INDIALabor Laws

Overview of India and Indian law

The Republic of India is a federal republic consisting of twenty-eight states and nine union territories.¹ As per the Constitution of India, labor is a subject in the Concurrent List meaning both the federal and the state governments have the power to enact Employment Laws (section 246 of the Constitution of India and Schedule 7 thereof); although, as a general rule, federal laws are given precedence in application over state enacted laws, and there are certain exceptions where a state law may override a federal law for that particular state. While state employment laws, in general, may be considered subordinate to federal employment law (in the case of a conflict), resulting in restrictions on employment laws that state parliaments may pass, actual restrictions on the powers of the state parliaments to pass such laws are rare. Indeed, there are only a few laws that are outside the remit of state parliaments to modify, such as the definition of an employee (which must be uniform across the nation), the prohibition on the use of child labor at night, and the necessary protection of the socially vulnerable. As a result of this situation, it has been estimated that there were more than 500 federal and state laws and regulations on employment.

However, the integration of the complex employment law system has consolidated some 30 federal laws into four codes covering four major areas with the passing of the Code on Wages 2019 in August 2019, the Occupational Safety, Health and Working Conditions Code 2020 (OSHW Code), the Industrial Relations Code, 2020 (IR Code), and the Code on Social Security 2020 (SS Code) in September 2020. These four basic codes enacted by September 2020 will enter into force as the regulations will be enacted, as well as amendments to the laws and systems of the states in line with the laws of the federal states. Note, however, that some provisions will continue to be enacted and amended on a state-by-state basis, and some existing laws will remain unintegrated. As of February 2024, it has not yet been enacted.

Distinction between Workman and Non-workman

The employment laws in India uniquely classify employees into two different classes: workman and non-workman. This classification is dependent on status and authority. In the new Codes, the term "worker" is used instead of "workman," This change seems to have been made with the intention of creating a gender-neutral expression, but the concept of "workman" is retained in principle. This concept first appeared in the Industrial Disputes Act (1947), which is one of the fundamental laws regulating employment and industrial relationships in India. A workman is considered to be in a weaker position compared to a non-workman; therefore, when they are subject to normal dismissal, layoff, or redundancy due to the winding up of business, they are entitled to further protection compared to a non-workman. An employee's status or position is not determinative as a workman or a non-workman, but rather, such classification is determined according to the individual factual circumstances. However, it is important that the contract or appointment letter clearly states whether the employee is a worker or a senior employee to reduce the risk of disputes at a later date as much as possible.

This classification is similar to that of supervisor and non-supervisor in the Japanese Labor Standards Act. According to the Act, a supervisor is defined in Article 41(ii) as "persons in positions of supervision or management or persons handling confidential affairs, regardless of the type of business." Japanese law does not exclude supervisors from being categorized as workers and allows them certain levels of protection. On the other hand, in India, senior employees falling under the category of supervisors were exempted from the provisions related to working hours, rest, and holidays under the previous laws. They were therefore not subject to the eight-hour working day and were not eligible for overtime pay.

It should be noted that there is some confusion as to whether the new Codes apply to senior employees with respect to working hours, overtime pay, and other conditions of employment because this could be interpreted as applying under the Code on Wages and not under the OSHW. Concerns have been expressed by industry, and it will be necessary to wait until the new Labor Code comes into force to see how it is adjusted.

Signing an Employment Agreement

In Japan, orally agreed employment agreements without being in writing are not unusual. On the other hand, in India, it is common for employment agreements to be in writing. In particular, under the recently amended OSHW (came into force in September 2020), every establishment employing 10 or more workers is required to issue an appointment letter to all employees. Appointment letters generally set forth the basic working conditions, such as title and job description, amount and method of payment of wages, probationary and employment period, place of work, working hours, and leaves. Measures can be implemented, such as keeping a copy of the appointment letter signed by the worker, in case of an industrial dispute.

However, in practice, drafting a custom-made employment agreement or appointment letter for each individual can be time-consuming, so employers often stipulate employment conditions that apply commonly used rules (such as those related to coming to work and leaving work, holidays, and disciplinary procedures) as office regulations and reflect these regulations in their employment agreements or appointment letters. Only some parts that must be individualized, such as salary and benefits, are specifically stipulated in the employment agreement itself, and employees are generally advised to refer to the office regulations for other conditions. Unlike Japan, Indian employment laws do not typically obligate employers to stipulate office regulations (except where stated otherwise). Implying office regulations into employment agreements is merely a method for employers to simplify their employment procedure. Therefore, employers are free to have employment agreements without including any of the provisions of the office regulations and to decide on the conditions with each employee individually.

