Diwan Advocates

Labour and Employment Law Practice

A technology company with 400 employees wants to retrench 80 people as part of a restructuring. It operates across three states. Three of its employees are on deputation from a subsidiary. Two are on fixed-term contracts. One has filed a complaint under the POSH Act two weeks before the retrenchment notice. The company wants to know the correct process, the notice and compensation requirements, whether the ongoing POSH complaint affects the retrenchment, and what the exposure is if any of the terminated employees challenge the decision. Each of those questions has a specific legal answer, and the consequences of getting any one of them wrong can be significant.

India's labour law framework is in transition. Four Labour Codes, enacted in 2019 and 2020, consolidate over 40 central labour statutes into a simplified structure. The Codes have received Presidential assent but their full notification depends on states finalising their rules. The result is that employers currently operate in a hybrid environment: the old statutes are still in force in most states while the new framework is being progressively implemented. Knowing which regime applies where, and how the transition works, is essential for any employer with operations across multiple states.

At Diwan Advocates, we advise employers on employment contracts, HR policies, retrenchment and closure compliance, industrial disputes, EPF and ESI compliance, POSH implementation, and gig worker classification. We appear in labour courts, industrial tribunals, EPFO forums, and the High Courts. We also advise employees and trade unions on their statutory rights.

The Four Labour Codes: What Changes and When

Parliament enacted the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020, and the Occupational Safety, Health and Working Conditions Code, 2020 to consolidate India's fragmented labour law framework. The Codes are awaiting state rules before they can be fully notified. Until then, the old statutes, including the Industrial Disputes Act, the Minimum Wages Act, the Factories Act, and the EPF Act, continue to apply in most states.

When the Codes are notified, the most significant changes include a universal minimum wage floor applying to all workers regardless of skill level, a new definition of workers that brings more categories of employment within statutory protection, revised thresholds for prior government approval before retrenchment and closure (raised from 100 to 300 workers in the Industrial Relations Code), and the extension of the social security framework to gig and platform workers for the first time.

Employment Contracts and HR Documentation

A well-drafted employment contract defines the relationship, sets out the obligations of each party, protects the employer's intellectual property and confidential information, and governs what happens when the employment ends. Standard employment agreements for India should address the applicable personal law provisions where relevant, the governing law and jurisdiction for disputes, the scope of any non-compete or non-solicitation obligation, and the IP assignment clause for work created during employment.

Non-compete clauses in employment contracts are more difficult to enforce in India than in many other jurisdictions. Section 27 of the Indian Contract Act renders agreements in restraint of trade void, and courts have consistently held that post-employment non-competes are in restraint of trade and unenforceable. Confidentiality obligations and non-solicitation of clients and employees post-employment are more likely to be enforced. We draft employment agreements that protect what can actually be protected and do not create false expectations about what cannot.

Fixed-Term Employment

The Industrial Relations Code recognises fixed-term employment as a distinct category. A fixed-term employee is entitled to the same wages and benefits as a permanent employee doing the same work and is entitled to proportionate gratuity even if the term is less than five years. Fixed-term contracts cannot be used as a device to avoid the statutory rights of permanent employees.

Retrenchment, Closure, and Standing Orders

Under the existing Industrial Disputes Act, establishments employing 100 or more workmen require prior government permission before retrenching workmen or closing the establishment. The Industrial Relations Code, 2020, once notified, raises this threshold to 300. In both cases, retrenchment requires one month's notice or wages in lieu, compensation at the rate of 15 days' wages for each completed year of service, and notification to the appropriate government. Retrenchment without following this process is illegal and the retrenched workman is entitled to reinstatement with back wages.

Standing orders under the Industrial Employment (Standing Orders) Act prescribe the conditions of employment in industrial establishments with 100 or more workmen. Every such establishment must have certified standing orders covering matters including classification of workmen, working hours, leave, disciplinary procedures, and grounds for dismissal. An establishment that dismisses a workman without following its certified standing orders, or without giving the workman a reasonable opportunity to be heard, is exposed to a reinstatement and back wages order from the labour court.

POSH: Prevention of Sexual Harassment

The Sexual Harassment of Women at Workplace Act, 2013 requires every employer with 10 or more employees to constitute an Internal Complaints Committee with a woman as its presiding officer. Every employer is required to conduct annual awareness programmes and to submit an annual report to the District Officer. The ICC must complete its inquiry within 90 days of receiving a complaint and submit its report with recommendations to the employer.

POSH compliance failures carry significant consequences: penalties for the employer, personal liability for the presiding officer in some circumstances, and serious reputational risk. We advise employers on constituting legally compliant ICCs, conducting POSH training, drafting POSH policies that go beyond the statutory minimum, and managing the investigation process when a complaint is received. We also advise employees who need to understand their rights in the complaint process.

EPF, ESI, and Gratuity Compliance

The Employees' Provident Fund applies to establishments with 20 or more employees. Both employer and employee contribute 12 percent of the basic wage to the EPF. The employer also contributes to the Employee Pension Scheme and the EDLI insurance scheme. EPFO inspections and demand notices for shortfall in contributions, including on the question of what amounts constitute basic wages for EPF purposes, are a common source of compliance disputes for employers.

The Employees' State Insurance Act applies to establishments with 10 or more employees where employees earn below the wage ceiling. ESI provides medical, disability, maternity, and dependants' benefits funded by employer and employee contributions. Gratuity is payable to all employees who have completed five years of continuous service, at the rate of 15 days' wages for each year. We advise on EPF and ESI compliance, defend employers in EPFO and ESIC proceedings, and advise on gratuity calculation disputes.

Gig Workers and the New Economy

The Code on Social Security, 2020 defines gig workers as persons who perform work or participate in a work arrangement and earn from activities outside of traditional employer-employee relationships. Platform workers are gig workers who work through digital platforms. The Social Security Code, once notified, will require the Central Government to frame welfare schemes for gig and platform workers covering life and disability insurance, health and maternity benefits, and old age protection. Platform aggregators will contribute a specified percentage of their annual turnover to the social security fund.

The classification of app-based workers as employees versus independent contractors is a live and commercially significant question. Workers classified as employees have statutory rights to minimum wages, EPF, gratuity, and industrial dispute protection. Workers classified as contractors do not. Courts and tribunals are increasingly looking at the substance of the relationship rather than its label, and platforms that misclassify employees as independent contractors face retrospective compliance liability.

Why Diwan Advocates for Labour and Employment?

Legislative Reference Index

Labour disputes are expensive, disruptive, and often avoidable.

The best employment law advice is the kind that prevents problems before they reach a tribunal.

Diwan Advocates provides that advice.

Diwan Advocates  |  Delhi, India