Indo-Japan Trade & Investment
Bulletin
October Issue
Japan Desk, Corporate Professionals

2013
INDEX
Indo-Japan Trade & Investment Highlights
Diesel Engine Leads Honda’s Resurgence in India
Japan may Import Rice Bran ...
Indo-Japan Trade & Investment Highlights

Diesel Engine Leads Honda’s Resurgence in India
Honda’s local unit has overtaken...
potential for investment in the automotive industry. Tsunemasa Teramoto, the First Secretary of
the Embassy of Japan, said...
It is understood that the talks for civil nuclear cooperation agreement will get momentum post
Abe's visit. Official sourc...
According to Akira Morikawa, Line Corporation CEO, the company had already made
investment up to one billion Yen (Rs. 62.9...
Knowledge Center

LABOUR CONTRACTS IN INDIA
The employment contracts in India are governed by the Indian Contract Act, 187...
which break-up, as the case maybe, should be clearly provided in the agreement.
Remuneration provisions not in compliance ...
(ii)

11

states that any agreement which restrains a person from exercising a lawful
professional, trade or business of a...
violation of section 27 of the Contract Act, 1872. Also, if wrongly drafted,
may be in violation of the fundamental rights...
Individual Labour Contracts vis-à-vis Collective Labour Contracts and Rules of Employee
Entering into an individual employ...
for matters connected therewith.22 The establishments covered under the CLA are required to be
registered as principal emp...
DISCLAIMER:
The document has been prepared and produced only for the information purpose only and is not
to be construed a...
CONTACT US

MUMBAI
Mastermind- I, Royal Palms Estate, Aarey Colony,
Goregaon (East), Mumbai -400065
Tel: +91 9820079664
Fa...
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India Japan Trade Investment Bulletin

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Highlights of Indo-Japan Trade & Investment Bulletin:- October 2013 (Monthly newsletter of Japan Desk of Corporate Professionals)

India- Japan Trade and Investment News

Knowledge Center: Labour Contracts in India

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India Japan Trade Investment Bulletin

  1. 1. Indo-Japan Trade & Investment Bulletin October Issue Japan Desk, Corporate Professionals 2013
  2. 2. INDEX Indo-Japan Trade & Investment Highlights Diesel Engine Leads Honda’s Resurgence in India Japan may Import Rice Bran Oil from India Hitachi Inaugurates Two Projects at Neemrana Japanese Zone ICICI Securities Ties Up With Japanese I-Bank GCA Savvian Corporation Japan’s Unicharm Corp Setting Up Rs. 250 crore Manufacturing Facility at Sri City Japan’s PM Shinzo Abe likely to be Chief Guest at Republic Day Parade Fujitsu to Triple Work Force at Rapidigm Release of Indian Films to Double in Japan Japanese App Company Line Eyes Doubling Indian User Base More Japanese Firms to Set Up Facilities in Gujarat LIXIL Corporation Acquires 70% Stake in DLF Arm Gujarat Government Plans Exclusive Zone for Japanese Companies Knowledge Centre Labour Contracts in India
  3. 3. Indo-Japan Trade & Investment Highlights Diesel Engine Leads Honda’s Resurgence in India Honda’s local unit has overtaken Tata Motors in respect of the sales volume and gained a place amongst top 3 car makers in India, driven by the popularity of its first diesel-fuelled vehicle, Honda Amaze. Honda launched the Amaze in April this year which has been a great success in the country. Honda is certain that it will be able to keep buyers interested, not only with the Amaze, but also with new products it will introduce in India. While its sales growth has primarily been driven by the Amaze, the larger City sedan has not done badly either. The Amaze has been so well-liked by the buyers that six months after its introduction, Honda still has accumulation of more than 15,000 units it needs to deliver. Honda is planning to introduce the next-generation City and Jazz cars and a multi-purpose vehicle, the Mobilio, in 2014. Japan may Import Rice Bran Oil from India Japan depends on import of edible oil for meeting nearly 60 per cent of its domestic consumption and it has shown interest in buying rice bran oil from India, known as “heart oil” in Japan. India is the second largest producer of the oil after china. However, a major hurdle for the bulk exports is the current export policy as India does not allow bulk exports of edible oils. The exports of edible oils are allowed in small packs of 5 kg with a maximum limit of 20,000 tonne. B.V. Mehta, executive Director of SEA said "We will take up the matter with the government so that rice bran oil can be exported to Japan and other countries”. Some of the Japanese producers are also looking for joint ventures with Indian companies for value-added products. Hitachi Inaugurates Two Projects at Neemrana Japanese Zone Hitachi has beefed up its presence in India as it has inaugurated two new projects in the Northern Japanese Hub in India. Speaking at the inauguration of Hitachi‟s two new projects, Allied JB Friction Pvt. Ltd. and Hitachi Chemical India Pvt. Ltd., Mr. Tanaka (Hitachi President) praised the transformation of the Japanese zone at Neemrana. He further said that India had tremendous