Employment Conditions

Similar to the Japanese Labor Standards Act, employers are required to comply with certain minimum standards apropos of working conditions in India. However, in India, the standards of working conditions that employers need to comply with vary according to the employees' workplace and the nature of the work. For example, prior to the formation of the uniform Code, the Shops and Establishment Act (1953)² applied to employees working in offices or stores and the Act stipulated the minimum standards for the working conditions for those employees. However, as the Act is a state law, the specifics of the law in relation to this area are established at the state level, so it is important to understand that each state has its own minimum standards for working conditions. The Factories Act (1948), on the other hand, was a federal law and applied to employees who work in factories. If an industrial facility wherein 300 or more workers are currently employed or were employed on any day of the preceding 12 months, the Industrial Employment (Standing Orders) Act (1946), a federal law, would apply. Under the Industrial Employment Act, an employer is required to stipulate Standing Orders. Although there are a number of laws that will be repealed with the passing of the unified new labor code, including the aforementioned Factories Act and Industrial Employment Act, much of the content of these former laws has been incorporated into the new law. Therefore, in India, it should be understood that the standards for working conditions may differ depending on the location and nature of the work and size of the company.

Visa Acquisition

The government of India issues several types of visas, including tourist visas, business visas, employment visas, and student visas. The employment visa is the most relevant when considering the hiring of foreign employees.

Business Visa

Individuals who are doing business in India, such as making sales or establishing contacts on behalf of a company outside of India, are eligible for a business visa. A business visa issued to Japanese nationals may be valid for up to five years and is valid for multiple entries.

Employment Visa

Employment visas are issued to foreigners who intend to work in India. In principle, an applicant for an employment visa should be a highly skilled and/or qualified professional and should be engaged/appointed by a company/organization/industry/association that operates its business in India. In addition, the applicant's salary must be in excess of US$25,000 per year. There are no jobs that an applicant is barred from performing on the basis of nationality.

Trade Union

Section 9 of the Industrial Relations Code, which succeeds the Trade Unions Act (1926) regulates trade unions. The Code provides for the formation and registration of trade unions and the rights to which trade unions are entitled. Trade unions are organizations with goals, such as better work conditions and resolving labor disputes. Their main activities are supporting and facilitating communication between labor and management. Companies should not interfere with employees joining a labor union or discriminate against employees based on whether they join a labor union or not, and if a company does so, it will be regarded as having engaged in unfair labor practices under the Code. Any worker may set up a trade union, and companies cannot unfairly prevent a worker from participating in a trade union. Persons aged 14 or older are eligible for trade union membership (section 20 of the Code).

Members of trade unions are immune from certain types of both civil and criminal liability. Pursuant to section 17 of the Code, no members of registered trade unions shall be liable for punishment under sub-section (2) of section 120B of the Indian Penal Code (45 of 1860) with respect to any agreement made between the members for the purpose of furthering any such object of the Trade Union as is specified in section 15. Furthermore, sub-section (1) of section 16 of the Code provides for the immunity of the members of trade unions from civil suits when members have done any acts in contemplation or furtherance of a trade dispute, and such acts induce some other person to break a contract of employment and that it is an interference with the trade, business, or employment of some other person or with the right of some other person. These rules only apply to trade unions that are formally registered.

As trade unions are common in India and are involved in a lot of activities, they often have great influence in relation to labor issues.

Labor Law and Religion

Positive statutory law and religious traditional law mutually coexist in Indian society. The statutes and customs pertaining to employment law in India established by a Legislature that is not strongly influenced by religion. While labor laws are not dictated by religious beliefs, certain other laws, such as those related to marriage and probate matters have a basis in religious tradition.

Overview of labor-related statues

The Constitution of India prescribes the prohibition of forced labor (section 23 of the Constitution of India) and the prohibition of labor by a child below the age of 14 in any factory (section 24 of the Constitution of India) as fundamental human rights. Under circumstances where both the Indian Parliament and the respective Legislative Assemblies possess legislative power regarding labor laws (more accurately, matters related to labor unions, labor disputes, social security and social insurance, employment and unemployment, and the welfare of workers), there are still more than 20 labor-related federal laws, after the recent consolidation of about 30 laws, that have been enacted by the Indian Parliament, and the Legislative Assemblies are enacting independent state laws to the extent that they do not run counter to federal laws. Thus, the labor laws of India constitute an extremely complicated system.

Currently, the key labor-related statues in India are as follows. The four new codes, namely, the OSHW Code, Code on Wages, IR Code, and SS Code, have been passed into law but are not yet in force as of February 2024.

Laws that play a central role in the labor-related matters in India are now explained in detail.

1. Code on Wages, 2019

   As a first step, the Code on Wages, 2019, was promulgated on August 8, 2019. Wage-related acts, namely the Payment of Wages Act, Minimum Wages Act, Payment of Bonus Act, and Equal Remuneration Act, are consolidated into the Code on Wages, and the passing of the Code will result in the repeal of the four existing laws.

2. The Occupational Safety, Health and Working Conditions Code 2020 (OSHW Code)

   The OSHW Code consolidates 13 existing laws and sets out a legal framework to ensure humane working conditions for workers, including employee safety in all workplaces, working hours, annual leave, and overtime. The provisions of the OSHW Code apply to all establishments employing 10 or more workers.

   The Code stipulates, among other things, the obligation to issue appointment letters to all employees, rules on working hours (up to eight hours per day), rest, holidays and overtime, the obligation to take safety precautions and risk prevention measures, and the protection of women.

