Lab-our Laws for IT Industry
Recently FAPCCI conducted a Seminar on Q3.
"Labour Laws for IT Industry"and questions raised
by participants were answered by. Sri M
Radhakrishna Murthy, Advocate. Some of them are
published hereunder for the benefit of FAPCCI
Review readers.
QI. The IT industry in AP, llke its global
counterparts usually works on 5 days a week.
However the AP Shops and Establishments
Act, Iimits the working hours to 8 hours per
day and max of 6 days in a week. Can the
ITIITES companies demand longer working
hours In lieu of 5 day week? Is there, any
way to increase working hours to 48 Wile
retahng 5 day week?
Ans: Yes, though Section 16(1) of APS & E Act,
says no employee shall be required or
allowed to work more-man8 hours a day and
48 hours in a week, the' Government of AP
vide GO Ms.Mo.53, dated 20.062007 granted
exemption to Section 16(1) in respect of daily
hours of work while keepingthe weeJly hours
of work in tact. Therefore, you can organise
working hours per day as per' your
conveniencefor 5 days. However, the weekly
hours of woking should not exceed more
than 48 hours. -.
Q2. Is there any law, whkh specifically prescribes
the space / area to be provided to each
employee working in an IT/ IES company?
;Can ihe space stipulations of fhe Factories
Act, appiy to IT/ ITES employees working in
AC offices?
7
Ans: Provisionsof FactoriesAct, are not applicable
as per as IT Software Industries are
concerned. The Provisions of ~aioties Act
are applicable for IT (Hardware Units). For
IT Software it is APS &E Act, which is
applicable and there is no provisidh under
APS&E Act in respect of space stipulations.
10 11 ~ l v e # 30 September 2008
Is there any legally stipulated retirement age?
Is it OK for an IT/ ITES company to employ
a 65 year old person? Or to retire a 50 year
old as per company policy7
Ans: Under the Shops and Establishments Act,
there is no mention about the RetirementAge.
Rule 24(1) of the A.P.1.E (S O), Rules, 1953,
deals with the provision of retirement, but the
age of retirement is not mentioned. The
APS&E Act and the I.E(SO) Act applicable
only to the non-managerial category, i.e., to
those employees, who come under the
definitionof employee. For the non-employee
category the retirement age is as per the
terms of appointment between the employer
and the employee. As there is no specific
provision dealing wifh the age of retirement
under the APS&E Act. The age of the
retirement can be fixed by the employer.
There is no restriction of age for employment.
Q4. I T/ITES companies usually offer vastly
varying contracts to different employees. Is
this valid in Law7 Can this be interpretd as
discrimination by the employer? Can varying
terms (based on experience, productive
value) be potfrayed as discrimination on sex,
caste, religious or other grounds? How can
such situations be avoided?
i
An$: h, any contract is a valid contract only where
there is free consent by the party who signs
the contract. The contract is nothing but an
' offer and. acceptance. After accepting the
terms there cannot be any complaint of
discrimination. No Rule or Provision of Law,
that the contract of all the employees should
be alike. Therefore, the contracts can differ
depending upon the nature of employment
and employee.
U5. Several IT companies are subsid!aries of
MNCs and their engtneers are o f t e required
~ with a probation period of 6 months. Is it Iegmli y
to work as per US or Europaar, t~m~ngs. Is
there any legal dj#iculiy in asking engineers
to work at such hours? If a wmpany requires
providing 24 hours support and work in shifts,
what are the provisions if has fo comply?
&.
Ans: There is no legal difficulty. The GO.Ms.No.53,
dated 20.06.2007, gives liberty to the
employer to fixlorganise the daily hours of
working.. Even the young and women
employees also can be asked to work during
the night shift subject to the conditions
stipulated in the said GO.
Q6. What are the minimum leaves and holidays
applcable to the IT industry in AP. Spec&
for Privilege Leave (Earn Leave), Casual
Leave, Sick Leave, Ofherstatutory leaves
and Minimum m p a n y holidays?
Ans: As per & t i o n 30 of APS&E Act, every
employee who serves for 240 days or more
during continuous period of 12 months shall