  4. 4. potential for investment in the automotive industry. Tsunemasa Teramoto, the First Secretary of the Embassy of Japan, said that Japan is looking forward to collaborate (with India) and invest in the automotive sector. ICICI Securities Ties Up With Japanese I-Bank GCA Savvian Corporation ICICI Securities, the investment banking subsidiary of ICICI Bank, has tied up with GCA Savvian in a bid to co-operate on possible mergers and acquisition transactions involving India and Japanese companies. GCA Savvian has extensive expertise in deal execution and industry knowledge. This is a great opportunity for both ICICI Securities and GCA Savvian. This strategic alliance will help ICICI gain entry in Japan, which is one of the leading nations in the world and is looking for acquisition opportunities in India. The partnership will help them to leverage their combined knowledge of local markets and established corporate relationships to grow cross-border M&A opportunities. Japan’s Unicharm Corp Setting Up Rs. 250 crore Manufacturing Facility at Sri City Japan-based baby care products manufacturer Unicharm Corporation is setting up its manufacturing facility at Sri City Special Economic Zone with an investment of Rs 250 crore. The company which was established in 1961 at Tokyo, Japan, is one of the world's leading companies in manufacturing and distribution of baby care products, feminine care products and pet care products. Unicharm had signed a lease agreement with Sri City for utilising 40 acres of land for its new production facility. The initial phase of the factory is planned to be completed by July 2015. During this phase it will offer jobs for around 400 persons. Ravindra Sannareddy, Managing Director, Sri City said that a production plant of this scale will certainly create plenty of jobs to the local people. The direct and indirect employment opportunities will greatly enhance the economic conditions of the people of this region, he added. By 2020, Unicharm targets to have a total turnover of Rs 90,000 crore and in this direction they are expanding their business in India. Japan’s PM Shinzo Abe likely to be Chief Guest at Republic Day Parade India's relations with Japan have been transformed during the past decade across strategic and economic spheres. Abe's visit next January will take their strategic partnership to the next level.
  5. 5. It is understood that the talks for civil nuclear cooperation agreement will get momentum post Abe's visit. Official sources point out that Abe attaches special importance to ties with India. Abe has been projecting Japan as a power willing to shed its Pacifist image in the midst of tensions with China on Senkaku Islands and seeks friendship with India to balance China's growing ambitions. Fujitsu to Triple Work Force at Rapidigm Japanese technology firm, Fujitsu, is willing to triple the work force at Rapidigm, its IT consulting arm in India, to 10,000 within two years, from around 3,000 at present. Fujitsu India's head for JOC Business, Takashi Yano said that India is the IT resource pool for the world. Government of both the countries have started working on the project post Kapil Sibal‟s visit to Japan, where he appealed to the Japanese companies to consider manufacturing in India. Both the countries have agreed to collaborate in developing technology and standards, cyber security space, policies to promote mutual investments, infrastructure promotion in the field of Information and Communication Technology. Release of Indian Films to Double in Japan Akifumi Sugihara of Japan‟s 101-year-old production studio predicts that the number of releases of Indian films will soon double in Japan. Sugihara first came to India in 2011 to attend the Mumbai Film Mart. In an interview, he talked about the market of Indian films in Japan and how increased co-productions between India and Japan can provide "a big stimulus” for Asia to form a new highly potential entertainment market. Aamir Khan‟s “3 Idiots" not just gave the Indian film industry a firm grip in Japan but also opened up Japanese viewers to comparatively traditional affairs like "Jab Tak Hai Jaan". Although Japan and India seem to be close to each other spiritually, they know little about each other. Through movies, people in both the countries will get to know each other much better and hopefully, they will share common entertainment interests through co-productions. Japanese App Company Line Eyes Doubling Indian User Base Line aims to double its user base in India to 20 million by this year end. Line started its operations in India in July this year and have a subscriber base of 10 million registered users.