3. Industrial Relations Code, 2020 (IR Code)

   The IR Code consolidates the Trade Unions Act, Industrial Employment (Standing Orders) Act, and Industrial Disputes Act. It sets out the obligation of establishments with 300 or more employees to have standing orders, conditions of dismissal and working conditions, strikes and other labor disputes and dispute resolution, and registration of trade unions.

4. Code on Social Security 2020 (SS Code)

   The SS Code consolidates nine laws³ on welfare and social security. The Code prescribes matters that include state insurance, Employees’ Provident Funds (EPF), maternity benefits, and gratuities.

System of Worker and Non-worker

1. Definition

   The term "worker" refers to a worker employed to perform simple tasks for relatively low pay and is protected generously under laws. Meanwhile, the term "non-worker" (senior employee) refers to a worker employed to perform administrative or supervisory work for relatively high pay, and protection under laws is limited on the grounds that a non-workman is considered to be a person whose position is substantially equivalent to a company.

   	Worker	Non-Worker/ Senior employee
   Definition	Any person employed to do any manual, unskilled, skilled, technical, operational, clerical, or supervisory work (section 2 of the Code on Wages, and section 2 of the OSHW Code). However, this does not include any person (i) who is involved in the Air Force, Army, or Navy; (ii) who is employed as a police officer or employed by a prison; (iii) who is employed in a managerial or administrative capacity; or (iv) whose monthly wages exceed a certain amount4, who is employed in a supervisory capacity, or who functions mainly as a manager. Any person who corresponds to (i) to (iv) above does not correspond to a “worker.”	Any person who does not satisfy the definition of “worker” (any person who satisfies the requirements of exemption indicated in the left column).
   Legal status	As a person who is in a weaker position than a company, a worker is protected under all labor-related laws.	As a person whose position is substantially equivalent to a company, protection under labor-related laws is limited.
   Restrictions on dismissal under laws	Applicable	Not applicable

   As described above, because the definition of "worker" is considerably broad and covers nearly all workers, whether or not a person corresponds to a worker is generally determined based on whether the person corresponds to the persons who are excluded under (i) to (iv) above. Since the Codes do not prescribe clear standards regarding whether a specific worker corresponds to a workman, it is necessary to determine whether a worker corresponds to a workman in light of assigned duties and roles. The term "employee" is defined separately to encompass both workers and non-workers (senior employees) and is used throughout this report in accordance with the Codes.

   In addition, as mentioned above, the new Codes use "worker" instead of "workman," but some existing laws that have not been consolidated still use "workman", so either "worker" or "workman" or both may be used in this report.

2. Determination of whether or not an employee corresponds to a worker

   Whether or not an employee corresponds to a worker is determined in accordance with actual conditions. In judicial precedents, the following opinions were offered:

   1. Irrespective of whether the employment status of an employee is permanent employment, temporary employment, or probationary employment, that employee may correspond to a worker.
   2. Even if an employee is incidentally performing supervisory work, it does not mean that such employee's correspondence to a worker is immediately denied.
   3. In order to determine whether an employee corresponds to a worker, it is necessary to take note of the nature of assigned duties and not the specific title or position.
   4. Upon determining whether an employee corresponds to a worker, the nature of assigned duties, and not wages, should be used as the primary judgmental standard.
   5. Just because an employee is a person in charge of a small business division, it does not mean that such employee's correspondence to a worker is immediately denied.
   
   

   Moreover, the following factors are taken into consideration upon determining that an employee employed in a managerial capacity, an administrative capacity, or a supervisory capacity corresponds to a senior employee:

   
   
   6. In cases where an employee is undertaking various duties, if such employee's correspondence to a worker becomes an issue, it is necessary to examine the basic and primary work description, and the incidental work description does not change the nature of the employee's primary duties. Consequently, even if an employee who primarily engages in supervisory work incidentally or partially performs clerical, manual or technical work, it should be determined that the employee was employed in a supervisory capacity.
   7. Because the meaning of "managerial capacity or administrative capacity" is not defined under the Industrial Disputes Act, it should be interpreted according to the normal meaning. In order to say that an employee was employed in a managerial capacity, the employee does not necessarily need to be positioned at the top of the hierarchy, or possess absolute authority regarding all matters. Furthermore, the employee does not even need to be in a position of independently managing an organization or a business division within an organization.
   8. Upon determining that an employee corresponds to a senior employee on the grounds that the person was employed in a managerial capacity, an administrative capacity, or a supervisory capacity, a court gave consideration to the following specific facts: (a) the person is in a position of assigning workers to various job positions, (b) the person is in a position to confirm the presence of workers, (c) the person is in a position to demand explanations from workers, (d) the person is in a position of assigning work to workers, and (e) the person is in a position to allow workers to take leaves.