be entitld during the Gbseqiient period of
12 months one leave for every 15 days of
working and such leave can be accumulated
up to maximum period of 60 days.
Ertcashment up to 8 days in a year, Skk leave
12 days in a year, Casual leave 12 days in a
year, liafidays Section 31 of the Act says that
the employee is entitled to 9 holidays ina year
which includes26th Jan, 01st May, 15th Aug,
02nd Oct and 01st Nov.
b s in and punch out their
Q7. ~ r n ~ l o ~ epunch
ammml #d d-re in the company. They
are suppbed to do 8 hours of work and have
I hour lunch- break. Since the company
offers recreational facilities, employees play
table tennis, use gyni, do yoga and so on in
he facility and thus their time in office shows
1(1-7 1 hours per &y Can this be used by an
employee to claim over time, -lady if
no ovedme was asked by ernplofle or
appmvd by managefl
Ans: Wages need to be paid for the periormance
but not for the mere presence without
performance of duty. However, it is advisable
'to take necessary precautions in respect of
record of-total hours of presence. Confine
record only to he extent of hours worked.
Q8 An IT4 TES company usually recruits people
permissible for the company io undateralry
extend the probation period? If yes,for how
long and for how many extensions? Are there
any conditions for such extension?
Ans: The company can extend the probation for
such periods unilaterally. However, the
company need to specify the reasons for
extension of probation. The law doesn't
prescribe the probationary period. It is
governed by the terms of appointment. The
dause in terms of probationshould be drafted
in the appointment to suit the management
requirements in an unambiguous manner.
Q9. IT companies offer a high increment in
salaries when the going is good. Similarly
when a company is in financr'al crisis, can
the company impose a cuf back in salaries?
Can this be done unilateraIIp Does the
company have to enter info fresh contracts?
Does a provision to this effect have to be built
into the original contract? Also can an
employee claim an annual increment as a
right? Does the law prewibe the periodicity
of the hike? -
Ans: he statute / law guarantees only the
minimum wage to the employee. Over and
the above theminimum wage is always
subject to fhe performance of the employee
and paying capacity of the employer. The
employer is at liberty to incorporate a clause
to the said effect in the appointment letter and
obtain the consent of the employee. i n such
event, the employer can reduce the wages.
Increment is only a reward for performan=
but cannot be claimed as a matter of right
until unless the employer gives a scale of pay
m$he employee with the component of
increment.
No period is fixed for increment under law.
QIO. What are the rights of an employee at the
time of his terminatLon? Can any of these
. rights be denied and under what
circumstances?
Ans: No-employee who had put in 6 months of
service shall be terminated without one
month notice or pay in lieu of notice and
 without sufficient cause. The terminal benefits Q 14. Can confidentialitfi non- disclosure and IPR
like gratuity, retrenchment compensation, clauses be included in the employment
etc., cannot be denied and must be complied. agreement / contract or should there be a
separate agreement?
Q l l . An employee has disappeared without
infomath, in W t i o n of his empbyment Ans: Yes,
cunt,ract / employment agreement /
em$oovees handbook provisions, withaid Qi5. While appointing a contractor for contract
resignation or notice. period. Can the labour, whatareWk@?/requi#tn#kwhkh
company make deductions from his we should insist on ffie contiactor following?
outsfanding dues on account shoitfall of What am fhe regbiers we have to maintain
no& period, bond amount, excess leave as Principal Employer under various acts
availed, prqoetiy not rsiumed, eetc.. 7 . and whatareihregktm undervahusacZs
w hMcqtrectwk wpposd to m~r'ntalnand
A m No recoveries can be made from provident show us on demand?
fupd, gratuity and retrenchment
. compnsatian. The recoveries can be done Ans: Principal employer required to register their
fr& out of the other payable amounts other . establishment as per Section 7, read with
than the same. Rule 17(1).