  6. 6. According to Akira Morikawa, Line Corporation CEO, the company had already made investment up to one billion Yen (Rs. 62.98 crore) in India on various operations. He added the company had not experienced the kind of growth in any other country to date like it had in India, where the company will continue to focus. More Japanese Firms to Set Up Facilities in Gujarat Recently, a number of Japanese companies have announced plans to set up factories in Gujarat as the state provides good infrastructure and supportive policies. Japan is the partner country in Gujarat's National Summit on Inclusive Urban Development. Automobile firm Maruti Suzuki will open its third factory in India at a location in the state. The interest shown by the Japanese companies also underscores Gujarat's crucial role in the upcoming DMIC (Delhi Mumbai Industrial Corridor) and Dedicated Freight Corridor in which Japan is a major investor. Apart from the DMIC and the Dedicated Freight Corridor, Japanese companies are also interested in manufacturing automobile and consumer good in India. Ambassador of Japan, Takeshi Yagi said that by the end of 2013, number of Japanese companies operating in India will exceed 1,000. LIXIL Corporation Acquires 70% Stake in DLF Arm The largest housing finance and building materials company in Japan, LIXIL Corporation, has made a foray into Indian market by acquiring 70% stake in Star Alubuild, a DLF group company, for Rs 79.8 crore. The company gives top priority to develop the Indian market due to the country's fast and enormous potential for growth. Gujarat Government Plans Exclusive Zone for Japanese Companies Government of Gujarat is planning a dedicated industrial zone for Japanese companies. The process of developing the dedicated zone to facilitate setting up of medium and large scale units has been initiated by Gujarat Industrial Development Corporation (GIDC), the nodal agency for the planned industrial development in the state. Sources in the government informed that apart from ancillary units of Maruti Suzuki, a number of medium and large Japanese companies are keen to invest in Gujarat.
  7. 7. Knowledge Center LABOUR CONTRACTS IN INDIA The employment contracts in India are governed by the Indian Contract Act, 1872. An employment contract is a mutual agreement between the employer and the employee that governs the terms of employment. Similar to any other contract under the common law system, the essential requirements of the employment contracts include offer, acceptance, consideration, lawful object, competent parties and free consent. As per the law, the employment contracts may be written or oral and therefore it is not mandatory to have a written agreement to conclude an employment contract. However, in order to minimise disputes and for the purposes of dispute resolution, the employment contracts are often concluded in the form of a written agreement. It is a general practice in India to have an employment agreement with the employees. The employment contracts complying with the general principals of law of contract are legally binding on both the parties. Therefore, contractual obligations of a party to the contract may be enforced through the terms of the agreement. The law does not prescribe any specific or fixed format of an employment contract and the employers have the freedom to choose their own form. Moreover, since the law does not require an employment agreement to be in written form, it does not prescribe any mandatory contents of an employment agreement. The employment agreements must be drafted very carefully and in compliance with all the applicable laws. Although the law does not prescribe a form or even require a written agreement, various clauses of an agreement determining the terms of the employment may be subject to legal regulations. Following are the most commonly featured clauses in an employment agreement and the legal regulations governing the same: The Employee's Position and Duties: This clause usually covers the functions/ duties to be performed by the employees, his position/designation and general expectations in terms of work of the employer. Remuneration: Generally, the employment agreements in India are in the form of an appointment letter1, which usually and must very clearly mention the remuneration of the employee. Remuneration generally includes basic salary, dearness allowance, provision for bonuses2, gratuity3, contribution towards provident fund4, house rent allowance etc., “Law on negative covenants in employment contract” by Dr. R. Krishna Murthy The Payment of Bonus Act, 1965 3 The Payment of Gratuity Act, 1972 4 The Employees‟ Provident Funds and Miscellaneous Provisions Act, 1952 1 2