3. Cases where worker and non-worker are not differentiated

   The Factories Act, which is a federal law, prescribed matters mainly related to work hours, overtime pay, and the leaves of workers who work in factories. Furthermore, the state-specific Shops and Establishment Act prescribes matters related to the work hours, overtime pay, and leaves of shops in the respective states operated in India and their workers. The application of these regulations to non-workmen is not excluded. In addition, the application of laws concerning the payment of wages, bonuses and retirement allowances, and social security systems such as the workers' compensation system, pension system, and state insurance system, is not restricted based on the differentiation of workman and non-workman. As a result of the recent amendments to the labor laws, the above-mentioned regulations, with the exception of the state-specific Shops and Establishment Act, have been incorporated into the new Labor Code. However, as mentioned in section 1-2, under the new Labor Code, there is some confusion as to whether working hours, wages for overtime work, and other working conditions apply to senior employees. Therefore, it is necessary to keep a close watch on the implementation of the revised Labor Code and the state laws that may be amended in response to the Code to see how the distinction will be adjusted.

Work hours

The OSHW Code stipulates that the maximum number of working hours in a day is 8 hours (section 25, (1) a of the Code). This eight-hour period does not include rest periods. However, overtime work based on consent is allowed, in which case the employee is separately paid twice the normal wage as overtime. For miners, motor vehicle transport workers, and journalists, there are separate regulations based on the nature of their work. The Code does not apply to establishments with fewer than 10 workers.

1. (1) Statutory work hours

   As a general rule, the work hours of a worker who is 15 years of age or older is limited to no more than 8 hours in any day (section 25 (1) a of the OSHW Code).

   Additional protection is offered for young workers (the Child and Adolescent Labour (Prohibition and Regulation) Act, 1986). Adolescents between the ages of 14 and 18 are not allowed to work overtime nor are they allowed to work between the hours of 7:00 p.m. and 8:00 a.m. (section 7 (4) and (5) of the Act).

   With regard to the working hours of female workers, although there were laws prohibiting night work (from 7:00 p.m. to 6:00 a.m.), the new Code stipulates that night work is permitted with the consent of the female worker, provided that the employer complies with laws and regulations regarding safety management and working conditions.

   (2) Overtime work

   The consent of a worker is required upon causing the person to work outside of work hours. Moreover, when an employer causes a worker to work more than eight hours in any day, the employer must pay an extra fee that is double the standard wages of that worker (section 27 of the OSHW Code). Although there are no clear regulations regarding the upper limit of overtime work, the government can stipulate the total number of hours of overtime work (section 27 of the Code), so it is possible that the upper limit will be set in each state in the future.

   Item	Overview
   Work hours	No more than eight hours in any day (excluding rest period)
   	Female workers Consent is required for the night work (from 7:00 p.m. to 6:00 a.m.)
   	Workers between the ages of 14 and 18 General rule: May work only between the hours of 8:00 a.m. to 7:00 p.m.
   Overtime work	No clear regulations regarding the upper limit Overtime pay is double the standard wages of that worker

Requirement for Preparation of Workplace Policies

Unlike Japan, employers are not required to prepare employment regulations (in India, these regulations are referred to as standing orders), except where the law so provides. Only industrial establishments that hire over a certain number of workers are required to prepare standing orders. However, it should be checked whether any amendments, including the number of workers employed, have been made at the state level. Moreover, certain laws, such as the Companies Act, 2013, and the Sexual Harassment of Women in the Workplace (Prevention, Prohibition, and Redressal) Act, 2013, mandate the preparation of certain workplace policies applicable to certain establishments that are meant to provide additional protection to the employees.⁵

Cases Where the Preparation of Standing Orders is Required

The situations where standing orders are to be prepared and submitted are provided in the chapter 4 of the Industrial Relations Code (IR Code). The Code stipulates the minimum standards of working conditions for employees and defines which employers fall within the ambit of the Code. Industrial establishments in which 300 or more workers are currently employed or were employed on any day of the preceding twelve months are required to prepare and submit standing orders (section 28 (1) of the Code). Industrial establishment means an establishment or undertaking in which any industry is carried on (section 2 of the Code). The appropriate government (state or federal), may exempt, conditionally or unconditionally, any industrial establishment or class of industrial establishment by notification in the official gazette from the provisions of the Standing Orders (section 39 of the Code). However, section 39 is not intended to grant any additional rights to those industrial establishments. Furthermore, it should be emphasized that where a company has at any time in the preceding 12 months fallen within the meaning of "Industrial Establishment" as defined in the Code, it remains compelled to adhere to the provisions therein.

Preparation of Standing Orders

Employers are required to submit draft standing orders within six months from the date on which they fall within the definition of "Industrial Establishment" in the Code to the Certifying Officer (section 2g, 30 and the following of the Code). The Certifying Officer is, under the predecessor of the Industrial Employment Act, an officer who is designated by the Labor Commissioner, the Regional Labor Commissioner, or the appropriate government.

Employers need to specify the following eleven items (Schedule 1 of the IR Code), and other items deemed necessary, and describe these in their draft standing orders. As of February 2024, the government released drafts of the model standing orders for the service sector, the manufacturing sector, and the mining sector, and it is expected that once enacted, standing orders will be prepared for each industrial facility in accordance with the model standing orders as in the past.

The draft should be certified as final following an examination by the certifying officer, and the certifying officer subsequently needs to send a copy of the standing order that the officer certified to the trade union or representatives of the workers (section 30 of the IR Code).