Q 12. W h 4 is the d i f t e r m ~
( m W I i t y . o f labour Contractor need to obtain Ibense as per
l a d or legal rights) between a regular Section 12 CAN Rule 2t(l).
employes proba&mr, trainee, msultanf, Contractor should apply for renewal of
empbyee on cmhct, intern In law? . license as per Rule 29(2).
Ans: T h e : + p ~ l i t y of labur I& are same to ~ e r to maintain the
Principal ~ i n ~ l o need
mg&r employee, probath, employee under register stipulated under Rub 74 to 77.
contract, trafnes. However, certain
ex~epbionscan be availed depending on the Contractor-need to maintain the registers
ternis of appointment for the probationer / stipulated under Rule 78 and 79.
cawalltrainee employees. Cowltant is not Rule 8l{j~mntractorneed to submit half
an*&~~loyee if he is not employedfor full time yearly retwms,
exqtusively
, * l
for that company.
Rule 82($) Annual returns by Principal
~ 1 3 Can~lhefotIowingclausesbelegellyWdh
. Employer before 15th F&.
an *ptoymenf coma&?
I
Q16. Can an ett&loye& who has not paEd gratu&
i - :Noncompete demand gratuity?
Nonsdki&tion Ans: Yes
, ., -
1: Bond for specified amount for not 8 f 7 , ) T industry,oftenfollows the concept of 'Af
.', COrnpMng twnmcwperiod hll' employment. Is this valid in Indian
'.' NoWce perfod of 3 months Labour Law? Is an employment contract
:J '<
having 'a6w1P ahuse valid?
- - Compensation offered cat6rs for
"
privileges and r e s ~ l i t i e sof the Ans: No,for fhe'non-managerialcategwy.yea,fur
- p W o n and therefore no overt,-me Is the managbrs.
&bww
t ' Qla An empbyee has been employed on a 2
Ans: M clauses like noncompete, non-payment year contract. Due to ove-t, the contact
of'mrtime are notvalid. The dauses of mm- - hrss end&~renewrrlbufffie emplop
sokition, bond for m e d perid, notice Is continuing to work in the company. What
Wriod &., am permissible. is the statvs of he employee now7 Does he
 have any rights? Can the contract be
backdated and renewed? Can he be
terminated if he refuses the renewal of
contract? Does a notice period hold in this
case?
Ans: Contract cannot be back dated until and
hless the employee agrees for the same. If
h e employee continues to work beyond 6
months 1 240 days after the expiry of the
contract, the company need to fdlow the legal
provisions for termination of such employee.
Q 7 9. Is rhe Employees Handbook, which most IT/
ITES companies have, be treated as standing
orders for the purpose of the Industrial
Employment (Standing Ordets) Act, 79467
Does the standing order have to be in the
fomat of the Model Stawing Orders or can
I? be different? What is the forgetting
thh standing orders approved? Can the
apPm'ved standing orders be posted on the
wlkisite/intmnefofan IT company and these
be deemed to be notice boards under the
ad?
AM: ~ 6 hand
0 book can be pitt of the contract I
&ointment letter. Hand book cannot be a
standing order. Standing orders need not
always be as per the model standing orders. Q23. How is a m p a n y to disringuish between
Tf!p company can incorporate several
dauses, wch are not in the model standing
orders. However such d a w s should be in
consonance with the provisions of the Ans: Managerihl Functions
law.Draft standing orders need to be
submitted under Section 3 of IESO Act, as
4 section 5 the certifyingofficer shall certify
th8 standing oFder after calling for objections
ahd considering the same in terms of law.
I .
Section 12(a) Temporary Application.
Q20. qk common to have hn'able' and 'deferred"
cpponents in the compensation pa&age
in the IT/iTES industry. Is there any lirnhw
i m b e d on this by iaw?
Ans: ione of the provisions of law deals with
bifurcationof salary / compensationpackage.
section 12 of the EPF and MP Act stipulates
that the basic once fixed cannot be reduced.
No limitation b imposed.
Q21. Is group insurance/ employee insurance
mandatory? Can an I T 1TES cornpa ny Iea ve
~nsuranceout of its compensation package
and leave the choice to employee a s
optional?
Ans: G m p Insuranceis not mandatory. Employee
insurance under ESI Scheme is mandatory,
insurance for group gratuity scheme under
the PG'AC~is mandatory.
Q22. IT Company has senf papers for self-
certifEcat5n under various acts and in spite
of repeated reminders has got no reply from
