LEGAL NEWS

Labor Act, 2017 (2074) – Major Highlights

September 7, 2017
The Labor Act, 2017 (2074) ("New Labor Act") was passed by the Parliament on August
11, 2017 (Shrawan 27, 2074) and accorded the assent by the President on Sept. 04,
2017 (2074-05-19). The New Labor Act is now effective from the date of assent by the
President by virtue of Section 3 (f) of the Interpretation of Statute Act, 1953 (2010). The
New Labor Act has repealed the Labor Act 1992 (2048) (the "Previous Act"). The New
Labor Act has brought complete change in employment regime in Nepal. The major
provisions of the New Labor Act are briefly outlined below.
 
1.      Applicability of the New Labor Act
 
Definition of Entity
The New Labor Act is applicable to entity, which has been defined to include company,
private firm, partnership firm, cooperatives, association or other organization ("entity")
in operation, or established, incorporated, registered or formed under prevailing laws
to undertake industry or business or provide service with or without profit motive.
Head Count Threshold
The New Labor Act has removed the head count requirement for applicability. The
New Labor Act is applicable to all entities regardless of number of labors
(worker/emploees). Previous Act was applicable only to entity where ten (10) or more
people engaged in the work.
However, the threshold of head count continues for certain arrangements to be made
in the entity such as an entity having ten (10) or more workers should constitute a
collective bargaining committee, labor relations committee etc.
Entity Registered in Foreign Country:
The New Labor Act has made provisions in relation to settlement of dispute with the
entity registered in foreign country however, undertaking sales and and market
activities in Nepal through representative or hiring labor in Nepal. In accordance with
the New Labor Act the representative or the labor hired by the foreign entity may file
complaint before Labor Office or Labor Court if such entity violates the terms and
conditions of the employment agreement.
Domestic Workers
The New Labor Act also deals with domestic workers. The New Labor Act has made
certain provisions relating to domestic workers. For example, the New Labor Act
provides that the minimum remuneration of such workers, public and weekly holidays
should be as prescribed. The employer can deduct the expenses incurred in providing
food and lodging from the remuneration if such is provided. Domestic workers should
be allowed to celebrate festivals as per their culture, religion, tradition.
Exempted Entity:
The New Labor Act is not applicable to civil service, armed force etc. It is also not
applicable to entities incorporated under other prevailing laws or special economic
zone, provided that terms and conditions of services in those entities have been
covered in other prevailing laws. The Working Journalists are also not governed by the
New Labor Act, unless the employment contract specifically provides for the
applicability of the New Labor Act.
The New Labor Act does not specifically provide its application to the persons working
with the foreign diplomatic missions. The foreign missions are exempt from local laws
and jurisdiction which of course may be extended to the employment matters in
Nepal.
 
2.      Hiring
 
Employees
 The New Labor Act has provided flexibility in hiring providing different modes of hiring
as per the requirement of the entity:
Regular Employment: the person hired for the work or service other than work
based, time bound, casual or piece rate employment.
Work Based Employment: the person hired for carrying out specific work or
rendering specific service.
Time bound Employment: the person hired for carrying out work or rendering
service for definite period.
Casual Employment: the person hired to carry out the work or rendering service for
seven or less days in a month.
Part -time Employment: the person who is hired in such a manner that he works for
35 hours or less in a week.
The Part-time worker cannot be restricted to work in other places. The remuneration
of such part time worker shall be on the basis of the hours he/she works unless
otherwise provided in the employment agreement. The remuneration shall be
determined on the basis of remuneration of regular employee engaged in similar work.
The part time worker shall be entitled to social security benefits.
Intern- The New Labor Act has introduced the concept of intern according to which
any person may be allowed to work as intern pursuant to the approved syllabus of any
educational institution after concluding the agreement with that educational
institution. The interns shall not be engaged at work exceeding 8 hours a day and 48
hours a week. Interns are entitled to health and safety arrangements, and to medical
expenses and compensation in case of injury at work. The intern shall be deemed
regular employee if engaged in work other than prescribed in
Trainees -The New Labor Act also covers the trainees engaged in a work. The
employer may also appoint a trainee to work, provided that the training period should
not exceed more than a year. However, training for specialized work whose time
period has been assigned by law is not regulated by this provision. The trainee should
be provided with social security benefits including provident fund, gratuity, and
minimum remuneration. The employer is not obliged to appoint the trainee as regular
employee upon the completion of training period. However, if such trainee is
appointed, he/she shall not be kept in probation.
There was no such classification in the Previous Act and the Previous Act did not
regulate the intern and trainee.
 
