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CHANAKYA NATIONAL LAW UNIVERSITY

FINAL DRAFT SUBMITTED IN THE FULFILMENT OF THE COURSE

“LABOUR LAW - I”

TITLED-

“Law Relating To Hiring And Firing Of Workmen”

SUBMITTED TO:-

Ms. PALLAVI SHANKAR

FACULTY OF LABOUR LAW – I

SUBMITTED BY:-
SUVAM KISHORE
ROLL NO:-1768
SEMESTER: - 4th

SESSION: - 2017-2022
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DECLARATION BY THE CANDIDATE

I hereby declare that the work reported in the B. A. LLB (Hons.) Project Report entitled
“Law Relating To Hiring And Firing Of Workmen” submitted at Chanakya National Law
University is an authentic record of my work carried out under supervision of Ms. Pallavi
Shankar have not submitted this work elsewhere for any other degree or diploma. I am fully
responsible for the contents of my project report.
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ACKNOWLEDGEMENT

I would like to thank my faculty Ms. Pallavi Shankar whose guidance helped me a lot with
structuring my project.

I owe the present accomplishment of my project to my friends, who helped me immensely

with materials throughout the project and without whom I couldn’t have completed it in the
present way.

I would also like to extend my gratitude to my parents and all those unseen hands that helped
me out at every stage of my project.

Thank You,
Name-: Suvam Kishore
Course:- B.A., Ll.B. (Hons.)
Roll No:- 1768
Semester:- 4th
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TABLE OF CONTENTS

 Introduction

1. Social justice and labour law

2. Hiring of employee
 Legal requirements
 Mandatory requirement
3. Firing the employee
 Procedure for terminating the agreement
 Instant dismissal
 Termination on notice
 Termination due to age
4. conclusion

 Bibliography
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1. Introduction

Indian Labor and Employment Law is among one of the most complex in the world and
therefore employers in India have to exercise great caution while hiring and managing
employees. As any firm hire, it is mandatory to conform to various central and state
regulations that ensure employees are well protected and has access to various. There are
regulations that one need to conform when any firm could hire such contracted labor.
Workers are more aware of their rights under the law—and they’re more likely to seek the
advice of an attorney if they think they’ve been wronged by their employer. As a result:
Many workers are getting even by suing their employers for wrongful discharge or
discrimination. This paper reviews the legal prospective regarding the hiring and firing
aspects in firms according to different laws in India.

According to Indian Labour and Employment Laws there are three main categories of
employees: government employees, employees in government controlled corporate bodies
known as Public Sector Undertakings (PSUs) and private sector employees. The rules and
regulations governing the employment of government employees are covered under the
Constitution of India. Accordingly, government employees enjoy protection of tenure,
statutory service contentions and automatic annually salary increases. Public sector
employees are governed by their own service regulations, which either have statutory force,
in the case of statutory corporations, or are based on statutory orders. In the private sector,
employees can be classified into two broad categories namely management staff and
workman. There is no statutory provisions relating to their employment and accordingly in
case of managerial and supervisory staff/employee the conditions of employment are
governed by respective contracts of employment and their services can be discharged in
terms of their contract of employment.1 Many employees don’t know what are their rights
and what the Indian laws says to protect their rights, it’s very important to know the rights as
an employees in any firm, people join firms but they are unaware of the laws related to their
hiring and firing, due to which many employers exploit there employees, in government
sector such cases are less but in privet sector they are many, this paper focuses on the laws in
India which were formulated to protect employees from illegal firing and other legal aspects

1
Dakin, Stephen; Armstrong, J. Scott (1989). "Predicting job performance: A comparison of expert opinion and
research findings" (PDF). International Journal of Forecasting. 5 (2): 187–94. doi:10.1016/0169-2070(89)90086-
1
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related to hiring and firing of employees. While hiring employee whether on full time
bases/directly hiring, or on permanent or fixed term basis or on temporary period all the laws
potentially be applicable. Till now there are no specific laws in India, which could provide
procedure or manner for hiring employees in private sector. Organizations hire employees on
permanent basis or contract basis, the employee could be hired through newspaper
advertisements, recruitment firms, online job portals, personal networks. A permanent worker
can be terminated only for proven misconduct of for habitual absence from work. The terms
of the employment, either on contract basis or permanent employee basis, would be governed
by the contract between the organisation and the employee. However, the Local Shops and
Establishments Act also plays an important role for such provisions.2

According to labour laws in India certain conditions were laid down for legal termination of
any worker/ employee, which firms should follow, other than these the termination would be
treated as illegal in law. Following are the laws which are related to termination of employee/
worker in different sectors.