  8. 8. which break-up, as the case maybe, should be clearly provided in the agreement. Remuneration provisions not in compliance with applicable laws5 may render the agreement void. Working Hours, Holidays and Leave Provisions: Working hours are governed by a variety of statutes depending on the nature of the activity undertaken by the establishment.6 Generally, these statutes provide for working hour limits both on a daily and weekly basis. The normal daily hour limits range from between eight to nine hours, and the usual weekly limit is 48 hours7. Additionally, the employment agreements cover the holiday entitlement8 of the employees. Moreover, the employment agreements in India also include the clearly laid out holidays list.9 Probation Period: Probation period is another clause that is usually added in the all the employment contract. Fixing the probation period is considered as the prerogative of the employer. It usually ranges from 3 to 12 months. Code of Conduct: It may include the following subheads: duty of fidelity, duty of confidentiality and duty to protect the employer's property. The code of conduct usually forms part of human resource policies or employee handbook. Such human resource policies or employee handbook may include provision related to the protection from discrimination and harassment. Generally, most employment contracts contemplate the employee not to divulge any confidential information and trade secrets. An employee has a fiduciary duty even after termination to protect the trade secrets and other confidential information of business until and unless they are made public. Dispute Resolution: Dispute resolution clause has become the standard feature of most of the commercial agreements and employment agreements are no exception. A clear and precise dispute resolution clause to cover the cases of disputes between the employer and the employee goes a long way in resolving any disputes at early stage. An effective arbitration clause clearly laying down the procedure for appointment of arbitrator(s), number of arbitrators, place and language of arbitration proceedings and enforceability of the arbitration award has become a regular feature. Restrictive Clauses: (i) Non-compete Clause10: Non-compete post-employment provisions must be considered in the light of Section 27 of the Indian Contract Act, 1872. Sec 27 5 Note: Relevant provisions of laws such as Equal Remuneration Act, 1976, Minimum Wages Act, 1948, Payment of Wages Act, 1936, etc. should be complied with. 6 Note: For example, if the establishment is a factory, the Factories Act, 1948 (Factories Act) applies, and if the establishment is involved in a commercial activity, then the local shops and establishments statute applicable in the region in which the establishment is located applies. 7 Chapter VI, “WORKING HOURS OF ADULTS” Clause 51 of The Factories Act, 1948 8 Note: Where the employer is involved in a commercial activity, the local shops and establishments statutes be come applicable and these determine the minimum thresholds concerning holiday entitlement. The thresholds usually range from 12 to 21 days' holiday per year. Certain local shops and establishments statutes also contain provisions concerning sick leave and casual leave (which generally ranges from 12 to 24 days). Similarly, the Factories Act, 1948, the Maternity Benefit Act, 1961 and other applicable statues, as applicable, determine the minimum number of holidays that an employee is entitled to. 9 Note: These holidays differ from region to region and range from between four to ten days' holiday each year. 10 Noncompetition clauses generally provide that an employee will not join a competitor in the same business for a specific period of time
  9. 9. (ii) 11 states that any agreement which restrains a person from exercising a lawful professional, trade or business of any kind is void. The Madras High Court in Polaris Software Lab. v/s Suren Khiwadkar11 has rejected the contractual right of the company to restrain the employee from working with a competitor. In India it is a common practice to include some clauses, which may be called Non-competition and non-solicitation clauses in the employment contract. An employer wishing to justify the reasonableness of such a clause must do so based on the length of time the employee will be restricted, the geographical area concerned and its overall reasonableness. Whenever an agreement is challenged on the ground of it being in restraint of trade, the onus is upon the party supporting the contract to show that the restraint is reasonably necessary to protect his interests12. For that reason, an employer should consider the careful drafting of a non-competition provision when an employee commences employment. 