Outsourcing
The Previous Act has no provision for outsourcing of jobs/services. The practice of
outsourcing however, it had judicial baking and allowed to outsource certain manual
works such as security personnel, drivers, cleaning staffs, messengers etc. The New
Labor Act deals with outsourcing arrangement.
Work for Outsourcing:  the outsourced laborers can be engaged in the works other
than core work of the entity. The work that can be carried out by the outsourced
laborers can is as prescribed in the Nepal Gazette.
Outsourcing Agency: The company licensed by the Labor Office or Labor Department
can provide manpower to another entity. The existing manpower suppliers are
required to be registered and obtained license within six (6) months from the date of
commencement of the New Labor Act.
Restriction: A company cannot supply manpower for more the two works or services.
The New Labor Act has also restricts to avail the laborers from the labor supplier
where the Main Employer, his management or family members are involved.
Obligation of the Main Employer: The Main Employer (the person providing work to
the outsourced laborers) should obtain laborers from the licensee Labor Supplier. If
the laborers are availed from outsourcing agency without licensed for Labor Supply the
laborers are deemed to be the workers of the Main Employer. The Main Employer may
engage laborers supplied by Labor Supplier entering into agreement with the Labor
Supplier. The agreement should ensure that the laborers will not be provided the
remuneration and facilities below the minimum remuneration and benefits prescribed
in the New Labor Act. The Main Employer should regularly obtain the information if the
Labor Supplier is providing such remuneration and benefits regularly. The Main
Employer is required to inform the Labor Office or Department if the Labor Supplier
has not provided outsourced labors the remuneration and benefits. Further, the Main
Employer is required to adjust the increment if the minimum remuneration and
benefits are increased in accordance with the laws.
Obligation of Labor Supplier: Labor Supplier must obtain a license to operate its
business. Only after the Labor Supplier furnishes the security or bank guarantee, the
Labor Office or Department issues the license. Labor Supplier should provide the
remuneration and other facilities to such outsourced workers. The license of the Labor
Supplier can be terminated on non-payment of remuneration and other benefits. The
Labor Supplier can be fined up to Rs. 25,000 for violating any regulation or directives
framed under the Nee Labor Act. In case of liquidation of the Labor Supplier, the
workers shall be paid the outstanding remuneration and facilities within 15 days. If the
the Labor Supplier fails to make such payment, the payment shall be done from the
security or bank guarantee furnished.
Hiring Foreign Nationals
The New Labor Act continues the general terms of hiring of foreign nationals by a local
entity that the foreign national can only be hired if local skill sets are not available for
the job.  In additional to the general rule of hiring of the foreign nationals the New
Labor Act also provides certain new provisions such as flexibility on work permit for
certain entities the language of employment agreement, repatriation of salary and
terms and condition of service etc. The provisions are  briefly summarized below.
General Provisions: No foreign nationals can be engaged in work without having
obtained the work permit from the Department. Prior to engaging a foreign national in
work, the entity must publish an advertisement in national level Daily Newspaper to fill
the vacant posts by Nepali citizens. If no application is submitted or if no local skill set
is available for any work after the vacancy publication foreign national can be hired for
the work with the approval of Labor Department. This provision is similar to that of the
Previous Act.
Entity with foreign investment or operating on foreign aid: Work permit to the
foreign nationals hired as the chief executive may be provided by simply recording
them at the Department. The work permit may also be provided in the same manner
to the employees for such number as prescribed.
Work Permit for technicians for short period: Technicians engaged for less than
three (3) months to carry out repairing of any machinery or installing new technology
or similar casual work may be provided work permit simply by recording in the Labor
Department.
Employment Agreement: As per the New Labor Act, no foreign national can be
engaged in work without the employment agreement which should be entered into
either in language understandable by such foreign national or in English language.
Unless otherwise provided in the agreement, the employment agreement continues
for three years.
Repatriation of Income: The foreign nationals can repatriate their income in
convertible foreign currency.
Work Permit Exemption:  The foreign nationals having diplomatic immunity or the
foreign nationals who are exempted from work permit under the treaty or agreement
entered into with Nepal government are exempted from work permit requirement.
Probation Period
            The New Labor Act has shortened the probation period as shown in the table
below:

Previous Act New Labor Act

1 year (240 days) 6 months

 
3.      Working Hours
 
Working Hours continue to be 8 hours a day and 48 hours a week. Overtime has been
increased to 24 hours per week from 20 hours a week.
Unlike the Previous Act, the New Labor Act simply requires to make arrangement for
transportation while engaging a female employee in such a way that the working
period begins or ends before the sunrise or after the sunset.
 
4.      Leave & Holidays
 
            There have been major changes in maternity leave, sick leave and accumulation
of leave in the New Labor Act.  It also provides additional category of leave such as
paternity leave which was not there in the Previous Act. The comparison of leave is
given in the following table.       

Heading Previous Act New Labor Act

Weekly Off 1 day every week 1 day every week

13 days
Public
13 days 14 days including International Women
Holidays
Labor Day for female employees

1 day for every 20 worked

Home Leave 1 day for every 20 worked days
days

Fully paid up to 12 days

Half paid up to 15 days
Sick Leave Eligibility: on a proportional basis for
Eligibility: completion of 1
those employees who has not
year of service
completed 1 year of service

Maternity up to 52 days
up to 14 weeks, fully paid for 60 days
Leave fully paid

Paternity
No up to 15 days, fully paid
Leave

Mourning
13 days 13 days
Leave

Leave in lieu No For the laborers put in work on public

 holiday or weekly off

30 days in a year, not

Special Leave exceeding 6 months in total No
service period-unpaid

Home Leave- 90 days

Home Leave - Up to 60 Sick Leave- 45 days
Accumulation
days
Excess Accumulation- Encashed every
year.

 
The Act has also made it compulsory maternity leave from 2 weeks before the delivery
up to at least 6 weeks after the delivery.
 
5.      Terminal Benefits
 
            There have been also major changes in the terminal benefit provided to the
employees such that the benefits are provided to each laborers irrespective of length
of service or nature of employment. The Previous Labor Act provided the terminal
benefits to the permanent employee and for certain benefits such as gratuity the
employee should have completed certain year of services. The eligibility criteria have
been removed by the New Labor Act. There have been also changes in the benefits
such as rate of gratuity and leave encashment etc. The benefits have been compared
in the following table.

Heading Previous Act Act

Contribution: 10% by employer

and 10% by employee of the basic The Act has continued the same
Provident remuneration of the  concerned provision. Such amount should be
Fund employee. deposited in the Social Security Fund.
Eligibility: permanent r employee

Gratuity Rate of Gratuity: Rate of Gratuity: 8.33% of basic

remuneration
for the first 7 years of service: an
amount equal to a half a month  
 salary of the relevant year for each
year of service.
for more than 7 up to 15 years
service: an amount equal to a two
third of a month salary of the
relevant year for each year of Time of Allocation: Every month (time
service of payment of remuneration)
for service exceeding 15 years: an  
amount equal to one-month salary
of the relevant year for each year Eligibility: since the first day of
of service. employment

Time of Allocation: Every year

 
Eligibility: completion of 3 years of
service

Accumulation: 

Accumulation- Home Leave up to -Home Leave up to 90 days

60 days. -Sick Leave up to 45 days
Leave
Encashment  Encashment at the time of  
discontinuation of service as per
the last drawn salary. Encashment -at the time of
discontinuation of service at the rate
of last drawn salary.