The certifying officer may amend the provisions if necessary, after considering input from both the workers and the employer. All provisions of the standing orders need to be not only lawful but also fair and reasonable in order to be certified by the certifying officer. Generally, companies draft their standing orders by following the Model Standing Orders.

Standing orders come into operation upon the expiry of thirty days from the date on which authenticated copies are sent to the employer and to the trade union or other representatives of the workers (section 33 of the Code). Standing orders that have been finally certified under the Code must be displayed in the prescribed language and in the prescribed manner (section 33 of the Code). The prescribed language and posting method will be specified in the relevant regulations. Under the previous Act, the standing orders must be displayed on special boards near the entrance through which the majority of the workmen enter, and must be posted in English and in the language understood by the majority of the workers.

Penalties

An employer that fails to submit draft standing orders or fails to follow the necessary procedures will be liable to pay a fine that shall not be less than 50,000 rupees (section 86 (10) of the Code). If an employer fails to comply with the obligation to prepare standing orders, the model standing orders are to be adopted as the applicable standing orders (section 29 (2) of the Code).

Modification of Standing Orders

Employers or workers (or a trade union or other representative body of the workers) are able to apply to the certifying officer to have the standing orders modified (section 35 (2) of the Code). However, for a period of six months following the date on which the standing orders come into operation, the standing orders may not be modified unless the workers (or a trade union or other representative body of the workers) and the employer have mutually agreed to do so (section 35 (1) of the Code). Modifications to the standing orders need to be followed by process of certification in the same way that the first iteration of the standing orders would (section 35 (3) of the Code).

Overview

The Code on Wages, 2019,⁶ stipulates the laws applicable to wages, such as the timing of and deductions from payment, in order to avoid unnecessary disputes in relation to unreasonably unpaid wages, imposition of fines, and deductions from wages. In addition, the Code on Wages guarantees a minimum wage to protect the rights of employees.

Scope

The Code on Wages applies to a wide range of persons who fall under the definition of "employee" therein. Under the Code, an "employee" is defined as any person (other than an apprentice engaged under the Apprentices Act, 1961) employed for wages by an establishment to do any skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical, or clerical work for hire or reward, whether the terms of employment are express or implied (section 2(k) of the Code).

Payment Methods

Every employer is responsible for fixing the period of payment (hereafter referred to as "wage periods"), and such wage period must not exceed one month (section 16 of the Code). In case the salary is paid on a monthly basis, the payment must be made before the expiry of the seventh day of the succeeding month (section 17 (1) iv of the Code). In cases where the employment is terminated by the employer, or an employee resigns, the wages must be paid before the end of the second working day from the date of termination (section 17(2) of the Code).

All wages are to be paid in cash, by check, by way of bank transfer into the account of the employee, or by the electronic mode (section 15 of the Code).　

Deductions

Deductions from wages are only permitted insofar as they are permitted in the Code on Wages (section 18 and beyond). The Code on Wages specifies an exhaustive list of items for which deductions can be made, including fines, loss, damage, recovery of loans and advances, and more.

Minimum Wage

The Code on Wages⁷ is to protect workers in the various industries covering both organized and unorganized sectors (manual labor) (section 5 and beyond).

The federal government shall, based on the advice of the Central Advisory Board, set the floor wage as per the living standards of a worker, and the minimum wages set by the state government shall not be less than such floor wage as set by the central government (section 9 of the Code). This will maintain a uniform standard of minimum wages across industries. In practice, the rate of the minimum wage is set by individual states, and it is common for such rates to be amended every April. It should be noted that the minimum wage for each industrial sector was previously varied from state to state, but the Code has unified and simplified this industrial sector.

Bonuses

The Code on Wages sets out the law surrounding the payment of bonuses for employees fulfilling certain criteria.

Every employer needs to pay a minimum bonus that is calculated as 8.33 percent of the wage during the accounting year or one hundred rupees (100 Rs), whichever is the higher (hereafter referred as "minimum bonus") to the employee who has worked at least 30 days in an accounting year (section 26 (1) of the Code). Also, if the allocable surplus exceeds the amount of minimum bonus payable to the employees, the bonus will be an amount in proportion to the excess up to a maximum of twenty percent (20%) of the salary or wages of the accounting year (section 26 (3) of the Code).

Gratuity

1. Applicable Scope

   The Code on Social Security (SS Code) provides that a gratuity will be payable to an employee after the person has rendered at least five years of continuous service on any of the following events:

   1. Superannuation
   2. Retirement or resignation
   3. Death or disability due to accident or disease
   4. 4Termination of contract period under fixed term employment

   The Code will apply to every factory, mine, oilfield, plantation, port, and railway company, as well as to every shop or establishment in which ten or more persons are employed, or were employed, on any day of the preceding twelve months (schedule 1(v) of the Code).

   However, an employee whose services have been terminated because of any act, willful omission, or negligence causing any damage or loss to, or destruction of, property belonging to the employer has no entitlement to gratuity to the extent of such damage or loss. Furthermore, where a cause of termination is (iii) or (iv) above, the requirement of five years continuous service does not apply.

