Labour and Employment

The third quarter of 2022 witnessed crucial Supreme Court rulings on atypical families and their entitlement to equal protection of law and continuity of service in cases of retrenchment. The central government introduced a new WFH rule in SEZs and issued updates regarding the Labour Codes.

Atul GuptaPartner

Parvathy TharamelCounsel

Tania GuptaAssociate

There were several important judicial developments in the field of labour and employment during the last quarter. In a ruling that is likely to forge a better path for formal recognition of atypical family structures in India, the Supreme Court observed that familial relationships may take the form of domestic, unmarried partnerships or queer relationships. Separately, the Supreme Court also ruled that continuity of service can be directed in cases where retrenchment is not bona fide. The Allahabad High Court set aside a stay on the order of termination during the pendency of court proceedings. It reasoned that an interim order can be passed by a court only in aid of the final relief and should not provide the final relief itself. On the legislative front, the Government made amendments to the Special Economic Zone (SEZ) Rules to allow work from home (WFH).

Key Developments

  • Supreme Court observes that atypical family units deserve protection of law and benefits under social welfare legislations

    In the case of Deepika Singh v Central Administrative Tribunal and Others, while holding that a woman who has utilised childcare leave to care for children from her spouse's first marriage is not disentitled from availing maternity leave for her own biological children under the Central Services (Leave Rules), 1972 (CCS Rules), the Supreme Court further observed that atypical families are also entitled to equal protection of law.

    In this case, an employee's request for maternity leave under CCS Rules for her first biological child was rejected on the ground that she had already availed childcare leave earlier to care for the two children born from her husband’s first marriage. The employee challenged this before the Central Administrative Tribunal (CAT) which dismissed her application. CAT’s decision was upheld by the Punjab and Haryana High Court as well.

    On appeal, the Supreme Court adopted the approach of purposive construction and reiterated that social welfare legislations must receive broad and liberal interpretation. The Court stressed that social legislations in the country must be purposively interpreted and should not stick to the literal bounds. The Court held that maternity leave and childcare leave are two distinct forms of entitlement. The allowance of the latter cannot be used to disentitle the employee to avail maternity leave under the CCS Rules. The Court also shed light on the concept of ‘family’ and opined that familial structures may change (e.g., take the form of unmarried partnerships or queer relationships) and courts in such situations will need to give effect to the purpose of the law in question rather than to prevent its application.

    This judgement suggests that employers would need to keep in mind redefined familial roles while extending employee benefits. While the remarks of the Supreme Court are non-binding, they are likely to fuel expectations for extension of benefits – either private or statutory - that are currently only available to employees in traditional family constructs. This judgement will likely pave the way for a more employee-friendly and inclusive welfare jurisprudence in India.

  • Supreme Court holds that continuity of service can be directed in cases where retrenchment is not bona fide

    In the case of Armed Forces Ex Officers Multi Services Cooperative Society Ltd. v Rashtriya Mazdoor Sangh, the employer had retrenched 55 employees on grounds of closure of business and offered retrenchment compensation under Section 25F of the Industrial Disputes Act, 1947. In an appeal, the Industrial Tribunal set aside the termination of employees and directed the reinstatement of most workmen with 75% of back wages and continuity of service.

    The Supreme Court, on 11 August 2022, upheld the decision of the Industrial Tribunal and stated that the retrenchment of workmen was only out of retribution against the workmen for going on strike and the entirety of the business was not lost. The Court further upheld the Tribunal's decision that retrenchment of the workmen followed by an offer of re-employment on new terms and conditions and without continuity of services evidenced the lack of bona fide intention in the act of retrenchment.

    This judgement reaffirms that it is imperative for employers to follow the due process of law in cases of retrenchment of employees.

  • Government allows work from home in Special Economic Zones

    The Ministry of Commerce and Industry issued a notification on 14 July 2022 amending the Special Economic Zones Rules, 2006 to include a new and more specific rule, Rule 43A, for governing WFH by SEZ units. Key features of Rule 43A are:

    • WFH facility may be offered to employees of the Information Technology (IT) and IT enabled services SEZ units, employees who are temporarily incapacitated, employees who are travelling and/or are working offsite;
    • A proposal to implement WFH has to be submitted to the Development Commissioner (DC) with the terms and conditions of the WFH facility and the details of the employees to be permitted to WFH;
    • The proposal for WFH may cover up to 50% of the total employees, including contractual employees;
    • Permission to WFH may be granted by the DC for a period of one year and may be extended for a period not exceeding one year at a time;
    • Employees on WFH may be provided laptop, computer and other electronic equipment with prior permission of the Specified Officer (i.e., the Joint or Deputy or Assistant Commissioner of Customs for the time being posted in the SEZ);
    • Units, whose employees are currently availing WFH facility, would be required to obtain permission under Rule 43A by submitting a proposal for permission to the DC within 90 days from 14 July 2022.

    Additional guidelines were issued by the government on 12 August 2022 providing standard operating procedure for WFH such as details required to be mentioned in the application for WFH scheme, timelines for approval of the application, etc. Further, after the meeting of the reconstituted Board of Trade in New Delhi, the Central Commerce and Industry Minister shared that the government is considering further relaxations by extending WFH facility to 100% of the workforce in all SEZs. However, an official order implementing this has not yet been issued by the government.

    Several issues regarding WFH rules in SEZs remain uncertain at this stage, including how organisations operating from SEZs, who want to operate in a ‘remote first’ or ‘work anywhere’ set up or otherwise offer flexible/hybrid working opportunities to their employees, will be able to comply with these rules.

  • Allahabad High Court rules that order of termination should not be stayed during pendency of court proceedings

    On 12 July 2022, in the case of Vice Chairman Abss Institute of Technology v State of U.P., the Allahabad High Court held that the order of suspension, termination, dismissal, transfer, etc., should not be stayed, by way of an interim order, during the pendency of the proceedings in court.

    On 23 March 2022, the High Court had stayed the termination order issued to an employee by the Vice Chairman of Abbs Institute of Technology (in April 2021) and held that the employee be permitted to perform his current duties and be paid his salary, both subject to the final outcome of the case. When this interlocutory order was challenged before the Allahabad High Court, it observed that an interim order can be passed by a court only in aid of the final relief and should not provide the final relief itself. By directing the payment of salary to the employee, the court had virtually granted the final relief which could not be done in the initial stage. Relying on various rulings of the Supreme Court, the Allahabad High Court set aside the interlocutory order staying the termination of the employee.

A rather prominent debate on ‘moonlighting’ emerged in this quarter, with various industry leaders coming out with different perspectives and approaches on it. Employers are taking a closer look at their conflict-of-interest policies to examine the contours of the outside activities that employees can and cannot be permitted to do while under full-time employment with an organisation. Does full-time employment bar an individual from taking up other forms of non-traditional employment or activities in their spare time? The limits of these policies are likely to be tested in the future. We also await the implementation of the new Labour Codes in the coming months to see how the central and state governments' efforts over the last three years finally culminate into a changed landscape for labour laws.

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