 
6.      Other Benefits

Headings Previous Act New Labor Act

Allocation of 5% of gross
Housing Fund profit to provide housing No.
to the worker/employees.

Festival Expenses No. Amount equivalent to the

monthly remuneration
once a year. The
employee not completing
 1 (one) year service is
entitled to the expenses
on proportional basis.

If disability is caused by
accident while on duty to
any employee or worker,
he/she is entitled to
disability compensation  from insurance amount
Disability Compensation depending on degree of on the basis of degree of
disability. For 100% disability
disability a lump sum
amount equivalent to 5
years’ salary should be
paid.

The Proprietor should pay

the whole amount
incurred on treatment of
worker or employee as
compensation in case
Compensation against such worker or employee
from insurance amount
Injury is injured while doing a
work designated by Entity,
on the recommendation
of the medical practitioner
recognized by
Government of Nepal.

The entity is to be pay the

nearest successor of an
The Act provides that the
employee who dies while
nearest successor is
Death Compensation on duty a lump sum
entitled to the amount of
amount equivalent to 3
accident insurance.
years’ salary of such
employee.

Medical Insurance No. Coverage: at least one

hundred thousand rupees
(Rs. 100,000) per year for
 every worker
Premium: half by the
employer and half by the
employee

Coverage: at least seven

hundred thousand rupees
(Rs. 700,000) for every
Accident Insurance No. worker
Premium: fully paid by
employer

           
 
7.      Safety and Health Arrangement
 
Formulation of Safety and Health Policy: As per the New Labor Act, the entity should
formulate the safety and health policy as per the Regulation or Directive. Such policy
should be registered with Labor Office.
Formulation of Safety and Health Policy: As per the New Labor Act, the entity should
formulate the safety and health policy as per the Regulation or Directive. Such policy
should be registered with Labor Office.
Safety and Health Committee: Where 20 or more workers are engaged in work in an
entity, employer shall constitute a safety and health committee having the
representation of workers.
Employer's Duties- The New Labor Act has set out the duties of employer towards
workers which include making appropriate safety and health arrangement,
arrangements ensuring no adverse effect on workers from use, operation, storage or
transport of chemical, physical or biological liquids, disseminating necessary notice,
information and training related to safety and health arrangements, etc. It also sets out
the general obligation of employer towards non-workers such as putting the signs to
indicate the safety or health hazards, to manage the gas, chemicals waste of the entity
so as not to cause adverse effect on local animals, people or environment, etc.
Employee's Duties-The New Labor Act also sets out the duties of workers related to
safety and health arrangements which includes refraining from doing any activities that
are likely to cause adverse effect on safety and health of any individuals in the entity,
cooperate with the employer to effect the health and safety arrangements, to
compulsorily use the personal safety devices provided by the employer, etc.
Stopping Work- In case of the immediate threat of any injury or adverse effect on
health or damage to the devices in the entity, the worker should provide the
information thereof to the employer who should cause to stop the work until the
period the threat is prevented or minimized.
Preventing Communicable Diseases- The employer should arrange for the
prevention of communicable disease in the workplace. The worker suffering from the
communicable disease can be ordered to stay in the unpaid leave or adjust with other
leave and may be restricted to come to workplace until cured.
Medical Expenses- In case any worker suffers from the work related hazardous
disease, he/she should be provided medical expenses. And where such disease cannot
be cured the worker should be provided compensation as prescribed.
            Light Work to Pregnant- The employer is required to make arrangement to put
the pregnant female laborer is such work which generally does not have adverse
impact on her health.
 
