Labour and Employment

The first quarter of the year 2022 witnessed several orders by the government in the wake of the Omicron wave as well as key employment law developments in Gujarat, Jharkhand and Maharashtra. On the judicial front, the Supreme Court issued orders in the case of the controversial Haryana State Employment of Local Candidates Act, 2020, amongst others.

Atul GuptaPartner

Parvathy TharamelSenior Associate

Tania GuptaAssociate

Several notable developments took place in the previous quarter in the field of labour and employment law with the state governments implementing stringent measures to deal with the third wave of Covid-19 followed by subsequent relaxations. The Supreme Court’s order on payment of damages for provident fund arrears and interim stay on the Haryana local candidates' law were keenly watched. In this update, we discuss these developments as well as the effect of the new Gujarat budget on remittance of professional tax, amendment in the Maharashtra Shops and Establishment Act and implementation of the new law on employment of local candidates in Jharkhand.

Key Developments

  • Covid-19 Updates - Onset of Omicron and subsequent orders

    The quarter started with employers and employees gearing up to handle the spread of the Omicron variant by implementing prevention measures. This was followed by a decline in cases in several parts of the country and consequent lifting of restrictions and relaxations by central and state governments.

    • Preventive measures by states during January and February 2022

      Karnataka: The government of Karnataka issued an order on 5 January 2022 directing the labour and health department to ensure that employees working in industries / factories, IT industries, etc., are vaccinated with both doses of the Covid-19 vaccine. The order also mandated that employees are required to strictly adhere to Covid appropriate behavior (CAB) in the workplace including maintaining physical distance, wearing face masks, etc. However, all Covid-19 related restrictions in Karnataka were applicable only till 28 February 2022 and the government did not issue new orders in the latter part of the quarter. Accordingly, there are no vaccination mandates, restrictions on office capacity or mandatory adherence to CAB in Karnataka as on date.

      Maharashtra: The Maharashtra government issued an order on 8 January 2022 directing the management in offices to rationalise the number of employees through work from home and staggering of working hours and allowing only fully vaccinated staff to attend office. Employers were advised to limit the strength of working staff to 50% and undertake practices of keeping the offices open for 24 hours, allow employees to work in shifts, etc., to achieve the same.

      CAB guidelines were provided under this order and employers were required to ensure strict adherence to such measures by all employees. CAB included social distancing at workplace, wearing of face masks at all times, thermal scanning, frequent sanitisation of the workplace, mandatory usage of Arogya setu app, identifying nearby hospitals authorised to treat Covid-19 patients and providing a list of the same to employees, etc.

    • Relaxations issued in March 2022

      Towards the latter half of the previous quarter, the country witnessed a significant decline in the number of positive cases and consequently the Ministry of Health and Family Welfare (MoHFW) issued an order on 25 February 2022 directing the states to implement a risk assessment-based approach on the opening of economic activities. Accordingly, all offices were allowed to function without any capacity restrictions, subject however to CAB, including use of mask and physical distancing. Subsequently, the central government issued an order on 22 March 2022 which provided that the standard operating procedures and advisories of the MoHFW may continue to be followed by states.

      On account of the directives issued by the central government, new orders were issued by state governments as well. The Government of Maharashtra issued an order on 31 March 2022 lifting all restrictions imposed through previous orders such as vaccination mandates, limitation on office capacity, etc. The state government continues to advise all citizens and organisations to follow the central government advisories on CAB including wearing face masks and maintaining physical distancing.

  • Supreme Court holds mens mens rea or actus reus not relevant for payment of damages for employer’s defaults in making EPF contributions

    The Supreme Court, in the case of Horticulture Experiment Station Gonikoppal, Coorg v The Regional Provident Fund Organisation, held that default or delay in the payment of employees’ provident fund (EPF) contribution by the employer under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (EPF Act) is the only requirement for imposing damages under Section 14B of the EPF Act. It further held that mens rea or actus reus is not an essential element for the imposition of penalty for breach of civil obligations/liabilities.

    The Karnataka High Court had held that once the default in payment of contribution is admitted, the damages are consequential and the employer is required to pay such damages under Section 14B of the EPF Act. The Supreme Court upheld the decision of the High Court by reiterating that as far as the penalty inflicted under the provisions is a civil liability, mens rea or actus reus will not be an essential element for imposing civil penalties.

  • Interim stay on implementation of Haryana State Employment of Local Candidates Act, 2020 set aside by the Supreme Court

    The Supreme Court, on 17 February 2022, set aside the interim stay ordered by the Punjab and Haryana High Court on the implementation of the Haryana State Employment of Local Candidates Act, 2020 (Haryana Act) which requires private employers to provide 75% reservation to locally domiciled candidates with gross salary of INR 30,000 or less. The Supreme Court did not comment on the merits and ordered that no coercive steps should be taken against employers by the state government, due to which companies are still in the wait-and-watch mode and not actively trying to comply with this law. The Supreme Court also directed the High Court to decide on the matter within a month. The High Court concluded hearing the various pleas challenging the constitutionality of this law on 17 March 2022 and has reserved its judgment on the same.

    The constitutionality of this law has been challenged before the High Court in writ petitions filed by several industry bodies in the state on the ground that it is against the principles of meritocracy and competitiveness. The new law is being criticised for creating an exclusion policy by interfering with a private employer's ease of doing business and recruitment.

  • Waiver of professional tax for monthly salary up to INR 12,000 in Gujarat

    As part of the budget for financial year 2022-23 for Gujarat, the government announced that the exemption threshold for professional tax on salaries/wages will be increased to INR 12,000 from 1 April 2022.

    Employers in Gujarat are required to deduct tax from the salary of employees and pay such tax on behalf of the employee to the authorities under the Gujarat Panchayats, Municipal Corporations and State Tax on Professions, Traders, Callings and Employment Act, 1976. Earlier, only persons earning less than INR 5,999 were exempted from the levy of professional tax. This revision in the professional tax slab brought by the budget will be a welcome change for the taxpayers.

  • Amendment to Maharashtra Shops and Establishments Act

    The government of Maharashtra amended the Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2017 (S&E Act) and mandated that the name board of every establishment registered under the S&E Act will be in Marathi language in Devanagari script. The name board may be in other languages as well, in addition to Marathi. Further, the amending Act provides that this requirement will also be applicable to establishments employing less than 10 workers, that are otherwise exempted from the provisions of the S&E Act.

  • The Jharkhand State Employment of Local Candidates in Private Sector Act, 2021

    The government of Jharkhand notified the Jharkhand State Employment of Local Candidates in Private Sector Act, 2021 (Jharkhand Act) on 4 January 2022. The Act was introduced in December 2021 and mandates 75% job reservation in companies, societies, trusts, partnership firms, etc., employing 10 or more persons in the private sector. Employers shall be required to register employees earning a gross monthly salary of not more than INR 40,000 or as notified by the government from time to time and will be exempted from the requirement to reserve such positions only if an adequate number of local candidates having the necessary skill, qualifications or proficiency is not available.

Enforcement of the new labour codes and the impact that it will have on companies' employment practices is eagerly awaited in the coming months. The four new labour codes, originally planned to be implemented in 2021, are now anticipated to take effect in 2022, although there is no official word from the government on this yet. Several states like Karnataka, Maharashtra, Haryana, etc., have released draft rules under some of the labour codes while some other states are in the process of finalising them. The labour codes will be a significant step towards the simplification, rationalisation and consolidation of the existing labour legislations. The changes that the associated delegated legislations will bring, will also be interesting to follow through the next quarter. To read our summary on the introduction of the Labour Codes, click here.

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