2. Amount of Gratuity

   In cases of monthly salaried employees, the amount of the gratuity payable is calculated as follows: last drawn wages × 15/26 × completed years of service (including a part of year in excess of six months) to a maximum obligated amount to be notified separately by the federal government (section 53 (2) of the SS Code). However, this is only the minimum standard obligated by the law; therefore, it is, of course, possible for an employer to pay more than the amount calculated as above at the employer's discretion (section 53 (5) of the Code). Also, where there is an employment agreement stipulating a higher gratuity than the amount the Act provides for, the employer must pay the sum stipulated in the agreement.

Overview

As a general rule, restrictions on dismissal under Indian labor laws are applicable only to workers and are not applicable to non-workers / senior employees. It could be said that this is one of India's most unique characteristics regarding restrictions on dismissal. Because restrictions on dismissal regarding non-workers / senior employees are not prescribed by law, upon dismissal, the current condition is that there is no choice but to proceed with the dismissal based on the employment contract concluded between the employer and the non-worker / senior employees.

The Industrial Relations Code (IR Code) strengthens the protection of workers and imposes obligations on the employer to follow the statutory procedures and pay statutory compensation upon dismissing a worker. Furthermore, because the employer is required to dismiss workers in order from the worker who was last employed, the employer is not allowed to freely select the worker to be dismissed.

Similar to the labor laws of Japan, the IR Code merely prescribes the procedures that must be followed upon dismissing a worker and does not prescribe substantive standards regarding under what kind of circumstances the dismissal of a worker is allowed. Companies need to pay ample attention to this point. Moreover, an employer is not allowed to freely dismiss a worker at any time so as long as the procedures are correctly followed, and the judicial precedents (Labor Courts) have rendered judgment to the effect that due cause is required for dismissing workers. Thus, at least regarding workers, it is extremely difficult to casually dismiss a worker on the grounds of dismissal for the purpose of reorganization or poor performance. On a practical level, upon corresponding to the foregoing cases, the standard practice is to present favorable conditions to the worker to be dismissed and urge the person to voluntary resign from the company. As the means for dealing with such restrictions on dismissal, companies are implementing measures, such as 1) establishing a probation period of roughly three months to six months without employing a worker as a permanent employee from the very beginning or 2) employing a worker based on fixed-term employment.

Ordinary dismissal (retrenchment)

Under the IR Code, the term "ordinary dismissal (retrenchment)" refers to the termination of employment of a worker by the employer (on grounds other than disciplinary punishment) but does not include the following cases (section 2(zh) of the Code).

1. Voluntary retirement of the worker
2. Mandatory retirement in cases where a provision concerning mandatory retirement is stipulated in the contract of employment
3. Termination of employment on the grounds that the contract period has expired and will not be renewed, or on the grounds that the contract of employment is terminated pursuant to the provisions of such contract of employment
4. Termination of employment on the grounds of continued health problems

Accordingly, various restrictions are imposed on companies upon dismissing a worker on the grounds of ordinary dismissal.

Ordinary dismissal of a worker

When an employer is to dismiss a worker who was in continuous service for one year or longer on the grounds of ordinary dismissal, the company must satisfy the following procedures. As a general rule, when a worker has worked for not less than 240 days in a period of 12 months prior to the ordinary dismissal, it should be noted that the worker will be deemed to have been in continuous service with the employer.

1. (1) Notice

   The employer must give one month's dismissal notice to the worker indicating the rational reason for ordinary dismissal (section 70 (a) of the IR Code). However, the employer is also allowed to pay wages corresponding to the foregoing period in lieu of giving the dismissal notice. It is said that a rational reason is required for dismissing a worker on the grounds of ordinary dismissal, and such a reason must be adequate and reasonable, such as retrenching excess manpower. Thus, without the foregoing rational reason, an employer may not dismiss a worker on the grounds of ordinary dismissal as a matter of course.

2. (2) Payment of compensation for dismissal

   An employer must pay compensation for dismissal to a worker in an amount equivalent to 15 days' worth of the average wage for each year that the worker was in continuous service with the employer or for a year that the worker was in continuous service under the employer in excess of six months (section 70 (b) of the IR Code). Payment of the compensation for dismissal is prescribed as being a precondition for dismissal.

3. (3) Notification to government agency

   The employer is required to submit a prescribed notification to the prescribed government agency (section 70 (c) of the IR Code).