8.      Disciplinary Action
 
The New Labor Act has redefined the punishment as it removed suspension as
punishment and included salary deduction or withholding promotion as one of the
form of disciplinary action. Further, the list of there has been also changes in the list of
misconducts subject to disciplinary action. The comparative chart of the list of
misconducts and disciplinary action has been shown in the following table. 

Punishment Misconduct under Previous Act Misconduct under New Labor Act

Warning abusing any items kept for absence from the work without
interest, health and safety of the obtaining permission,
workers or employees or
leaving the workplace without
causing damage to them
obtaining the permission from the
intentionally,
Managerial level,
absence from the work
coming late frequently without
frequently without obtaining
obtaining permission,
permission or coming late after
 the regular time, not abiding the order of the
violating directives under the senior or employer with regard to
Act, Regulation or Bylaws work,

misbehaving with the customers other misconducts as prescribed

of the entity. in Bylaws.

taking the entity's property

embezzlement in the
outside the entity or allowing
transactions of the entity,
unauthorized person to use such
participation or compelling to without the permission of the
participate in unauthorized or competent person
illegal strike,
embezzlement with the entity's
striking without fulfilling the legal transactions
Withholding of requirements
Annual Salary destroying the entity's property
Increment for intentionally slowing down the due to negligence or recklessness
One Year  or work against the interests of the preventing the supply of food and
Withholding Entity water in entity or obstructing
Promotion for destroying any property of the movement in the entity
One Year entity, or causing damage
abusing any items kept or
thereon
arrangements made for interest,
taking the entity's property health and safety of the workers
outside the entity or allowing or employees or causing damage
unauthorized person to use to them intentionally
such without the permission of
Other misconducts as prescribed
the competent person.
in Bylaws.

Deduction of   not accepting the letter or notice

One Day of punishment
Remuneration
participation or compelling to
participate in illegal strike
collectively delaying in the work
causing loss to the entity by
reducing the production or
service recklessly or negligently
trying to take facilities by
 submitting false details
not using the security
instruments provided by the
employer
Other similar misconducts as
prescribed in Bylaws

creating or causing to create any

stir within the Entity with an
There is no such disciplinary
intention to or affecting the
action.
production or service
 
preventing the supply of food
Suspension
and water, or connection of (The employee can be suspended
up to 3
telephone and electricity (a) for investigation of misconduct
Months
or (b) if he/she is taken in judicial
obstructing the entry into or
custody for any office by lawful
movement within the entity
authority. But this is not the form
accepting or offering bribe of punishment)
consuming alcoholic drinks

Dismissal from causing bodily harm or injury to causing bodily harm or injury to
Service Proprietor, Manager or Proprietor, Manager or Employee
Employee of the entity of the entity
Stealing property of entity accepting or offering bribe
absence from entity for more stealing property of entity
than a consecutive period of 30
embezzlement of property of the
days without notices
entity
imprisoned on being convicted
causing damage to the entity's
on a criminal offence involving
property knowingly
moral turpitude
absence from entity for more
 causing damage to secrecy
than a consecutive period of 30
relating to special technology of
days without getting the leave
the Entity, Production Formula
approved
causing damage to secrecy
relating to special technology of
 the Entity
convicted on a criminal offence
involving the moral turpitude
Presenting false documents for
appointment
Consuming the psychotropic
drugs or alcoholic drinks
Having been punished twice for
other misconducts within 3 years
Other similar misconducts as
prescribed in Bylaws

The New Labor Act also provides that sexual harassment on workplace is subject to
disciplinary action up to dismissal from service.
 