13 Employment Bond: A number of knowledge based industries such as information technology, financial services sector, knowledge outsourcing service providers and other industries rely heavily on signing a bond with an employee in order to keep attrition in check. A bond may require an employee to work for a certain minimum period of time, which may be considered See 2004 I LLJ 323 Niranjan Shankar Golikari v The Century Spinning and Manufacturing Company Ltd, AIR 1967 SC 1098 13 The law in India is, therefore, very clear on the subject matter of non-competition clauses in an agreement. Non-compete agreements have regularly been held to be non-binding on the parties esp., a non-compete agreement between an employer and employee has repeatedly been held to be null and void in numerous judicial pronouncements. Indian courts have consistently refused to enforce post termination non-compete clauses in employment contracts being restraining to lawful profession under section 27 of the Contract Act and have held them as void and against the public policy for having the potential to deprive an individual of his or her fundamental right to earn a living. Upon a literal construction, section 27 of the Contract Act invalidates all agreements that impose a total bar on or restrict the exercise of a lawful business. The Supreme Court of India has examined the question whether an agreement is void under section 27 of the Contract Act must be decided upon the wording of that section alone. In the case of Superintendence Co. of India Pvt. Ltd. v. Krishan Murgai, Hon‟ble Supreme Court examined: (1) whether a post-service covenant in restraint of trade between the parties was void under section 27 of the Act; and (2) whether the said restrictive covenant, assuming it to be valid, was on its terms enforceable at the instance of the employer against the employee? The court concluded that the negative covenant during the term of the service was not in restraint of trade, and that the doctrine of restraint of trade could never apply during the continuance of the service. However, a restrictive covenant extending beyond the term of service was void as the court held, “Restrictions on competition during that period are normally valid, and indeed may be implied by law by virtue of the servant's duty of fidelity. In such cases the restriction is generally reasonable, having regard to the interest of the employer, and does not cause any undue hardship to the employee, who will receive a wage or salary for the period in question. But if the covenant is to operate after the termination of services, or is too widely worded, the Court may refuse to enforce it. It is well settled that employees covenants should be carefully scrutinised because there is inequality of bargaining power between the parties” Similarly, in the case of Desiccant Rotors International Pvt. Ltd. Vs. Bappaditya Sarkar & Anr., Delhi High Court held that restrictions in an employment agreement that interfere with the right to livelihood of the employee would be held invalid. However considering the required confidentiality and the integrity of the employments, the judiciary has inclined its view towards giving some regard to the non compete agreements. In the case of „Niranjan Shankar Golikari Vs the Century Spinning and Manufacturing Company Ltd.‟ , the Hon‟ble Supreme Court observed that-“restraints or negative covenants in the appointment or contracts may be valid if they are reasonable”. Further, in one case - V.F.S. global services Pvt. Ltd Vs Mr. Suprit Roy, the Bombay High court established the principle that a restraint on the use of trade secrets during or after the cessation of employment does not tantamount to a “restraint on trade” under section 27 of the Contract Act and therefore can be enforceable under certain circumstances. However, in Percept D'Markr (India) Pvt. Ltd vs Zaheer Khan, Hon‟ble Supreme Court held that even if a restraint is reasonable, it may still be null and void under section 27 of the Contract Act. Therefore, restrictions imposed during the term of the employment are valid, and the covenants that prohibit employees from engaging in a business similar to or competitive with that of the employer beyond the term of employment are invalid unless they can pass the reasonability test. 12
  10. 10. violation of section 27 of the Contract Act, 1872. Also, if wrongly drafted, may be in violation of the fundamental rights of citizens enshrined in the constitution of India (“Constitution”). Termination of employment: Under Indian law14, there are two types of dismissal: Ordinary dismissal and Dismissal for cause. Generally, the notice period for ordinary dismissal is one month, unless the employment contract provides for a longer notice period to be given.15 A termination clause in violation of applicable laws such as the Industrial Dispute Act, 1947 (IDA), if applicable, may render an agreement void16. Severance payments: In order to minimise the legal risks, the employers have adopted a practice of having a severance payment clause in the agreements. It specifies the severance package that an employee is entitled to in the event of termination of employment by the employer17. However, the agreement on severance package may not