Scroll Top

NAVIGATING THE COMPLEXITIES OF LEGAL COMPLIANCE FOR BUSINESS IN EMPLOYMENT AND CONTRACT LAW

INTRODUCTION

Legal compliance is a major element of a company’s operation. It is the procedure of ensuring that a company is functioning in conformity with the rules, regulatory requirements, and requirements of its business along with its particular activities and operations. Legal concerns may arise in every company or organization for many factors. It might be owing to a miscommunication within the financial institution or a dispute between employees and customers. When a business doesn’t keep up with statutory provisions or other government-mandated regulatory requirements, it may encounter legal repercussions. Businesses encounter an array of lawsuits that may have a significant adverse effect on their business and bottom line.

IMPORTANCE OF LEGAL COMPLIANCE FOR BUSINESSES

Legal compliance is crucial for several different reasons from preventing legal fines and penalties, avoiding legal cases, adequate adherence, and establishing standards of conduct. Noncompliance with laws can curtail legal consequences, financial penalties, and other punitive measures which may be cost-effective and destructive to a company’s reputation. Not maintaining compliance with relevant laws can introduce an employer to civil suits[1]. Adherence helps improve a company’s productivity minimise risk, and significantly improve management and governance techniques.

CURRENT EMPLOYMENT LAWS IN INDIA

Employment law governs the relationship between employers and employees. The Industrial Disputes Act[2] of India, which enforces the settlement of conflicts between workers and their employers, is India’s primary employment law.

The Payment of Wages Act[3], the Minimum Wages Act[4], the Employees Provident Funds and Miscellaneous Provisions Act[5], and the Maternity Benefit Act[6] are also important employment laws in India. Under the Industrial Disputes Act[7] of India, each of these laws imposes unique obligations on employers while also protecting employees. Companies may face numerous legal challenges resolution for dispute settlement, the process for retrenchment for employees, collective bargaining, and actions of industries like strikes and lockouts. It is noteworthy that shifts in labour laws may be both effective and challenging for businesses, depending on the exact nature of the developments and unique circumstances.

ERA FOR UNORGANIZED SECTORS

 ‘Unorganized workers’ as defined under the act[8] in India are individuals who function with no formal or lawful protection or entitlements and aren’t covered either by labour laws. Individuals are most often working in the unregulated sector, which includes local businesses, agricultural cultures, street vendors, building workers, domestic servant, as well as other related operations.

Unorganised sector employees have restricted bargaining leverage and they regularly face challenges in trying to organize themselves into trade unions or other labour organisations. The Indian government has implemented many measures for instance, the implementation of ‘social security’ through various schemes like ‘Pradhan Mantri Shram Yogi Maan-Dhan’ (PMSYM)[9] and The ‘Atal Pension Yojana’(APY)[10], which aims to provide pension payments to unorganised sector workers.

 Nevertheless, far more needs to be done in India to enhance the standard of living of unorganised workers.

INTEGRATION OF CENTRAL LABOUR LAWS INTO FOUR MAJOR CODES

Four bills to combine 29 central laws were introduced in 2019 by the Ministry of Labour and Employment.  These Codes govern (a) Wages, (b) Industrial Relations, (c) Social Security, (d) Occupational Safety, Health, and Working Conditions, and (e) Wages.  While the Code on Wages, 2019, was approved by Parliament, the Standing Committee on Labour was assigned with managing the three additional bills.  On all three Bills, the Standing Committee has delivered its report. On September 19, 2020[11], the government updated these Bills with new ones.  

The (Code on Wages)[12] integrates the provisions of four laws: the Payment of Wages Act[13], the Minimum Wage Act[14], the Payment of Bonus Act of 1965, and the Equal Remuneration Act. It applies to all businesses and employees in both the organised and unorganised sectors. This code perceives the consistent application of wages as defined under sec 2(a) of the Code on Wages, 2019 and salaries and basic wage provisions to all workers. It establishes the idea of a floor wage, which is to be ascertained by the Centre[15] after considering workers’ least standard of living, which might also vary by geographic area. The Code also protects wages payable equally to male and female workers.

The (Code on Social Security)[16] 2020 has included nine laws and enables the Centre to inform various social security schemes such as the EPF, EPS, and ESI for the welfare of employees across all industry sectors. This also gives the Centre the power to establish any other schemes for self-employed, informal workers, gig workers, platform workers, and all people in their families.[17] Under this code, businesses with even more than 20 employees are obligated to advertise job openings electronically. The Code stipulates the creation of a social security system for unorganised sector employees.