9.      Termination of Employment
In addition to disciplinary actions, the New Labor Act has provided certain other
grounds on which the employment can be terminated:
Voluntary Termination of Employment
The employee can terminate the employment voluntarily by submitting a resignation
letter. The employer must approve the resignation within 15 days and provide a notice
thereof to the employee. Even if the employer does not approve the resignation the
resignation becomes effective on the next day of the expiry of the 15 day time.
However, if the employee continues to work in the entity even on the effectiveness of
resignation in such situation  the resignation is deemed cancelled.
Compulsory Retirement
            The New  Labor Act has  increased the age for compulsory retirement .  The
compulsory retirement age under the Previous Act and the New Labor Act is as shown
below.

Previous Act New Labor Act

At the age of 55 At the age of 58

Termination of Service of Time Bound Employees

            The employment of the employee on time bound employment is terminated
after the expiry of the time period prescribed in the employment agreement
Termination of Service of Work Based Employee
The employment of the worker on work bound employment is terminated after the
completion of the work provided in the employment agreement. However, the
employment continues if the worker is engaged in a project and the time period of
such project is extended.
Termination for Poor Performance
            If the performance of  the employee is found to be unsatisfactory or below the
standard in the performance appraisal for three or more times, the employment of
such worker may be terminated by the employer. However, prior to terminating the
employment the performance appraisal as per the Regulation under the Act or Bylaws
should have been conduct. Such employee should be provided an opportunity to
submit explanation giving at least  seven (7) days by the employer where ten (10) or
more people work.
Termination due to Health Reason
In case any employee is physically or mentally disabled or injured rendering him/her
unable to work or requiring a long period for medical treatment effecting in the work of
the entity, the employer, on recommendation of a medical practitioner may terminate
his/her employment. However, if the worker suffers injury due to accident in the
workplace or due to workplace hazard and is undergoing the treatment, the
employment cannot be terminated until a year from the date of starting of such
treatment. The employment of a worker undergoing the treatment cannot be
terminated until 6 months unless it is certified by a medical practitioner that he/she
won't be able to return to work.
Notice Requirement:
The employee or employer terminating the employment should provide a notice
except in the situation of termination by dismissal. The notice requirement is linked to
the length of service which is as follows.

Period of Employment Notice Period

a. for up to 4 weeks 1 day

b. 4 weeks to 1 year 7 days

c. exceeding one year 30 days

If the employer terminates the employment without providing a notice, the employee
should be provided remuneration in lieu for the notice period.
 
10.  Flexibility in Retrenchment
 
The New Labor Act has amended the requirement of prior approval of Department of
Labor to retrench employees. As per the New Labor Act, the workers can be
retrenched as agreed with the Trade Union or Labor Relation Committee in absence of
Trade Union.  Where the agreement cannot be reached with the Trade Union or the
Labor Relation Committee the employees can be retrenched by giving information to
the Labor Office.
            The employees are entitled to the retrenchment compensation at the rate of
one month salary for each year of service.  The compensation is paid on proportionate
basis for the service rendered below one (1) year. The employee who is paid
unemployment allowance is not entitled to the retrenchment compensation. The rule
of retrenchment does not apply to the employer have less than 10 people.
 
