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Bengalore tech companies gets exemption on industrial employment

Recognition for investment winners

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Recognition for investment winners

 

 

Bangalore, India’s technology capital, once again stands exempted from the Industrial Employment (Standing Orders) Act, 1946 (Standing Orders Act) – a labour law which requires employers to define and publish uniform conditions of employment in the form of ‘standing orders’.

Giving importance to the investment-drawing technology companies, the Karnataka State Government has renewed the Standing Orders Act exemption for IT and ITeS companies, along with certain other knowledge-based sectors, for five years.

The technology sector in Bangalore was exempted from this law since 1999. The previous exemption had expired on January 25, 2019.

As a result of the new notification, IT and ITeS companies in the State of Karnataka (Bangalore) will not be required to comply with the Standing Orders Act until May 2024, provided that certain conditions are complied with by the employer.

The HR Law team at Nishith Desai Associates supported NASSCOM from a legal perspective in its efforts in securing the Standing Orders Act exemption from the State Government of Karnataka.

The exemption has been granted for five years as per the notification issued by the State Government of Karnataka on 25 May 2019 (Notification), according to Nishith Desai Associates report on 4 June 2019.

The Notification reinforces the Karnataka State Government’s objective to support and promote the growth of technology and related sectors in the State, which is likely to lead to continuing investments in the State.

BACKGROUND

The Standing Orders Act is a pre-independence enactment, a 1946 law, which was originally drafted and intended to apply to industrial establishments such as factories, mines, plantations etc in order to define the conditions of employment applicable to workmen in these sectors with sufficient precision and to make the said conditions known to them.

The Standing Orders Act requires employers to draft and publish Standing Orders in accordance with the format prescribed in the statute, have it approved by employee representatives and get it certified by the labour department.

The Standing Orders contain terms and conditions of employment including hours of work, wage rates, shift working, attendance and late coming, leaves and holidays, termination of employment and suspension/dismissal of workmen for misconduct, etc.

Until such time that a covered establishment gets its Standing Orders certified, the Model Standing Orders prescribed under the Standing Orders Act containing several of the above-mentioned provisions would automatically become applicable to such establishment.

The State Government had in 1999 originally exempted the Information Technology (IT) and Information Technology Enable Services (ITeS) sectors from the applicability of the Standing Orders Act. The exemption was thereafter renewed several times with the most recent exemption having expired on 25 January 2019.

THE EXEMPTION

The Notification exempts industries and establishments operating in the following sectors in the State of Karnataka from the provisions of the Standing Orders Act for 5 years:
a. IT
b. ITeS
c. Startups
d. Animation
e. Gaming
f. Computer Graphics
g. Telecom
h. Business Process Outsourcing (BPO)
i. Knowledge Process Outsourcing (KPO)
j. Other knowledge based industries.

CONDITIONS FOR EXEMPTION

The exemption is subject to each employer complying with the following conditions:
The employer is required to constitute an Internal Complaints Committee (“ICC”) in accordance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (“Sexual Harassment Act”).
The employer is required to set up a Grievance Redressal Committee (“GRC”) consisting of equal number of persons representing both the employer and employees, to address employee complaints in a time bound manner.
The jurisdictional Deputy Labour Commissioner and the Commissioner of Labour, Karnataka are to be intimated about cases of disciplinary action like suspension, discharge, termination, demotion, dismissal, etc. of employees by each employer.
Any information regarding service conditions of employees sought by the jurisdictional Deputy Labour Commissioner or Commissioner of Labour, Karnataka, is to be promptly submitted by each employer.

Although the Notification does not expressly specify any penalties, failure to comply with the afore-mentioned conditions may result in withdrawal or cancellation of the exemption and trigger the application of the Standing Orders Act to the defaulting establishment.

ANALYSIS

The 1990s witnessed the beginning of a new technological era in India with Bangalore being the front runner. The era only got bigger and better in the following years with healthy competition among various state governments to attract more investments. As per a recent report published by the Indian Brand Equity Foundation, Karnataka has been recognized as the IT hub of India and home to the 4th largest technology cluster in the world.

Given the industry friendly approach and conducive policy and regulatory framework adopted by the State Government, Karnataka continues to remain in the forefront of India’s IT & ITeS sectors.

The cumulative FDI inflows in Karnataka have been significant enough to account for a major part of India’s cumulative foreign direct investment inflows. Karnataka also serves as India’s largest software exporter, with special focus on electronics and computer software exports.

Needless to mention, the State also houses around one-third of the total IT professionals in India. fiinews.com

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