2
"Bill Clinton for President 1992 Campaign Brochure". 4president.org. 2007-09-22. Archived from the original
on 2014-02-27. Retrieved 2013-11-29.
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AIMS AND OBJECTIVES

After studying this lesson, you will be able to:

• Discuss the provision relating to hiring and firing of workmen in India

• study provision relating to workmen and who can be under the perview of workmen

RESEARCH METHODOLOGY

This project is based mainly and heavily on written text material. It is based on the doctrinal
method of research. The segments are structured and written actively. The writing style is
descriptive as well as analytical. This project has been done after a thorough research based
upon intrinsic and extrinsic aspect of the assigned topic. The doctrinal method in this research
paper refers to various books, articles, news paper, magazine, Dictionary and political review.
In this research paper, the researcher will only use Doctrinal method.

HYPOTHESIS

There is a uniform provision relating to hiring and firing of workmen in India .

SOURCES OF DATA

The researcher will be relying on both primary and secondary sources to complete the
project.

1. Primary Sources : Books.

2. Secondary Sources :Material available on the internet.

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LIMITATIONS OF THE PROJECT

The researcher has territorial and monetary limitants in completing the project at hand
morever, taking the time into consideration, the researcher has to rely upon the doctrinal
method of research.
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1. Social justice and labour law

The Constitution of India has solemnly promised to all its citizens justices-social, economic
and political; liberty of thought expression, belief, faith and worship; equality of status and of
opportunity; and to promote among the all fraternity assuring the dignity of the individual and
the unity of the nation. The Constitution has attempted to attune the apparently conflicting
claims of socio-economic justice and of individual liberty and fundamental rights by putting
some relevant provisions.

Article 19 enshrines the fundamental rights of the citizens of this country. The seven sub-
clauses of Article 19(1) guarantee the citizens seven different kinds of freedom and recognize
them as their fundamental rights. Article 19 considered as a whole furnishes a very
satisfactory and rational basis for adjusting the claims of individual rights of freedom and the
claims of public good.

Articles 23 and 24 provide for fundamental rights against exploitation. Article 24, in
particular, prohibits an employer from employing a child below the age of 14 years in any
factory or mine or in any other hazardous employment. Article 31 makes a specific provision
in regard to the fundamental right to property and deals with the vexed problem of
compulsory acquisition of property.

Article 38 requires that the state should make an effort to promote the welfare of the people
by securing and protecting as effectively as it may a social order in which justice social,
economic and political shall inform all the institutions of national life. Article 39 clause (a)
says that the State shall secure that the operation of the legal system promotes justice, on a
basis of equal opportunity, and shall, in particular provide free legal aid, by suitable
legislation or schemes, or in any other way, to ensure that opportunities for securing justice
are not denied to any citizen by reason of economic or other disabilities.3

Article 41 recognizes every citizen's right to work, to education & to public assistance in
cases of unemployment, old age, sickness & disablement and in other cases of undeserved
want. Article 42 stresses the importance of securing just and humane conditions of work &
3
Kaufman, Bruce E. (2004) Theoretical Perspectives on Work and the Employment Relationship, Industrial
Relations Research Association
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for maternity relief. Article 43 holds before the working population the ideal of the living
wage and Article 46 emphasizes the importance of the promotion of educational and
economic interests of schedule castes, schedule tribes and other weaker sections.

The social problem presented by the existence of a very large number of citizens who are
treated as untouchables has received the special attention of the Constitution as Article 15 (1)
prohibits discrimination on the grounds of religion, race, caste, sex, or place of birth. The
state would be entitled to make special provisions for women and children, and for
advancement of any social and educationally backward classes of citizens, or for the SC/STs.
A similar exception is provided to the principle of equality of opportunity prescribed by
Article 16 (1) in as much as Article 16(4) allows the state to make provision for the resolution
of appointments or posts in favour of any backward class of citizens which, in the opinion of
the state, is not adequately represented in the services under the state. Article 17 proclaims
that untouchability has been abolished and forbids its practice in any form & it provides that
the enforcement of untouchability shall be an offence punishable in accordance with law.
This is the code of provisions dealing with the problem of achieving the ideal of socio-
economic justice in this country which has been prescribed by the Constitution of India.
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2. Hiring of employee

The labour enactments in India, is divided into 5 broad categories, viz. Working Conditions,
Industrial Relations, Wage, Welfare and Social Securities. The enactments are all based upon
Constitution of India and the resolutions taken in ILO conventions from time to time. Indian
labour law refers to laws regulating employment. There over fifty national laws and many
more state-level laws. Traditionally Indian Governments at federal and state level have
sought to ensure a high degree of protection for workers through enforesement of labour
laws. While conforming to the essentials of the laws of contracts, a contract of employment
must adhere also to the provisions of applicable labour laws and the rules contained under the
Standing Orders of the establishment. Indian labour laws divide industry into two broad
categories:

1. Factory Factories are regulated by the provisions of the Factories Act, 1948 (the said
Act). All Industrial establishments employing 10 or more persons and carrying
manufacturing activities with the aid of power come within the definition of Factory.
The said Act makes provisions for the health, safety, welfare, working hours and
leave of workers in factories. The said Act is enforced by the State Government
through their ‘Factory’ inspectorates. The said Act empowers the State Governments
to frame rules, so that the local conditions prevailing in the State are appropriately
reflected in the enforcement. The said Act puts special emphasis on welfare, health
and safety of workers. The said Act is instrumental in strengthening the provisions
relating to safety and health at work, providing for statutory health surveys, requiring
appointment of safety officers, establishment of canteen, crèches, and welfare
committees etc. in large factories. The said Act also provides specific safe guards
against use and handling of hazardous substance by occupiers of factories and laying
down of emergency standards and measures.

2. The Shops & Establishment Act The Shops and Establishment Act is a state
legislation act and each state has framed its own rules for the Act. The object of this
Act is to provide statutory obligation and rights to employees and employers in the
unauthorized sector of employment, i.e., shops and establishments. This Act is
applicable to all persons employed in an establishment with or without wages, except
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the members of the employers’ family. This Act lays down the following rules: •
Working hours per day and week. • Guidelines for spread-over, rest interval, opening
and closing hours, closed days, national and religious holidays, overtime work. •
Employment of children, young persons and women. • Rules for annual leave,
maternity leave, sickness and casual leave, etc. • Rules for employment and
termination of service. The main central laws dealing with labor issues are given
below: - 1. Minimum Wages Act 1948 2. Industrial Employment (Standing orders)
Act 1946 3. Payment of Wages Act 1936 4. Workmen’s Compensation Act 1923 5.
Industrial Disputes Act 1947 6. Employees Provident Fund and Miscellaneous
Provisions Act 1952 7. Payment of Bonus Act 1965 8. Payment of Gratuity Act 1972
9. Maternity Benefit Act 1961.
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3. Firing the employee

Indian Labour Laws does not include the employees who are employed in the corporate
sector (white collar employees) who basically do the administrative and managerial work.
The Legislations basically only includes the “workmen” who are majorly employed in the
Industrial sector and earn low wages as compared to the Corporate Sector.

Private sector employees can be management staff or workmen. The term ‘workman’ has
been defined under the Industrial Disputes Act, and would mean all persons employed in any
industry but does not include an employee who is in a managerial, administrative or
supervisory role. The workmen are governed by labour laws like the Factories Act, the
Payment of Wages Act, etc. The non- workmen are governed mostly by their employment
contract and the Shops and Establishment Act of the state in which they work.4

The employment agreement lays down the conditions for dismissal of an employee from the
services. Usually, termination takes place as misconduct, discharge or retrenchment.

They are related to misconduct, non-performance, lying about qualifications or experience,

statutory restrictions, undisclosed information, information theft, willful insubordination or
disobedience, fraud or dishonesty, willful damage or loss of employer’s property, bribery,
habitual lateness or absence, striking unlawfully and sexual harassment, etc. But these are the
fair reasons for the dismissal of an employee. Types of Termination of employment
Termination of employment may take place due to misconduct, discharge or retrenchment.

Termination of employment can be for misconduct, for which the employer is required to
conduct disciplinary proceedings. The procedure to terminate an employee in India, for
conducting a disciplinary proceeding has been set out under the law. It includes constituting
and having a disciplinary panel, serving a show cause notice to the errant employee, and
giving the employee a reasonable chance to put forth his defense. Proceedings have to be
conducted in a fair manner, keeping in mind principles of natural justice.

4
"Bill Clinton for President 1992 Campaign Brochure". 4president.org. 2007-09-22. Archived from the original
on 2014-02-27. Retrieved 2013-11-29.
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In some cases, the outcome of the disciplinary proceeding may justify dismissal without
notice, and any compensation. Under law, the term misconduct provides a list of
circumstances and events which would amount to misconduct. It is an inclusive list, and
hence, employers have the right to include in their company policies/ service rules, such other
events, as it may deem fit, which would in their line of business, amount to misconduct.
Misconduct includes wilful insubordination or disobedience; theft, fraud or dishonesty; wilful
damage or loss of employer’s property; bribery; habitual lateness or absence; striking
unlawfully and sexual harassment.5

The aforesaid procedure for termination will apply to all employees whether workman or
non-workman.

Discharge
The termination of employment of employees who are not workman are governed by the
notice period in their employment contract, and the shops and establishment act (“S&E’”) of
the State in which they work. Generally, the State S&E’s provide for at least one month’s
notice of termination, or pay in lieu of termination, and in some instances, termination needs
to be with cause, and in some other cases, the employer needs to pay compensation for
terminating the employment. The notice of dismissal under an employment contract should
not be less favourable than what is prescribed under law.