11.  Collective Bargaining
            Formation of Collective Bargaining Committee
            As per the New Labor Act, in an entity with 10 or more employees, there should
be a collective bargaining committee. The New Labor Act also defines as to how the
committee should be formed such as by authorized trade union or by all the trade
unions in absence of authorized trade union or by the signature of 60 percent workers
in absence of any trade union. The member of the committee should be at least 3 but
not exceeding 11. The committee is authorized to submit collective demands,
negotiate and settle the demand, among other things.
Excluded matters from Collective Demand
The Labor Act excludes certain matters from collective demand such matter include, if
it is (a) contrary to the Constitution of Nepal, (b) against interest of others due to being
baseless allegation, (c) prejudicial to the personal conduct of any worker or employee;
(d) unrelated to the entity, (e) without expiry of the time of the collective bargaining
agreement, (d) about  the rate and benefit prescribed for social security.
Procedure for Settlement of Collective Dispute
The Collective Bargaining Committee submits the collective claim in writing to the
employer. Upon the receipt of the collective claim, the employer must provide a notice
in writing within 7 days specifying the place and time for discussion. If the employer
does not call for discussion or if the problem is not settled through discussion within
21 days, application can be submitted to the concerned Labor Office for mediation.
Strike
If the dispute is not settled through mediation within 21 days the employees can go to
strike giving seven (30) day notice if they do not agree for arbitration.  Even the matter
is referred to arbitration the employee may go to strike in certain situation as defined
in the New Labor Act.
No Secret Ballot Required for Strike
Unlike Previous Act the New Labor Act does not require secret ballot to go for strike.
They can go for strike simply giving notice to the management and other security
agencies.
Strike should be Peaceful
The Labor Act provides that the strike should be peaceful and the employees may call
meeting at main entrance of the entity. However, the employee should not obstruct
access to and from the premises and cause any loss. 
Mandatory Arbitration for Collective Disputes
The New Labor Act requires the disputed parties to settle the dispute by arbitration in
certain situations or for certain entities depending upon their nature. Such situation or
entity includes the situation where the employer and collective bargaining agree to
settle the dispute by arbitration. The entity the collective dispute of which should be 
settled through arbitration include the entity (a) providing essential service, or (b)
established in Special Economic Zone, (c) state of Emergency declared as per the
Constitution.
The Arbitration Tribunal is composed by the Ministry constituting representatives of
workers, employer and Nepal Government. Any agreement between the Collective
Bargaining Committee and Employer in regard to collective dispute or award of the
arbitration tribunal is binding upon both the parties.
Lock Out
The requirement of Lock Out is mostly similar to that of the Previous Act that the
management can lock out the entity in the case of illegal strike or violent activities in
strike. The major change related to Lock Out is that the prior approval of Department
of Labor is sufficient and the approval of Government is not required.
Remuneration during Strike and Lock Out
The employees are entitled to half remuneration during lawful strike or lawful Lock
Out. The employees are not entitled to any remuneration for unlawful strike.
Conversely, the employees are entitled to full remuneration during unlawful Lock Out.
Government Intervention
The government has authority to require the parties to settle any collective disputes at
any stage through arbitration if it potentially trigger financial crisis in the country or the
government believes that the dispute should be settled through arbitration. 
Special Provisions on Collective Dispute
The New Labor Act also provides that the collective bargaining may be placed and
settled not in each individual entity but jointly for all the industries in the same sector
in association level.   The association of the industries of one sector may enter into the
collective bargaining agreement with the association of trade union active in such
business sector. In the situation the individual industry is not required to deal with
collective demand separately.
There was no such identical provision in the Previous Act.
 
12.  Sanctions
 
           The New Labor Act provides more stringent sanctions for the violation of the
provision of such Act. The Sanctions include fine, imprisonment and both.  The
authority to impose sanction also depends on nature of violation. The brief outline of
sanctions as provided in the New Labor Act is as follows:
Sanction by Labor Office

Non Compliance Consequence of Non Compliance

Indemnify the concerned worker with

Deduction of Remuneration and Other amount double the deducted
Facilities contrary to prevailing laws remuneration and other facilities
 
Obstructing government officer, Fine up to Rs. 20,000
submitting false details  

Fine up to Rs. 10,000 per intern or

Engaging an intern or trainee against trainee
the provision of the Act
 

Failure to deposit the gratuity amount,

or in provident fund or social security Indemnify the worker with an amount
fund, or to arrange medical or accident double the amount to be paid
insurance

Keeping the workers in reserve

Order to not to do so
discriminatorily

Terminating employment against the

Issue necessary directives
provisions of the Act

Sanction by Labor Department:

Non Compliance Consequence of Non Compliance

Supplying labor without Fine up to Rs. 200,000.

license and engaging labor in
work from such supplier  

Fine up to Rs. 200,000 depending upon the number of

workers; repetition even after being punished shall be
Engaging a foreign national in fined with additional fine of Rs. 5,000 per person per
work without work permit month.
 