curtail the right of an employee to leave encashment, if otherwise eligible under the employment contract, and gratuity payment18etc. As discussed above, the agreements must be drafted very carefully to avoid violation of any applicable laws. Non-observance of legal regulations governing a specific clause may render the agreement void. Collective Agreements In India Collective agreements are entirely voluntary. However, are common in labour intensive sectors, particularly the manufacturing sectors, including: automobile industry, banking sector, pharmaceutical sector etc. In the labour intensive organizations the workers sought to organize themselves into trade unions and then the trade union enters into an agreement with the management, so that they can bargain with the management on equal terms with regard to their conditions of service and ensure job security. The Trade Union Act, 1926 provides for the registration of trade unions. The Industrial Disputes Act, 1947 has given statutory recognition and enforceability to the collective agreements by providing collective bargaining power to the workers19. 14 The Industrial Dispute Act, 1947 Note: Under certain local shops and establishments statutes the employer is also required to notify the authorities of a dismissal event. For dismissal with cause, the ordinary principles of natural justice must be followed, and once an employer has established that misconduct has been proved at an enquiry, the employer can proceed with dismissal without providing any notice period. 16 Note: Section 25A and Chapter VA and VB of the IDA governs the retrenchment of workmen at a workplace having workmen above a certain limit and provides for procedure to be followed at the time of lay-off and retrenchment. 17 Note: The employer must pay certain termination benefits, as may be applicable, to employees who are dismissed, including: leave encashment, gratuity payment and any other amounts due under the employment contract. Termination benefits are calculated on the basis of the employee's salary and length of service. However, the employer is entitled to recover any damage suffered by it on account of the employee's wrongdoing from the gratuity payment. 18 Section 4, Payment of Gratuity Act, 1972. 19 Section 36 of IDA 15
  11. 11. Individual Labour Contracts vis-à-vis Collective Labour Contracts and Rules of Employee Entering into an individual employment contract is preferable in case of employees of higher positions and in some cases ordinary workers/ employees whereas collective agreements are mostly used in case of a labour intensive industry. Both the individual employment contracts and collective agreements are enforceable as per Indian Laws. It is important to point out that although the law does not mandate a written agreement for employment contracts, certain industrial establishments employing the prescribed number of workmen must adhere to the model standing orders under the Industrial Employment (Standing Orders) Act, 1946, which lays down certain conditions of service which must be uniformly implemented across the workforce who qualify as workmen. These standing orders/service rules and regulations/employee manual should constitute the terms and conditions of employment of all employees and workmen employed in the Factory/Company. These standing orders shall come into force as provided in Section 7 of the Industrial Employment (Standing Orders) Act 1946. The Industrial Employment (Standing Orders) Act, 1946, requires employers in Industrial establishments to define precisely the conditions of employment under them and make them known to their workmen. These rules, once certified, are binding on the parties for a minimum period of six months. If a workman is employed by the management under a specific agreement, signed by both parties then, in addition to the terms and condition of service contained therein, the provisions of the standing orders shall also apply. Distinction between Employment Agreements of Different Classes of Employees The employees can be classified into two broad categories namely „management personnel‟ and „workmen‟. Managerial, administrative or supervisory employees drawing a salary of Rs.10,000/- or more per month are considered management staff/ personnel20. Typically, managerial personnel are governed by the terms and conditions of their contracts of employment, service rules and agreements negotiated with the employer, if any, and do not enjoy any additional protection of law or security of service. Workmen, on the other hand, have been defined as the class of workers performing non-supervisory work including any manual, unskilled, skilled, technical operation or clerical work for hire or reward. Workmen enjoy several protections, (majority of which deal with social security measures) benefits and amenities including terminal benefits. The employment contracts of workmen are also governed by the Contract Labour (Regulation and Abolition) Act, 1970 (“CLA”) as applicable to certain establishments21. The CLA provides for abolition of contract labour in certain circumstances and 20 Section 2(s), The Industrial Disputes Act, 1947. Previously the limit was Rs. 1600/- per month. 21 The CLA is applicable to the establishments in which 20 or more workmen are employed or were employed on any day of the months as contract labour. preceding 12
