Staffing and recruiting industry -legal updates

Dear Friends

As per the ID Act Amendment Section 9 C was introduced .By that setting up of Grievance Redressal Machinery became a statutory need :

Section 9 C is extracted :

9C. (1) Every industrial establishment employing twenty or more workmen shall have one or more Grievance Redressal Committee for the resolution of disputes arising out of individual grievances.

(2) The Grievance Redressal Committee shall consist of equal number of members from the employer and the workmen.

(3) The chairperson of the Grievance Redressal Committee shall be selected from the employer and from among the workmen alternatively on rotation basis every year.

(4) The total number of members of the Grievance Redressal Committee shall not exceed more than six:

Provided that there shall be, as far as practicable one woman member if the Grievance Redressal Committee has two members and in case the number of members are more than two, the number of women members may be increased proportionately.

(5) Notwithstanding anything contained in this section, the setting up of Grievance Redressal Committee shall not affect the right of the workman to raise industrial dispute on the same matter under the provisions of this Act.

(6) The Grievance Redressal Committee may complete its proceedings within thirty days on receipt of a written application by or on behalf of the aggrieved party.

(7) The workman who is aggrieved of the decision of the Grievance Redressal Committee may prefer an appeal to the employer against the decision of Grievance Redressal Committee and the employer shall, within one month from the date of receipt of such appeal, dispose off the same and send a copy of his decision to the workman concerned.

Professionals may provide their feedback in this thread on their experience in setting up this Grievance Redressal Machinery in their respective organization.

With Regards

V.Sounder Rajan
VS Rajan Associates,
Advocates & Notaries -Legal Consultants
No.27, Ist Floor, Singapore Plaza,
No.164, Linghi Chetty Street,
Chennai - 600 001.
E-mail : rajanassociates@eth,net,
Off : 044-42620864, 044-65874684,

dear Adv Rajan,

One small suggestion here is that to prove the misconduct of drunkenness, there should be a standing instruction to the client that immediately blood test be carried out to know the amount of alcohol in the blood because subsequently the employee denies the charge and the misconduct will not stand.  Therefore blood test will prove the charge.

Dear All 

Sub: Interim Stay by Delhi & AP High Court of ESI Minimum Wage Circular

In one of News letter we had highlighted Circular No.: Coord/4(6)2003/Clarification/Vol-II/ Dated: 23-05-2011of Mr K.C. Pandey Addl. Central P.F.Commissioner(Compliance) Employees Provident Fund Organization (Ministry of Labour & Employment, Govt. of India), Head Office, Bhavrshya Yidhr Bhawan, 14, Bhikaiji Cama Place. New  Delhi prohibiting splitting of Minimum Wages for the purpose of PF contribution.

There is very good News for the Staffing Industry. The Delhi High Court in the matter of Pvt Security Industries vs EPFO on 30-08-2011 by the order of Hon’ble S.Muralidhar has granted limited stay of the circular .Similarly Andhra pradesh  High Court on 29.09.2011 has granted interim stay in Writ Petitions filed before the said Court.

Therefore the Circular No.: Coord/4(6)2003/Clarification/Vol-II/ Dated: 23-05-2011of Mr K.C. Pandey Addl. Central P.F.Commissioner(Compliance) Employees Provident Fund Organization (Ministry of Labour & Employment, Govt. of India), Head Office, Bhavrshya Yidhr Bhawan, 14, Bhikaiji Cama Place. New Delhi - 110 066 prohibiting splitting of Minimum Wages for the purpose of PF contribution has now come for Judicial review and its enforcement is subject to the legal decision.

With Regards

V.Sounder Rajan
VS Rajan Associates,
Advocates & Notaries -Legal Consultants
No.27, Ist Floor,Singapore Plaza
No.164, Linghi Chetty Street, Chennai 600001
E-mail : rajanassociates@eth,net,
Off : 044-42620864, 044-65874684,

ORIGIN OF 240 DAYS CLAUSE

The 240 days clause has its birth from Sec.25-B of the Industrial Disputes Act which is extracted below:


25-B. Definition of continuous service: -- For the purpose of this Chapter,-

(1) a workman shall be said to be in continuous service for a period if he is, for that period, in uninterrupted service, including service which may be interrupted on account of sickness or authorized leave or an accident or a strike which is not illegal, or a lock-out or a cessation of work which is not due to any fault on the part of the workman;

(2) Where a workman is not in continuous service within the meaning of clause (1) for a period of one year or six months, he shall be deemed to be in continuous service under an employer—

(a) for a period of one year, if the workman, during a period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than—

(i) one hundred and ninety days in the case of a workman employed below ground in a mine; and
(ii) two hundred and forty days, in any other case;

(b) for a period of six months, if the workman, during a period of six calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than—

(i) ninety five days, in the case of a workman employed below ground in a mine; and
(ii) one hundred and twenty days, in any other case;

Explanation: -- For the purpose of clause (2), the number of days on which a workman has actually worked under an employer shall include the days on which—

(i) he has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment [Standing Orders] Act, 1946 (20 of 1946), or under this Act or under any other law applicable to the Industrial establishment;

(ii) he has been on leave with full wages, earned in the previous years;
(iii) he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and
(iv) in the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave does not exceed twelve weeks.