Discriminating among the Fine up to Rs. 100,000 and the order the maintain the
workers equality may be given.

Fine up to Rs. 500,000 at a rate of Rs. 10,000 per

Engaging a worker without
worker; the order to conclude an employment
appointment letter or
agreement and provide an appointment letter shall also
employment agreement
be given

Sanction by Labor Court

Non Compliance Consequence of Non Compliance

 Imprisonment up to 2 years or fine up to  Rs. 500,000 or
both. The Labor Court can require the entity to provide
such bonded labor with remuneration, allowance and
For engaging a bonded labor
other facilities, as well as to indemnify the bonded labor
with an amount double such remuneration, allowance
and other facilities.

If the entity does not make Imprisonment up to 2 years, except otherwise provided.
health and safety Such person suffering the injury should be
arrangements knowingly and compensated.
as a result the worker dies or
 
suffers physical or mental
injury  

 
13.  Social Security
 
            The Labor Act requires the retirement fund such as (a) gratuity, and (b)
provident fund to be deposited in the Social Security Fund.  There has been separate
law on social security. The parliament has enacted the Social Security Act, 2017 (2074)
which has also been also obtained the accord of assent of the President on August 16,
2017.
 
14.  Other Key Provisions
 
Composition of Labor Court
As per the Act, the Labor Court shall consist of a chairperson and two members. The
jurisdiction of the Labor Court is exercised collectively where the majority opinion
prevails.
Appeal
Any decision or order of the Department or Labor Office can be appealed at Labor
Court within 35 days of such order or decision. Any decision of the entity terminating
the employment or on disciplinary action can be appealed at Labor Court within 35
days of having obtained the notice of such decision. The appeal on the case originally
tried and settled by the Labor Court is placed at Supreme Court. Any decision
rendered by the Labor Court exercising appeal jurisdiction is final.
Enforcement of Decision
The concerned party should enforce the decision or order of the Labor Court after the
finality of such order or decision. The decision on individual or collective dispute or the
arbitral award should be enforced by the concerned parties. If the decision or order is
not implemented, the concerned party can file an application to the Labor Office for
implementation. The Labor Office can write to the concerned worker or employer for
the implementation of such agreement, decision or order, which shall be effected
within 15 day.
If the order, decision or agreement is not enforced as per the procedure mentioned
above, the concerned party may submit an application to the Labor Office for
enforcement of such order, decision or agreement. For this purpose, the Labor Office
may write to the concerned office or officer to freeze the immoveable property, to
freeze the bank account, to freeze or suspend the concessions, exemptions granted
under prevailing laws, to suspend the work permit, or issue other necessary orders.
The concerned party can file a complaint to the Labor Court if the order, decision or
agreement, or arbitral award is not enforced within 3 months from the date of filing of
application with the Labor Office or within 15 days from the date of action taken by the
Labor Office for enforcement. The Labor Court provides a certain time period for
implementation and non-compliance during the period is punished with fine up to Rs.
100,000 or imprisonment up to 1 year.
Regulation of Management Level Employee
Manager and managerial level employee have been prohibited from submitting
collective demands on behalf of trade union, taking part in collective bargaining and
taking part in strike.
Performance Appraisal
The entity can conduct performance appraisal of its workers once in a year in general.
The bases and procedure of appraisal should be justifiable and reasonable, and
disclosed to workers prior to performance appraisal. The worker should be provided
an opportunity to present disagreement on the appraisal, if any. The entity should
arrange for the review of the appraisal if such disagreement is submitted.
Certificate of Work Experience
The entity should provide a certificate of work experience stating the period of the
service and the post if the worker whose service has been terminated asks for one.
 
15.  Repeal
The New Labor Act has repealed the following Acts:
Labor Act, 1992 (2048)
Industrial Trainee Training Act, 1982 (2039)
Retirement Fund Act, 1985 (2049)