Labour and Employment Quarterly Milestones (April – June 2025)

Partner: Atul Gupta, Senior Associate: Tania Gupta, Associate: Gokul Suresh Nair

Key Developments

Supreme Court upholds validity of minimum service conditions and liquidated damages in employment contracts

The Supreme Court of India, in Vijaya Bank v Prashant B Narnaware, has affirmed the validity of indemnity bonds in employment contracts. The Court held that such bonds are neither in restraint of trade under Section 27 nor opposed to public policy under Section 23 of the Indian Contract Act, 1872 (Contract Act).

The case involved an employee who was required to pay INR 2 lakh as liquidated damages for resigning before completing the three-year minimum service tenure specified in his appointment letter. Setting aside the High Court order that had quashed this stipulation, the Supreme Court held that restrictive covenants operating during the employment term did not curb an employee’s freedom of trade or employment. Accordingly, the Court found the condition to work for a minimum of three years or pay INR 2 lakh on early departure valid and not violative of section 27 of the Contract Act. The clause did not prevent the employee from seeking future employment but required reimbursement for costs if the agreed term was not completed.

The Court clarified that such clauses were not inherently opposed to public policy, especially when they aim to protect the employer from financial losses due to premature resignations and associated recruitment and training costs.

Supreme Court affirms validity of exclusive jurisdiction clauses in private employment contracts

The Supreme Court, through a common judgment in Rakesh Kumar Verma v HDFC Bank Ltd., and HDFC Bank v Deepti, has clarified and affirmed the validity and enforceability of exclusive jurisdiction clauses in private employment contracts.

The cases arose from two HDFC Bank employees who initiated civil proceedings in Patna and Delhi, respectively, following termination of their employment. However, their appointment letters conferred exclusive jurisdiction for employment-related disputes to the courts in Mumbai. HDFC challenged these legal proceedings, relying on the contractual clause.

The Supreme Court held that parties can by mutual consent confer exclusive jurisdiction to particular courts provided such courts possess the inherent jurisdiction to entertain such legal claim under Section 20 of the Civil Procedure Code, 1908. Further, jurisdiction of other courts must be explicitly or implicitly barred by the contract. The Court observed that contractual terms are legally binding, irrespective of the status of the parties. Unequal bargaining power between an employer and an employee does not justify deviating from established principles of contract law. Consequently, the Court ruled that the courts in Mumbai had exclusive jurisdiction.

This ruling provides significant certainty to private sector employers in India by ensuring that legal proceedings stemming from employment disputes are conducted in the forum mutually agreed upon executing the contract. This ruling did not discuss the enforceability of such provisions in the context of workmen or employees covered by the Industrial Disputes Act or the local Shops and Commercial Establishments Acts.

Punjab government renews labour laws exemption for commercial establishments

In March 2022, the Punjab government had exempted all shops and commercial establishments in the state from certain provisions of the Punjab Shops and Commercial Establishments Act, 1958. The exemption was renewed twice and expired on 31 May 2025. The state government renewed it again through a notification dated 17 June 2025 for one year up to 31 May 2026.

All shops and commercial establishments may now operate on all 365 days of the year and are exempted from restrictions relating to opening and closing hours and the mandatory weekly close day. This is subject to certain conditions including:

• Working hours: Employee working hours must not exceed 10 hours per day and 48 hours per week, with the daily spread-over not exceeding 12 hours per day.
• Holidays: Employees must be allowed a weekly holiday and granted national and festival holidays.
• Safety and security measures: Employers must put in place adequate safety and security arrangements for employees working after 10.00 pm. For female employees required to work beyond 8.00 pm, travel arrangements must be provided. Further, written consent must be obtained from women employees required to work night shifts.
• Compliance with laws against workplace sexual harassment: Employers must constitute an Internal Committee (IC) under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH Act), to handle complaints and redress grievances.

Non-compliance may result in revocation of the permissions and exemptions granted under it.

Mandatory compliance directives issued under the POSH Act, including She Box onboarding

In August 2024, the Ministry of Women and Child Development (MWCD) launched an updated version of the Sexual Harassment Electronic Box (SHe Box) portal to streamline the process of filing and tracking sexual harassment complaints and enhance accountability and transparency. The portal allows female employees to lodge sexual harassment complaints and function as a centralised repository of data and information.

While previous directives for SHe Box onboarding were primarily aimed at government departments and state agencies, the MWCD has extended this directive to private organisations. Through an internal communication dated 30 May 2025, the MWCD specifically emphasised the mandatory onboarding of ICs of private organisations onto the portal.