Retrenchment
The ID Act sets out the steps to be undertaken for retrenchment. The term retrenchment has
been defined to mean termination by the employer of employment of a worker for any reason,
other than disciplinary grounds, with certain exceptions.

An employer who proposes to retrench a workman, who have been continuously employed
for more than one year, must give one month’s notice (together with the reason for the
retrenchment) or pay in lieu of such notice to the workman. The employer must also inform
the local labour authorities of the retrenchment within a stipulated time frame.

5
Walker, Rob (3 August 2018). "Why 'Can I Sue My Employer?' Is Often the Wrong Question". The New York
Times. Retrieved 2018-08-12. Ms. Nielsen, who is one of the authors of the recent book “Rights on Trial,” a
critique of workplace discrimination law, has encountered the same phenomenon in her research. “Plaintiffs’
lawyers say this is the most important thing that ordinary people do not understand about the law,” she said.
“You do not have the right to a fair workplace. You have the right to a nondiscriminatory workplace.”
 P a g e | 15

In case you are preparing for a Government Exam, here are the ones sorted with best salary.

Rules for Retrenchment Compensation

Additionally, employers are also obliged to apply the “last in-first out” rule in selecting the
workman for retrenchment except for reasonable cause. A retrenched workman is entitled to
retrenchment compensation as per the provisions of the ID Act, which is calculated at the rate
of 15 days wages for every year of continuous service. Certain establishments (factories,
mines, plantations) employing over 100 workers may not be retrenched unless three months’
written notice, stating reasons for the retrenchment, or pay in lieu of notice, is given to the
worker. Furthermore, prior approval from the relevant governmental authority must be taken
before the retrenchment is made.

Severance Pay
Upon termination of employment of any employee, the employer is required to clear all dues,
which are payable to the employee at the time of the termination. Some of these payments are
as follows:

1. Notice pay, where notice of termination has not been given;

2. Salary for the days worked, but not paid for, during the month where the employee has been
terminated;
3. Payment of gratuity for employees who have completed at least 5 years of service, in terms of
the Payment of Gratuity Act 1972. This act is applicable to establishments which have 10 or
more employees. The gratuity is calculated at 15 days salary for every completed year of
service;
4. Leave encashment, for the leaves accrued, but not used by the exiting employee;
5. Statutory bonus, if the employee is eligible for the same. Employees who are earning up to
Rs. 10,000 per month and who has worked in an establishment for not less than 30 working
days in a financial year will be entitled to statutory bonus under the Payment of Bonus Act,
1965;
6. Retrenchment compensation, if the employee is a workman, and his services have been
retrenched;
7. Such other dues that may have been contractually agreed between the employer and the
employee, or is payable under the employer’s company policies;
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8. Assist the employee in making applications to the appropriate authority, for withdrawal of the
provident fund dues, accumulated to the credit of the existing employee.
There may be other dues payable, and such will vary from employment to employment 6

6
Prial, Frank J. (18 June 1991). ""Among Those Let Go, the Pink Slip Itself"". The New York Times. Retrieved
2008-10-22.
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4. Conclusion

Broadly speaking, the pursuit of industrial welfare might be expected to involve the
amelioration of all those conditions that combine to determine the well-being of the industrial
worker and his family. Any consideration of industrial welfare in China ought then to take
into account the origins and skill level of workers, the extent of urban-rural mobility, hiring
practices involved in apprenticeship, the labor contract system, and the letting of outwork, the
employment of women and children, hours, days of rest, and holidays, rates of pay, the cost
of living, the measure of unemployment, factors affecting workers' health and safety, the
quality of housing available, the accessibility of education, the provision, if any, of welfare
facilities by the employers, and the existence and enforcement of legislation to govern
conditions of labor. Any organization concerned with the welfare of labor might also be
expected to get in touch with the organizations of labor, to ascertain what working people
themselves were doing to improve their lot.
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Bibliography

 Books

 Singh, V.B. and Saran, A.K, (ed.). Industrial Labour in India, Asia Publishing

House, New Delhi, 1960.

 Mishra, S.N., Labour and Industrial Laws, Allahabad Law

Agency,Allahabad,1997

 Sinha, G.P. and Sinha, P.R, Industrial Relations and Labour Legislation,
Oxford & IBH Publishing Co, New Delhi, 1977.

 Agarwal, D.R., Labour Problems, Social Welfare and Security, Forward

Publishing Company, New Delhi, 1996

 Websites

 www.labour.nic.in

 https://en.wikipedia.org/wiki/Labour_Labour_law_history

 http://en.wikipedia.org/wiki/International_Labour_Organization#cite _ref-16
 https://www.legalcrystal.com/cases/search/name:factories-act-1948-main