Ordinary dismissal with strengthened protection

Under the IR Code, the protection of workers in certain industrial establishments is strengthened. Restrictions on the dismissal of workers working in factories, mines, and plantations where not fewer than 300 workers were employed on average per working day for the preceding 12 months have been strengthened to further protect such workers by imposing obligations on employers to implement the supplementary procedures in addition to the foregoing procedures required for ordinary dismissal. Specifically, in order for an employer to dismiss a worker on the grounds of ordinary dismissal in an industrial establishment corresponding to a factory as defined in the Factories Act, a mine as defined in the Mines Act, 1952, or a plantation as defined in the Plantations Labor Act, 1951 (hereinafter collectively referred to as the "Special Industrial Establishment"), the employer must obtain special permission from the government, in addition to giving a dismissal notice and paying compensation for dismissal to the worker (section 77 (1), (3), 78 (1) of the IR Code). It is obvious that this system was stipulated in order to prevent the occurrence of mass unemployment as a result of workers being casually dismissed in the foregoing large-scale establishments. Thus, naturally, the government is basically maintaining a passive stance in permitting ordinary dismissal. It should be noted that the requirement for the number of workers in Special Industrial Establishments, for which government permission is required for ordinary dismissal, was 100 or more in the former Industrial Disputes Act, but has been amended to 300 or more in the IR Code, taking into account the requirements of industry associations that need to adjust the number of workers to meet demand.

1. Notice

   Foremost, when an employer is to dismiss a worker on the grounds of ordinary dismissal in a Special Industrial Establishment, the employer must give three months' dismissal notice to the worker indicating the reason for the ordinary dismissal (as described above, the dismissal must be based on a rational reason) or pay wages corresponding to the foregoing period in lieu of giving the dismissal notice (section 79 (1) of the IR Code). It is evident that the protection of workers has been strengthened in comparison to normal cases where one month's dismissal notice to the worker would be sufficient.

2. Payment of compensation for dismissal

   When approved by the government agency, in the same manner as the compensation for dismissal described above for normal cases, the worker is entitled to receive payment in an amount equivalent to 15 days' worth of the average wage for each year that the worker was in continuous service with the employer at the time that the worker is dismissed on the grounds of ordinary dismissal.

3. Approval of government agency

   When an employer is to dismiss a worker, who was in continuous service with the employer for one year or longer, on the grounds of ordinary dismissal in a Special Industrial Establishment, the employer must specify the reason for ordinary dismissal and obtain permission from the government agency prescribed under the IR Code in advance (section 79 (1)b of the IR Code). Upon applying for the foregoing permission, the employer must submit an application for permission that clearly states the reason for dismissal (section 79 (2) of the Code). The government agency will offer an opportunity for the employer, the worker, and other interested persons to be heard and will conduct an investigation regarding the genuineness and reasonableness of the reason for dismissal and the interests of the worker and other circumstances (section 79 (3) of the Code). Upon offering an opportunity for the employer, the worker, and other interested persons to be heard, the government will determine whether or not to grant permission by giving consideration to 1) the genuineness and adequacy of the reason asserted by the employer, 2) interests of the worker, and 3) all other relevant factors. If no conclusion is communicated even after the lapse of 60 days from the filing of the application for permission by the employer, it shall be deemed that the permission has been granted after the lapse of such 60 days (section 79 (4) of the Code).

Punitive dismissal

Punitive dismissal is not subject to the application of the foregoing restrictions on dismissal. However, in order to clarify the grounds for disciplinary action, it would be desirable to prescribe in advance, in the Employment Policy or other documents, that the occurrence of specific events, such as misconduct and violations of confidentiality obligations, will constitute grounds for disciplinary action.

Mandatory retirement

Under the labor laws of India, there are no express provisions that stipulate the mandatory retirement system. While the model work rules prescribed under the Industrial Employment Central Rules prescribe the mandatory retirement age as 58 years of age, such rules do not preclude the employer from prescribing a different age under the contract of employment or the work rules to be individually prepared.

Overview

Industrial Dispute is defined as any dispute or difference between employers, or between employers and workers, or between workers (section 2 (q) of the IR Code). Worker means worker or workman, so under the IR Code, disputes between employers and non-workers (senior employees) do not constitute industrial disputes. There are three main procedures for resolving industrial disputes: (1) arbitration procedures, (2) procedures by judicial administrative bodies (such as Industrial Tribunals or National Industrial Tribunals), and (3) procedures by judicial courts (Labor Courts).

Arbitration

Industrial disputes may be settled through arbitration procedures based on the agreement of the parties (section 42 (1) of the IR Code). Arbitration procedures can be used until the industrial dispute is pending before a dispute resolution body as described below. Since it is generally understood that industrial disputes brought to the Industrial Tribunal tend to be judged in favor of the workers, employers have the advantage of being able to use the arbitration procedure and expect the dispute to be settled at an early stage.

Industrial Tribunals

One or both parties of an industrial dispute may apply to use a dispute resolution institution (Conciliation Officers, Industrial Tribunal, National Industrial Tribunal, and Labor Court) to resolve the dispute. Based on the application, the government decides to which institution the dispute will be pending.

As a dispute resolution body, it is common practice for workers to directly seek dispute resolution from the Industrial Tribunal (section 44 of the IR Code), which is a judicial administrative body. However, in cases where the dispute involves more than one state, the National Industrial Tribunal (section 46 of the Code) of the federal government is used instead of the state Industrial Tribunal.

There is an advantage for both employers and workers to use the Industrial Tribunal in that strikes and lockouts are prohibited while industrial disputes are pending before the dispute resolution body, and strikes and lockouts that have already occurred can be stopped by government order.