The (Code on Industrial Relations)[18] involves three existing laws and enhances the meaning of workers should include individuals employed in mechanical, technological, functional, or administrative assistants jobs. Moreover, individuals working in a management role and getting paid less than Rs. 18,000 per month are included in the definition. The code includes an additional provision for fixed-term employment, letting companies employ a worker based on a written agreement[19]. Workers on a fixed period will get the same advantages as permanent staff.

The (Occupational Safety, Health and Working Conditions Code)[20] was implemented to safeguard the health and working conditions of workers.

RELAXATION TO THE REQUIREMENT OF COMPLIANCE

The Indian government has taken measures to ease regulatory standards for companies, including standardising business license procedures, decreasing the number of rates of return that must be filed, and introducing digital sites for numerous regulatory requirements.

  • Advancement of employee categories

In 2021, the Indian government modified the Industrial Employment (Standing Orders) Act, of 1946 to include individuals employed on fixed-term contracts, interns, and trainees as “workers.”[21] It could give businesses more leeway in process of recruitment and workforce prepping.

  • Work-from-home frameworks are now being enhanced

The Indian government has widened the meaning of “inter-state migrant worker” should include individuals who work from home or in the unorganized sector. It might permit more virtual work arrangements and benefit from having more freedom when handling their working population.

  • Employees can change contract terms in course of restructuring the company

 In the organized sector of India, Employees can change contract terms The employee remains entitled to definite rights if one‘s employment conditions change as a result of a reconfiguration. This is because of the reality that the contract of employment between the employer and the employee, which underlines the terms and conditions on which the employee is obligated to perform their duties, is legally enforceable[22]. This means that any adjustments to these contractual conditions, which frequently imply adjustments in salary, working hours, or other employment conditions, must generally be consented to between the parties. The sole exemption from this rule is if the contract of employment contains a flexibility clause that allows the employer to alter certain elements of the employee’s contract terms.[23]

CONCLUSION

Legally complying with the laws governing employment is vital for companies to ensure that they function within the framework of law to prevent exorbitant dispute resolution. Organisations must be mindful of the different rules, rules and regulations, and norms that govern working relationships, such as minimum salaries, compensation for overtime, security at work, and anti-discrimination laws. Companies can ensure longevity while safeguarding the best interests of all stakeholders, involving employees, shareholders, customers, and others in the community, by putting first compliance with laws and taking preventative measures to manage legal threats.

Author(s) Name: Shuily Biswas (JECRC University, Rajasthan)

References:

[1]Shalini L, ‘5 Reasons Why Compliance is Crucial for Businesses Today’ (June 24 2022) <https://www.betterplace.co.in/blog/importance-of-compliance/> accessed on 27 April, 2023

[2] Industrial Disputes Act, 1947

[3] Payment of Wages Act, 1936

[4] Minimum Wages Act, 1948

[5] Employees Provident Funds and Miscellaneous Provisions Act, 1952

[6] Maternity Benefit Act, 1961

[7] Industrial Disputes Act, 1947

[8] the Unorganized Workers Social Security Act, 2008

[9] Pradhan Mantri Shram Yogi Maan-dhan (PMSYM), Government of India <https://csc.gov.in/notification/FAQ%20PMSYM.PDF> accessed on 27 April, 2023

[10] Swavalamban Yojana, 9 May 2015

[11]New Labour Codes for new India, Ministry of Labour and employment (2020) < https://labour.gov.in/labour-codes > accessed on 29 April, 2023

[12]Code on Wages, 2020

[13] Payment of Wages Act, 1936

[14] Minimum Wages Act, 1948

[15] Code on wages, 2019, Sec9(1)

[16] Social Security Code, 2020

[17]Praveen Raju and Renuka Ibraham, ‘India: Code On Social Security’, (Mondaq, 2022) <https://www.mondaq.com/india/employee-benefits–compensation/1256860/code-on-social-security-2020 > accessed on 29 April, 2023

[18] Code on Industrial Relations, 2020

[19]Industrial Relations Code 2020, Ministry labour and employment <https://prsindia.org/billtrack/the-industrial-relations-code-2020 > accessed on 29 April, 2023

[20] The Occupational Safety, Health and Working Conditions Code, 2020

[21] Industrial Employment Standing Orders act, 1946

[22] Job Restructuring Rights ,Employer’s Guide ( Davidson Morris  4 December, 2022 ) < https://www.davidsonmorris.com/job-restructuring-rights > accessed on 7 April, 2022

[23] Job Restructuring Rights ,Employer’s Guide ( DavidsonMorris  4 December, 2022 ) < https://www.davidsonmorris.com/job-restructuring-rights > accessed on 7 April, 2022