory, or for taking adverse action in case an employee refuses to get vaccinated. However, this must also be balanced with an employer's obligation to provide safe working conditions for employed individuals. Employers therefore do have a right to refuse access to physical premises to any employees who are not vaccinated as long as the denial of access does not impede the discharge of the employee's formal duties and obligations. In that context, employers are also entitled to ask for proof of vaccination subject to protection obligations under extant data protection laws in India.

However, it must be said that significant ambiguities remain as to whether an employer can deny recruitment to a prospective employee, based on whether he or she has taken the vaccine. The jury is still out on whether the employer's obligation to provide a safe working environment would vindicate the rejection of an otherwise eligible candidate. Clarifications from the government in this regard are awaited.

Under incumbent laws, employers are not mandated to grant a paid leave in order to allow employees to get vaccinated and neither are they required to cover the costs of such vaccination. However, a large majority of employers have continued to explore multiple ways in which employees can be incentivised to receive the vaccine. These include granting additional leaves, covering costs of vaccinations, on-campus drives featuring stringent safety protocols and measures, return to workplaces in a phased manner or even the possibility of geographical mobility in the near future.

The MoHFW has recently issued a notification allowing for COVID-19 vaccinations to be administered in workplaces. The benefits of this measure has been extended to every employee of the workplace, their family members and dependants, as defined by the respective employers. Several employers in both the government and private sectors have already undertaken mass vaccinations drives for their employees and their dependants.

Multiple organisations are now also coming up with new schemes and policies to support their employees who have been impacted by COVID-19. These include providing long-term financial aid to the families of employees that have succumbed to COVID-19, arranging access to mental health care support for employees, reducing working hours or granting "time off" to employees for dealing with anxiety and stress induced by COVID-19, setting up COVID-19 care facilities for its employees and family members, etc.

The Labour Codes

The multiplicity of Indian labour legislations enacted largely in the industrial era resulted in the development of diversified views on the same subject matter. The complex compliance requirements under each of the Indian labour legislations have often been touted as major hurdles for ease of doing business in India. In a major move to tackle these concerns and for the purpose of ensuring ease of doing business in India, as well as protecting rights of all stakeholders, several extant labour legislations have been consolidated and codified, which culminated in the drafting of four distinct labour codes.

Subsuming around 29 federal legislations within their ambit, these codes are:

• Code on Wages, 2019;
• Occupational Safety, Health and Working Conditions Code, 2020;
• Industrial Relations Code, 2020; and
• Code on Social Security, 2020.

The codes will take effect on a federal level, ensuring uniformity in its application. Each of the codes will have corresponding rules. Additionally, the state governments are likely to notify separate rules, as is their right under the Constitution of India. Consequently, the real test is to ensure that the state rules are aligned so that the objective of uniformity is not diluted. While the codes were originally set to be enforced from April 2021, supervening circumstances such as the ongoing pandemic have led to the postponement of the effective date. However, based on public statements released by government officials, the codes can be reasonably expected to come into force before the end of this year.

Within its respective sphere, each of the codes endeavours to strike a balance between the interests of the employer and the employee. While the primary objective was to ensure a seamless amalgamation of the subsumed legislations, the codes also introduce several new provisions, setting new trends within the employment sector.

Definition of "wages"

In a significant development, the Code of Wages, 2019, has introduced a definition of "wages". Under the existing regime, the definition of "wages" is distinct under each labour legislation, often leading to ambiguity for all stakeholders. The definition of wages has now been made uniform. Currently, employers often engage in the practice of splitting an employee's remuneration into various "allowances", instead of paying a lump sum amount as basic wages.

The new definition, however, stipulates that the basic wage component must constitute at least 50% of the gross remuneration payable to an employee. Hence, once the Code of Wages is brought into force, employers would be required to restructure their compensation models accordingly. While there is a possibility that the employer's liabilities towards social security may increase, the employee's take-home pay can reduce unless the new compensation structure is modelled for both sides' benefit. It is also imperative to note that the definition of wages will have a direct impact on the calculations relating to provident fund, gratuity, retrenchment compensation and maternity.

Setting floor wage rates

Currently, India does not have a federal minimum wages standard. The responsibility of setting minimum wage levels generally rests with the state governments who in turn specify various minimum wage rates based on the employee's industry, skill levels, nature of employment, etc. Furthermore, these rates vary with each state as well. As a result, for entities that engage in pan-India operations or are involved in multiple industries, keeping track of the different applicable statutory wage rates can be an exceedingly daunting task.

The Code on Wages has reduced the list of minimum wage rates that may be specified, while also introducing a new concept of "floor wage", which will be stipulated by the federal government, based on geographical areas. This will form the basis for fixation of the minimum wages by the state government for areas under their jurisdiction, which now need to be equal to or greater than the floor wages. No individual state would be allowed to set minimum wages below the national floor wage. In a case where a higher minimum wage has been already set by a particular state government, it cannot be reduced thereafter.