However, it should be noted that it often takes two to three years for the Industrial Tribunal to issue a decision, and that the Industrial Tribunal tends to issue decisions that are closer to the position of the workers.

With regard to disputes arising from the termination of an individual worker's contract, it is not possible to appeal to the Industrial Tribunal until 45 days have passed after the Conciliation of the dispute (section 4 of the Code).

Labor Courts

In cases where there is dissatisfaction with the decision of the Industrial Tribunal, the decision may be pending before the District Court (a kind of appeal), and the decision of the district court may be appealed to the High Court. In such cases, it often takes another two to three years for the District Court to decide, and one to two years for the High Court to decide.

It is necessary to pay attention to future trends, since there is a debate on the abolition of the Labor Courts, with the judgment of the Industrial Tribunal being the final word on industrial disputes.

Strikes and Lockouts

In order to go on a strike or lockout, (i) notice must be given to the employer or workers within 60 days before the planned date, and (ii) a minimum notice period of 14 days is required (section 62 (1) (a), (b) of the IR Code).

Specifically, in the case of a strike, notice must be given to the employer at least two weeks prior to the planned strike date. In addition, although it is possible to change the strike date because of prolonged negotiations or other reasons, even in such cases, the strike must be carried out within 60 days from 14 days after the date of the initial notice, in accordance with the provisions (i) above (i.e., the notice itself is valid for 60 days and the period during which the strike can be carried out is 46 days). For example, if the scheduled strike date is March 15, the notice must be given to the employer by March 1 at the latest, and even if the actual strike is to take place later than the scheduled date of March 15, the legally possible period is until April 30, when the notice is valid. A new notice will be required for any strike after that date.

Employers who receive such notice of a strike must report it to the appropriate Government and Conciliation Officer within five days (section 62 (6) of the Code). A strike may not take place during or seven days after the end of a Conciliation Proceeding or Tribunal nor during or sixty days after the conclusion of pending arbitration proceedings before an arbitrator.

In the case of a lockout by the employer, the same notice period as for a strike is required.

Under the former Industrial Disputes Act, restrictions on strikes were imposed only on public sector workers (Industrial Disputes Act, sections 23, 22 (1)), but the IR Code imposes restrictions on private sector workers as well (sections 62 (1) (a)-(g) of the IR Code). It can be said that the notification requirement has created a grace period for employers to respond to the situation but has made it more difficult for trade unions and workers to carry out strikes.

Overview

Japanese nationals planning to enter India must obtain an appropriate visa regardless of the purpose of traveling be it sightseeing or business before entering India.

The following are the main visas relevant for business travel.

• Business Visa
• Employment Visa

Main work visas

In India, recent years have seen the enactment of state laws mandating private companies and others to employ a certain percentage of local residents. Amidst this situation, newly enacted state laws have faced opposition from various industrial groups with multiple lawsuits challenging its constitutionality and validity currently pending, attracting significant attention.

In Haryana, the Haryana State Employment of Local Candidates Act 2020⁸ was implemented in January 2022. This law mandates that private companies within the state employ 75% of employees earning less than 30,000 rupees per month from among state residents. Industry associations contesting this challenged the law in the Punjab and Haryana High Court, which issued a temporary suspension in February of the same year. Later, the Supreme Court of India revoked this suspension, citing insufficient grounds, and the case continued in the high court. In November 2023, the Punjab and Haryana High Court ruled the law invalid retroactively from its date of enforcement, citing violations of Article 19 of the Constitution, which guarantees freedoms of movement, residence, and choice of profession.
Currently, this law is invalid, but the state government is preparing to appeal to the Supreme Court. The Supreme Court’s future decision on this state law could potentially impact employment policies and related laws in various Indian states, necessitating careful observation of future developments.

In Maharashtra, a law⁹ was enacted in 2018, assigning 16% of employment quotas in educational institutions and for appointments in the public services and posts (later amended to 12% and 13%, respectively) for the socially and educationally backward classes (SEBC),¹⁰ including the Maratha community, which constitutes about 30% of the state's population. However, as this would result in a Maratha employment percentage exceeding the 50% cap¹¹ established by the Supreme Court precedent, the Supreme Court overruled the Bombay High Court’s decision upholding the state law in May 2021 and declared the law unconstitutional. As a result, this law is currently invalid.
In 2019, the state's industrial policy¹² stipulated that private companies planning large-scale projects and receiving state preferential incentives must employ 80% state residents.
Although there is no law in Maharashtra currently mandating a uniform percentage of state resident employment for private companies, companies seeking certain concessions must strictly manage the percentage of state residents among their employees.

Furthermore, the Andhra Pradesh Employment of Local Candidates in the Industries/Factories Act, 2019,¹³ which first introduced a law mandating a certain percentage of state resident employment in private companies, is also being contested in the high court regarding its constitutionality. Laws on preferential employment of state residents have also been announced in Madhya Pradesh and Karnataka but have not yet been implemented.

Should these laws be enacted in the future, they could potentially impact the recruitment activities of Japanese companies, necessitating close monitoring of future developments.