  12. 12. for matters connected therewith.22 The establishments covered under the CLA are required to be registered as principal employers with the appropriate authorities. Every contractor is required to obtain a licence and not to undertake or execute any work through contract labour, except under and in accordance with the licence issued in that behalf by the licensing officer. The licence granted is subject to conditions relating to hours of work, fixation of wages and other essential amenities in respect of contract as prescribed in the rules. The establishments covered under the shop and establishment statue are also required to be registered with the appropriate authorities within the specified period under the statue which is applicable in the state in which the establishment is located. Legality of Employment Contract Terms Indian law doesn‟t provide for any maximum or minimum term of employment. Generally the employment contracts do not have a fixed term and are open ended. However, the contracts of workers employed as casual workers or contract labour are usually of fixed term. It must be noted that if the provisions of IDA become applicable to an employer, in such cases, it is advisable that the contract labour terms are fixed for a period of less than one year. As per Section 25F of IDA no workman employed in an industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer without complying with the conditions laid out under the act. Therefore, if an employee works more than 240 days in a year, the termination of such employee as per the mutual agreement as provided in section 2(oo)(bb) of IDA may not be of any use. There is no explicit provision of law capping the times a contract can be renewed, however, it is said to be advisable to not do so beyond two times. It must be noted that apart from the procedures prescribed under CLA, as discussed above, there are no procedures required to be followed before or after execution of labour contracts. However, having said that, the regular compliances under various labour legislations are applicable as prescribed under respective legislations. 22 Note: The CLA is applicable to every establishment which is not seasonal in character that employs more than 20 workmen as contract labour in the preceding 12 months and every agency employing 20 or more workmen in the preceding 12 months. Agency workers are not treated as the employees of the establishment unless the contract between the establishment and the agency is shown to be a sham, in which case all the statutory benefits usually received by the establishment's employees will be extended to the agency workers. The duration for which the agency workers have been employed in the establishment is one of the factors that the court considers when determining whether or not an agency contract is a sham, though there is no prescribed length of service that determines that an agency worker is in fact an employee.
  13. 13. DISCLAIMER: The document has been prepared and produced only for the information purpose only and is not to be construed as an advertisement, solicitation, invitation, personal communication or inducement of any kind by the Firm, the author or any of its Partner or associates. The entire content of this document has been developed on the basis of relevant statutory provisions and as per the information available at the time of the preparation. Though the author has made utmost efforts to provide authentic information, however, the material contained in this document does not constitute/substitute professional advice that may be required before acting on any matter. The author and the firm expressly disclaim all and any liability to any person who has read this document, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this document.
  14. 14. CONTACT US MUMBAI Mastermind- I, Royal Palms Estate, Aarey Colony, Goregaon (East), Mumbai -400065 Tel: +91 9820079664 Fax: +91 9810037390 PANKAJ SINGLA Japan Desk, Corporate Professionals FARIDABAD (DELHI NCR) 565, Sector-7B, Faridabad, Haryana-121006 Tel: +91 129 4061130 Fax: +91 129 2241017 BEDFORD (United Kingdom) 2-4 Mill Street, Bedford MK40 3HD U.K. Tel: +44 (0) 2030063240 NEW DELHI (Head Office) D-28, South Extension Part - I, New Fax: +44 (0) 2030063241 Delhi – 110049 Tel: +91-11-40622200 Dir: +91-11-40622293 Fax: +91-11-40622201 Mob:+91-99715-08320 Email: pankaj@indiacp.com

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