While this development may be indicative of an increased cost of labour in certain regions, in our opinion it should also bring in long-term benefits such as improving the living standards of labourers, avoiding space crunches and underemployment in major cities, and boosting a uniform growth of industries throughout the country. Once the Code is notified, employers would do well to revise the wages for a section of their workers who are paid wage rates approaching the statutory minimum threshold.

Non-discrimination in the workplace

Currently, the Equal Remuneration Act, 1976 serves as the anti-discrimination law in the country, prohibiting employment discrimination against women on the ground of sex. The Code on Wages has extended the benefits of these provisions to individuals of any gender, thereby eliminating the gender-binary-centric approach taken in the previous legislation.

This is in line with a recent judgment of a state High Court that has provided detailed directions for employers to generate inclusivity and eliminate all forms of discrimination against the LGBT+ community in the workplace. The directions include setting up and enforcing human resource policies that are LGBT+ community-friendly, adopting suitable policies that address non-discrimination on grounds of sexual orientation, including sexual harassment of the LGBT+ community in the workplace, making suitable changes in hiring policies for inclusivity, creating awareness and sensitising individuals on the prohibition of discrimination as provided for in the Transgender Persons (Protection of Rights) Act, 2019, etc.

Recognising gig and platform workers

In recent years, the idea of freelance working has gained extensive popularity in India and is currently considered as an intrinsic part of the nation's labour markets. The industry has been growing rapidly, with reports suggesting an exponential increase in its worth in the next five years. As in the USA and the UK, India is witnessing its fair share of challenges with protests regarding minimum wages, working conditions and claims of employment being raised by gig workers. Recognising the same and with the objective of protecting the rights of gig workers and ensuring that they are adequately taken care of, the Code on Social Security has now extended certain employment benefits to the gig economy in India, a measure that has been unprecedented.

A gig worker has been defined as any person that participates in a work arrangement and earns money from activities that fall outside the ambit of a traditional employer-employee relationship. By virtue of the Code on Social Security, gig workers would be able to avail themselves of various social security benefits relating to health, advanced age assistance, disability, maternity benefits, education, etc. The provisions have also been similarly extended to platform workers that engage in work arrangements outside of a traditional employer-employee relationship, via online platforms. By virtue of the definition provided for "gig workers", there is a possibility that even independent consultants would be considered as gig workers since they also function outside the traditional employer-employee relationship. However, this is a grey area and appropriate statutory clarifications are awaited.

While the Code on Social Security sets out a broad framework for social security benefits for gig and platform workers, the government is expected to formulate detailed schemes for these benefits. These schemes would typically provide for the manner of administration, agencies for implementation, role of aggregators and sources of funding. Since there is a possibility that the employer may be required to make certain contributions to such schemes depending upon their revenue, this would lead to a possible additional financial burden on employers engaging such gig or platform workers.

Mitigating trade union conflicts

Trade unions play an important role in ensuring that the rights of the workers are well protected. However, a loud complaint by several employers appears to be that unions can also be a hurdle against the smooth functioning of industrial establishments, especially in instances of conflicts and strikes. The issue often arises from the fact that it is common for employees of large industrial establishments to be associated with multiple trade unions. These trade unions may frequently develop ideological differences, leading to the creation of factions within the workforce. Furthermore, it is a significant challenge for the employer to negotiate with the different trade unions.

In order to address these concerns, the Industrial Relations Code now allows for the designation of a particular union as the sole negotiating union in an industrial establishment, subject to the achievement of certain thresholds.

Relaxation in threshold for retrenchment, lay-offs and closure

The extant labour law legislations have often been criticised for being skewed against the employer in certain aspects. For instance, currently, mines, plantations and factories employing more than 100 workers are required to obtain government permission for temporarily refusing work or retrenching its workers. Further, stringent compliance requirements are also stipulated for the aforesaid establishments seeking to close their businesses.

The Industrial Relations Code brings in a much-needed relief for employers by stipulating that only industrial establishments employing 300 or more workers are required to undertake the specified compliance obligations, in case they seek to retrench or lay-off their workers or close their businesses. Having said that, the government is expectedly receiving a significant push back from trade unions representing the workers.

Transition to the new labour codes

In terms of transition from the existing regime to the new law, although the codes do not prescribe any transition period, some amount of time can be expected to be given to organisations for adopting the necessary compliances. That said, the Social Security Code provides that the schemes and regulations framed under the Employees' Provident Fund Act, 1952 and the Employees' State Insurance Act, 1948 would remain in force for a period of one year to the extent they are not consistent with the provisions of the Code. Also, taking a cue from all the four codes which introduce an "inspector-cum-facilitator" who would be expected to assist the employers with ensuring compliance with the laws, one would assume that guidance and assistance would be offered by these government bodies to help with the transition rather than imposing penalties.

It has been seen in the past that at the time of implementation of the amendments in the Maternity Benefit Act, particularly the creche facilities, the government authorities had taken a practical approach and there was no prosecution of the employer in the first instance. The same approach can perhaps be expected to be taken for the codes as well. That said, employers must nevertheless demonstrate that effective steps have been taken at the organisational level to move towards the new regime.

Originally published in Chambers and Partners

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