The policy of economic liberalization, privatization and globalization introduced by the Government of India in the early nineties led to intensification of competition from several multinational companies. Domestic players were compelled to innovate and create a market for themselves in the global world. This required companies to adapt to dynamic nature of the market and engage in fixed term projects. Reduction of surplus permanent work force has been a continuous challenge for employers for the purpose of streamlining of operations. This has been possible only through twin modes of retrenchments and voluntary retirement schemes. Provisions relating to retrenchment in respect of large undertaking where more than hundred workmen have been employed are provided in Chapter VB of The Industrial Disputes Act, 1947. The procedure prescribed therein is both, cumbersome and time consuming. As a result, seasonal industries or industries involved in fixed term projects found it difficult to hire employees for specific durations.
Easing rigidity of labour laws
The need for streamlining labour laws with regard to fixed term employment has been a long felt need of the industry. One of the initial steps for achieving this was made by way of an amendment in 1984 when employees employed on fixed term basis were excluded from the definition of retrenchment by way of insertion of clause 2 (oo) (bb) in The Industrial Disputes Act, 1947. Thereafter, the Central Government notified ‘fixed-term employment’ for ‘Apparel manufacturing sector’ in February 2017. In December 2017, the Union Cabinet approved extension of fixed-term employment to leather, footwear and accessories industries.
Amendment at Central level
One of the major labour law reforms at the Central level with regard to fixed term employment has been when the Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018 were brought into force. The rules amended amend the Industrial Employment (Standing Orders) Central Rules, 1946 and came into force on 16th March, 2018. The amendment introduced Fixed Term Employment irrespective of the nature of work and made the provisions applicable to all sectors of industrial establishments. The fixed term employment envisaged in the amended provision was subject to certain conditions, inter alia, no establishment can convert the post of permanent workmen into fixed term existing as on 16th March 2018; the salary, allowances, benefits, etc., of fixed term employment workman cannot be lesser than that of permanent workmen and the fixed term employment workman will be eligible for all statutory benefits available to permanent workmen proportionately, according to the length of service even if this period of employment does not extend to the qualifying period of employment as required by that statute.
Amendment in the State of Karnataka
The Government of Karnataka has brought into force the Karnataka Industrial Employment (Standing Orders) (Amendment) Rules, 2019 by notification dated 30th June, 2020. The amendment has amended Schedule-A, titled ‘For Workmen excluding clerks and other Ministerial Staff’ to the Karnataka Industrial Employment (Standing Orders) (Amendment) Rules 1961, and inserted ‘Fixed Term Workman’ as a class of workmen under the same.
Definition and Conditions of Service of ‘Fixed Term Workman’ as per Amendment
As per the amended Rules, ‘fixed term workman’ is defined as a workman who has been engaged on the basis of a written contract of employment for a fixed period. It is stipulated that the hours of work, wages, allowances and other benefits of a ‘fixed term workman’ shall not be less than that of a permanent workman. Further, ‘fixed term workmen’ shall be eligible for all statutory benefits such as ESI, PF and gratuity available to a permanent workman in proportion to the period of service rendered by him, even if this period of employment does not extend to the qualifying period of employment required under the respective Acts. The rules also provide that the fixed term workman shall not be entitled to any notice or pay in lieu thereof, if his services are terminated as a result of non-renewal of contract or on expiry of such contract period without it being renewed. However, a ‘fixed term workman’ shall not be terminated by way of a punishment, unless he has been given an opportunity of explaining the charges of misconduct alleged against him.
As regards implementing the rules at the employer level, the employers must bear in mind that the Model Standing Order would not automatically amend the relevant provisions in the Certified Standing Orders. The company shall have to take steps to have the certified standing orders amended to include fixed term employment as a category of workman and thereafter engage workmen on fixed term in terms of the present amendments to the Model Standing Orders.
Impact of Amendment
The fixed term employment proposes a compromise between permanent employment and contract jobs. In respect of industries involved in seasonal production and firms who are engaged in project-based assignments, fixed term employment is expected to prove quite beneficial. In general, such employers will be benefitted by the freedom from intricacies relating to termination of employment and the exclusion from complying with the contract labour laws. There has been a long-standing demand of industries to exercise the right to directly engage the workmen for a period beyond 240 days and not be liable for permanence of such workmen. This has received the legislative sanction in Karnataka by way of this amendment. Fixed Term Employment will also benefit skilled workers because their skills are in demand and command high wages. Hence, they will not be frightened by the limited-duration contracts. Hence, such mechanism of engagement of workmen is expected to satisfy all stakeholders and provide competitive advantage to the Indian industry as the employers can complete the short term targets due to easy availability of fixed-term employees.
A Note of Caution
Employers looking forward to take benefit of the amendment must make sure that the Rules are not bypassed to engage employees as ‘Fixed Term Workmen’ in roles which are permanent by the very virtue of their nature, as far as the particular employer or industry is concerned. This route is neither permitted nor intended by the amendment. Further, fixed term employment cannot be extended to cases where the job continues but periodical renewals are made to avoid giving a regular status to the workmen, as the same would amount to an unfair labour practice. An Industrial Adjudicator retains the power to examine as to whether contractual employment has been resorted to as a mechanism to frustrate the claim of an employee to become permanent against the job which he continues.