Labour department, Is the company covered
,
by self- cettibtion if the paps were sent
by registered post?
Ans: The GO Ms.No.114, dated 25.09.1889,
prescribedformats for sell certification under
FactodesAct (Annexure-I), Maternity Benefit
Act (Annexure - II), APS&E Act (Annexure-
III), Contract Labour (R&A) Act (Annexure-IV),
PW A d (Annewre-V), MWAct (Annexure-VI),
~ rployrnennt
n Exchange CNV Act (Annexure-
VII). You are required to submit the same
before 3rlst December for the ensuring
calendar year. Such submission can also be
made by RPAD.
'managerial' and 'non-managerial'
empbye&? What are the d i f f e r e m of each
catego$bs per law?
a) kiaGng control on overall affairs of the
establishment, cheque power,
appointment authority, dismissal
authority, authority for performance
appraisals of sub-ordinates, authority
of reoommendationlsanetionof leave,
authority to delegate or entrust work,
ek. who ever is not discharging the
said functions can be called as non-
managerial employees.
024. Some IT/ lTES companies while recwiting
freshersseeka 'suretybond' which speci'fies
the amount an employee will pay to the
company Sf he/& fails to work there for the
prescribd p e M . Are such bonds valld In
law? How can they be legally e n f M
30 septmber2OOB 11 m h 11 13
Ans: Yes, valid as per law but be drafted in a 1229. What are fhe health and safety reiafed
manner where a fair acceptance be given by requirements that musl 5.5 p, O J ~ I b). ? ~IT;'
the employer. Company require to justify the 1 TES companies as per th: f : i i : i ~ j ~ : t ? ~k t .
claim for damages. Ans: The Provisions of Factories Act are
Q25. Department of labour officials are often applicable only for IT Hardware industry.
' ~ n d i n notices
g to IT companies in violation Chapter Ill and IV deals with heafthand safety
.bf GO 27, even without there being any of employees. Cleanliness, disposable of
'' specific complaint and after mmpany has wastes, ventilation, dust and fume,lightning,
sent self cettificEltion under GO 27. How can drinking water, over crowding, latrines and
t h e ~ p n y ~ w i t h s u d , c ~ s & s w h e m f f i e urinals, spittoons, etc.
labour o W s am functioning as inspector, (330.As per the S h o p and EstablishmentsAct, 9
:- pmsecutor, judge, and jury? company holidays are required to be
Ans: Labour offciah can only questionwhere there
announced for a miendar year,of which May
Dag State Formation Day, M a t m a Gandhi
Is a complaint of violation against self Birthday, Republic Day and Independ8m
~ertification.The labour official can only be a
,
Day are mandatory. How can an IT/ 1lEs
inspector and prosecutor but mnnot be a
company swffch some other feshhl day as
, judge and jury.
holiday instead of one of these days?
Q26. Can &ds h t n Emp/oy@s Handbook be Ans: Yes, the GO Ms.No.53, dated 20.06.2007,
,irsed by an employee to claim any rights? clause' 3(E), stipulates every employee shall
:Does ihe handlbodr have any irnpiicaffon as be given a compensate holiday in lieu of
.a 'contract'? is a disclaimer to that effecf notified holiday with wages under the prwiso
:requiredto be put info it7 to subsection (2) of Section 31 of APS&E Act,
if they work on notified holidays. Such
~ns::If the hand book is &e ,part of the terms of
compensatoryof be notifiedby the employer.
., ,empbyment, the employee can daim the
,
Section 9 is applicable only to Shops but not
,A clauses in the hand hook as a right. If the
comrhercial establishments.
employer expects exceptlow the same need
to,bementioned in the hand book.
a*.
~ 2 ~ ~ C
an aITATES
n company implement shift
>: system of functioning unilatera!&? Are there
":ny h 3 p l compIiatms to be follow& while
-1
doing this? SpecrpecrWly
7 for ladies, are there
. - any special provisions fo be followed?

Ans: Yes, the employer can ask the employees to

work in s h i and the shim timings can be
fixed by the employer subject to the
&mlitions hid down in GO Ms.No.53, dated
' 20.06.2007.

Q28. A group of employees in an IT company

'
dt&de toform a Unlon. Can a trade union be
j formed under the Trade U n h Act, 19267
What are the respnsbiliths of the company
, . towards such a union, tf formed in an IT
. . ccrmpany?
?

Yes, the employer required to negotiate with

%such unbn In respect of grievances of the
employees.