All questions

Year in review

There have been no significant legislative developments in India (under the ID Act, the S&E Acts or the SH Act) that affect the way in which the judiciary resolves employment disputes. Having said that, in recent months, courts have reaffirmed their commitment to balance employer and employee interests.

i Union Bank of India v. CG Ajay Babu

Under the Payment of Gratuity Act, 1972 (the PG Act), employees with five years of continuous service are entitled to receive a gratuity (a long-service payment) at the time of their exit. However, employers can wholly or partially withhold a gratuity, in limited circumstances, if the services are terminated for reasons such as the employee's riotous or disorderly conduct, or if the employee's acts (during the course of employment) constitute an offence of 'moral turpitude'. The Supreme Court recently confirmed the additional procedure employers need to follow before forfeiting gratuity on account of moral turpitude.

In this case, disciplinary proceedings were initiated against an employee for his failure to discharge his duties, and for committing certain acts that were 'unbecoming of a bank officer'. The employer-bank partially forfeited the employee's gratuity, reasoning that his misconduct constituted an act of moral turpitude. Since the High Court ruled that, under the PG Act, gratuity could be forfeited for misconduct only if it caused financial loss to the employer, the employer-bank raised an appeal before the Supreme Court. Dismissing the employer-bank's appeal, the Supreme Court clarified that misconduct (established during the disciplinary inquiry) was an insufficient ground to forfeit gratuity for 'an offence of moral turpitude'. The rationale here was that only a court of competent jurisdiction could convict an individual for an offence involving moral turpitude. As the employer-bank had not even set the criminal law machinery in motion to establish that the employee had committed an offence of moral turpitude, it could not forfeit gratuity; thus, forfeiture of gratuity would not be automatic on dismissal from service, and would depend on whether the employee's act or omission were punishable under law.

Previously too, the Supreme Court and some High Courts have endorsed the view that misconduct proved through a disciplinary proceeding cannot be construed as a punishable offence under law. Despite this, a few High Courts took a contrary view on the ground that the standards of proof for establishing guilt under a criminal proceeding and under a company's disciplinary inquiry vary.

With the Supreme Court's latest ruling on this issue (in the employer-bank case), it is now clear that unless an employee has been convicted by a court of law, employers would not have the ability to forfeit gratuity on account of moral turpitude. While this is the current legal position, imposing a conviction as a precondition to forfeiture can prove to be rather onerous for employers, as the expenses incurred for the litigation process may itself far exceed the gratuity intended to be forfeited. Further, in cases of grave misconduct (such as sexual harassment), the complainant may prefer not to file a criminal complaint against the accused employee. In such cases, employers could face practical difficulties in forfeiting the accused's gratuity.

ii Ruchika Singh Chhabra v. M/s Air France India

If an employer has not constituted an IC (on account of not having 10 employees), then victims of sexual harassment can file their complaints with a local committee (LC), which is an inquiry body constituted by the government. The requirement under the SH Act is that both an IC and an LC should include an NGO member who is 'committed to the cause of women or a person familiar with the issues relating to sexual harassment'. The rules under the SH Act provide that in relation to the LC, a person would be considered as being familiar with 'issues relating to sexual harassment' if he or she is a social worker with experience of the empowerment of women or is a person familiar with labour, service, civil and criminal law.

In this case, the appellant-victim challenged the IC's constitution on the basis that the NGO member did not have the qualifications required for IC membership. The respondent-employer contended that it had properly constituted the IC on the basis that the NGO member was a labour law practitioner. Rejecting this argument, Delhi High Court held that although the NGO member was a labour lawyer, no evidence was given to demonstrate that he was experienced in dealing with sexual harassment cases, or in representing the cause of women. The Court further clarified that the provision for appointing labour lawyers applied only with respect to an LC's NGO member, and the same qualifications or attributes could not be applied while assessing the eligibility of an IC's NGO member. On this basis, the Court struck down the respondent-employer's IC proceedings, and ordered the reconstitution of an IC and fresh consideration of the matter. This case highlights the importance of evaluating each individual's eligibility to be appointed as a committee member, and the caution that employers are required to exercise prior to appointing them.

Outlook and conclusions

All litigation in India is typically a drawn-out, expensive process, owing to factors such as procedural lags, backlogs and non-appearance of parties. Traditionally, most labour litigation pertains to the disputes of unions and the labour masses, because of the general misconception that the term 'workman' under the ID Act relates to employees in blue-collar jobs. Given the increased awareness among the educated classes, especially in the information technology (IT) sector, of their rights under the ID Act, the S&E Acts and the SH Act, individual labour disputes have been on the rise. The Forum of Information Technology Employees and the Karnataka State IT Union have very recently taken the initiative to form IT trade unions in the Indian states of Tamil Nadu and Karnataka. This emerging IT trade unionism movement should further catalyse the pursuit of labour disputes by white-collar employees. Further, the involvement of unions is likely to strengthen the collective bargaining powers of IT employees against unfair retrenchment.

While no immediate legislative changes may follow in the field of dispute resolution, one would not be wrong in expecting to see more challenges to unfair redundancies in the IT sector if employers do not adhere to due process under labour statutes. Further, with the reignition of the #MeToo movement in India, there has been a considerable spike in the number of sexual harassment complaints filed with ICs, specifically time-barred and anonymous complaints. Given the various nuances inherent to such complaints, it is likely that litigation will multiply if employers do not handle them in accordance with the law.