Introduction

The Ministry of Labour and Employment (Ministry), vide notification dated 16 March 2018 (Notification), has notified the Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018 (Rules). The Notification aims to amend the Industrial Employment (Standing Orders) Central Rules, 1946 to introduce a significant labour reform – allowing fixed term employment across all sectors. The Ministry had earlier released a draft notification dated 8 January 2018 for stakeholder comments. Our earlier update on the draft notification can be accessed here. The contents of the Notification are on the same lines of the draft notification dated 8 January 2018. However, the Ministry has clarified that no existing permanent employees can be converted to fixed term employees.

Highlights of the Notification:

  • Earlier, fixed term employment was allowed only in the apparel manufacturing sector. The Notification, however, has amended the Industrial Employment (Standing Orders) Central Rules, 1946 to include fixed term employment across all sectors.
  • The Notification is prospective in nature and clarifies that the employer of an industrial establishment shall not convert the posts of the permanent workmen existing in his industrial establishment to a fixed term employment, as on the date of the Notification.
  • The term ‘fixed term employment workman’ has been introduced in the Rules as ‘a workman who has been engaged on the basis of a written contract of employment for a fixed period: provided that, (a) his hours of work, wages, allowances, and other benefits shall not be less than that of a permanent workman; and (b) he shall be eligible for all statutory benefits available to a permanent workman proportionately according to the period of service rendered by him even if his period of employment does not extend to the qualifying period of employment required in the statute’.
  • The Notification amends the termination provisions in the Industrial Employment (Standing Orders) Central Rules, 1946 to clarify that no notice of termination of employment is required in the case of temporary workman (whether monthly rated, weekly rated or piece rated and probationers or badly workmen). Further, no fixed term workman is entitled to any termination notice or pay in lieu thereof due to non-renewal of contract. In order to safeguard temporary workmen, it has also been clarified that the services of a temporary workman shall not be terminated as a punishment unless he has been given an opportunity of explaining the charges of misconduct alleged against him. Further, notice requirements have been introduced for temporary workmen working in coal mines.

Comment

This move will enable industries across all sectors, whether seasonal or not, to hire workers for assignments that are based on duration of the project or specific tenure. Additionally, this will also provide flexibility to terminate such workers post the completion of such assignment.

In order to protect the workmen, fixed term workers will be eligible for all statutory benefits available to a permanent worker proportionately according to the period of service rendered by them, even though their period of employment does not extend to the qualifying period of employment required in the statute. Further, the work conditions in terms of work hours, wages, allowances, and other statutory dues of a fixed term employee would be at par with those of the permanent workmen. The employer can directly hire a worker for a fixed term without involvement of any contractor. Since the Notification is prospective in nature, it ensures that the employer does not convert the posts of the permanent workmen existing in his industrial establishment to fixed term employment. There appears to be some degree of ambiguity in the language in the Notification that tends to recognize the fixed term of an employee for any tenure based statutory benefits. It may be argued that the Ministry’s intention is to cover benefits like gratuity so that fixed term workers are not deprived of tenure based statutory benefits like gratuity. However, payment of gratuity cannot be extended to fixed term contracts with duration of less than 5 (five) years unless appropriate amendments are made in the Payment of Gratuity Act, 1972.

In the backdrop of the upcoming general elections, the Central Government has acted swiftly by implementing the Notification within a short span of releasing the draft notification for stakeholders’ comments. The Notification is a step which signals the intent of the Central Government to retain India on the manufacturing world map, without significantly compromising on labour interests.