Underscoring this requirement, state governments of Delhi, Maharashtra and Rajasthan have recently issued their own notices and directives, mandating all private organisations within their territories to register on the SHe Box portal at the earliest.

Formalising disclosure requirements for employers under Companies (Accounts) Rules, 2014

The Ministry of Corporate Affairs (MCA) recently notified the Companies (Accounts) Second Amendment Rules, 2025 (Amendment Rules), which became effective from 14 July 2025. The Amendment Rules have introduced certain additional disclosure and compliance requirements for employers, which include:

• disclosure of the number of sexual harassment complaints received, disposed of, and pending for more than 90 days in a year in the board report. So far, companies were only required to include a statement confirming their compliance in relation to the constitution of Internal Committee under the POSH Act;
• inclusion of a statement of compliance with the provisions of the Maternity Benefit Act, 1961 in the board report;
• disclosure of the number of female, male, and transgender employees in the format prescribed by the MCA in the board report.

(To read our detailed update on the Amendment Rules, click here.)

Karnataka GOVERNOR promulgates ordinance for protection and welfare of gig workers

The Karnataka Platform-Based Gig Workers (Social Security and Welfare) Ordinance, 2025 (Ordinance) was promulgated by the Governor of Karnataka on 27 May 2025. This Ordinance applies to every – (a) aggregator or platform operating or providing any of the services specified in the schedule to the Ordinance, (b) platform as defined under the Ordinance, and (c) gig worker registered with the welfare board (Board) under the Ordinance.

Key provisions of the Ordinance are as follows.

• Aggregators and platforms must register themselves with the Board and submit a database of all onboarded gig workers within 45 days of the Ordinance coming into effect.
• All new gig workers must be electronically registered with the Board within 30 days of onboarding. The Board will register and generate a unique ID for each gig worker.
• Gig workers have the right to fair contracts, freedom to refuse tasks, and 14 days’ notice for contractual changes. Conversely, the aggregators and platform must give gig workers 14 days’ prior written notice with reasons before termination.
• Aggregators and platform must ensure reasonable working conditions.
• Registered gig workers can raise grievances against both the aggregator or the platform, as well as against the Board.
• A welfare fee of 1%–5% of the payout to the gig worker in each transaction will be charged from the concerned aggregator or platform.

The Ordinance significantly enhances the accountability framework for digital platforms operating in Karnataka and marks a shift towards formalising the gig economy. From a business perspective, this may lead to increased compliance obligations including mandatory registration, welfare fund contributions, maintenance of worker databases, the establishment of grievance redressal mechanisms, etc.

While the Ordinance has been formally notified, it is still subject to legislative approval. In parallel, the anticipated rules governing welfare funds for gig and platform workers and the upcoming implementation of the Social Security Code, 2020 are also expected to shape the evolving regulatory landscape for the gig economy, both at the state and national levels.

Haryana government revises the conditions for employing women during night shifts

The Government of Haryana recently notified revised conditions for employing women during night shifts in certain establishments, including Information Technology/Information Technology-enabled services (IT/ITeS) establishments that are registered under the Punjab Shops and Commercial Establishments Act, 1958 (as applicable to Haryana). This notification supersedes all earlier notifications in this regard and relaxes certain compliance obligations, such as allowing women to opt out of employer-arranged transport, and omits certain requirements such as holding grievance meetings, submission of details of women employees working in night shifts in annual report, maintaining vehicle logs and boarding register, etc.

(To read our detailed update on the revised conditions for engaging women in night shifts in Haryana, click here.)

Tamil Nadu government renews the exemption allowing establishments to operate 24×7 in a year

In June 2022, the Tamil Nadu government had exempted all shops and establishments operating in the state from the requirements of opening and closing hours fixed by the state government under the Tamil Nadu Shops and Establishments Act, 1947 and permitted them to operate 24×7 on all days of a year, subject to certain conditions, for a period of three years until 5 June 2025. The state government has now renewed this exemption for a further period of three years until 5 June 2028, again subject to certain conditions.

(To read our detailed update on the exemption, click here.)

The labour and employment landscape is poised for significant legislative change across several states. Employers are advised to closely monitor ongoing discussions concerning the revision of working hour norms, with states like Karnataka and Andhra Pradesh reportedly exploring different frameworks. Further, given that the deadline set for states to complete the pre-publication of draft rules under the Labour Codes has expired, employers must start gearing up for the implementation of the Labour Codes.