Continuous Service is applied in Section 25 F


25-F. Continuous precedent to retrenchment of workmen.—No workman employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until—

(a) the workman has been given one month’s notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice:

(b) the workman has been paid, at the time, of retrenchment, compensation which shall be equivalent to fifteen days’ average pay [for every completed year of continuous service] or any part thereof in excess of six months; and

(c) notice in the prescribed manner is served on the appropriate Government [or such authority as may be specified by the appropriate Government by notification in the Official Gazette.]

Both the definition and the application has been extracted.Viewers would need to understand the Statutory provision in its original form and reach their own understanding.

With Regards


VS Rajan Associates,
Advocates & Notaries -Legal Consultants-HR
No.27, Ist Floor, Singapore Plaza,
No.164, Linghi Chetty Street,
Chennai - 600 001.
E-mail : rajanassociates@eth,net,
Off : 044-42620864, 044-65874684,
Mobile : 9025792684-9025792634

IMPORTANT ISSUES IN CONTRACT STAFFING INDUSTRY -F & F SETTLEMENT


Dear All


The essence of compliance of Section 25 F of the Industrial Disputes Act has been made clear by the Supreme Court of India in the reported case of Pramod Jha & others Vs State of Bihar reported in 2003(3) SBR 617. To quote the very words of the Supreme Court it has been held that

“the underlying object of Section 25 F[ the retrenchment provision in the Industrial Disputes Act] is two fold. Firstly, retrenched employee and must have one month's time available at his disposal to search for alternative employment, and so, either he should be given one months notice of the proposed termination or he should be paid wages for the notice period. Secondly the worker must be paid retrenchment compensation at the time of retrenchment, or before, so that once having been retrenched there should be no need for him to go to his employer demanding retrenchment compensation and the compensation so paid is not only a reward earned for his previous services rendered to the employer but is also a sustenance to the worker for the period which may be spent in searching for another employment."

Retrenchment can be simply termed as termination .Two points therefore emerge ;

Firstly, terminated Contract Staffing employee must have one month's time available at his disposal to search for alternative employment, and so, either he should be given one months notice of the proposed termination or he should be paid salary for the notice period.

Secondly the Contract Staffing Employee must be paid retrenchment compensation at the time of retrenchment, or before, so that once having been retrenched there should be no need for him to go to the Contract Staffing Company demanding retrenchment compensation and the compensation so paid is not only a reward earned for his/her previous services rendered to the Contract Staffing Company but is also a sustenance to the Contract Staffing Employee for the period which may be spent in searching for another employment.


With Regards
V.Sounder Rajan ,
VS Rajan Associates, Advocates and Notaries & Legal Consultants
No.27, Ist Floor, Singapore Plaza,
No.164, Linghi Chetty Street,
Chennai - 600 001.
E-mail : rajanassociates@eth,net,
Off : 044-42620864, 044-65874684,
Mobile : 9840142164-9025792684-9025792634

IMMEDIATE ISSUES FOR CONTRACT STAFFING ENTITIES


What are the circumstances in which the Central Government can prohibit the employment of Contract Labour under CLRA ?

Prohibition

De-hors the regulatory action under the Contract Labour (Abolition Regulation )Act CLRA provides the Authority , the "appropriate Government" under Sec 10 (1) after consultation with the Central or State Board employing agency to prohibit any establishment in an Process operation or other work. Such restrictions are often adopted on following these criteria .

if the work is in the nature of perennial;
if the work incidental or necessary for the work of a Operation;
if the work sufficient to employ a significant number the whole time workers;
if the work is usually done through periodic Workers at this factory, or a similar setting.

The Central Government on the recommendations of Central Advisory Board has prohibited employment of contract labor in various operations and categories of jobs in different establishments. These details are available by checking up the Notifications.

With Regards

V.Sounder Rajan
VS Rajan Associates,
Advocates & Notaries & Legal Consultants
No.27, Ist Floor, Singapore Plaza,
No.164, Linghi Chetty Street,
Chennai - 600 001.
E-mail : rajanassociates@eth,net,
Off : 044-42620864, 044-65874684,
Mobile : 9840142164-9025792684-9025792634

Subject: Legal Provisions of ESI Act

Dear Friends

Our wishes for the ensuing Festive season.


In the Contract Staffing Industry as the Temporary Employee is deputed to a Client location and if he falls sick and avails ESI Sickness benefit certain important provisions which Payroll of a Staffing Company may over look under ESI Act

Legal provisions

Section 72

Section 72 of the Act, places a bar upon the powers of an employer with regard to reduction of wages of an employee for reasons of his liability to pay contribution.

Section 73

Under Section 73, an employer cannot dismiss or punish an employee during the period of his certified sickness etc. Contravention of these provisions attracts penalties provided under Section 85 of the Act.

Many a times the Clients report Sick cases as absconding leading to legal complication .

Regulation 97

Regulation 97 permits an employer to discontinue or reduce benefits payable to his employees under conditions of their service which .are similar to the benefits conferred by the Act, to the extent specified below, namely

a) From the date of the commencement of the first benefit period following the Appointed Day for his factory or establishment -

*Sick leave on half pay to the full extent;
*Such proportion of any combined general purposes and sick leave on half pay as may be assigned as a sick leave but in any case not exceeding 50 per cent of such combined leave.

b) Any maternity benefits granted to a woman employee to the extent to which such a woman employee may become entitled to the Maternity Benefit under the ESI Act.

Where an employee avails himself/herself of any leave from the employer for sickness, maternity or temporary disablement, the employers shall be entitled to deduct from the leave salary of the employee the amount of benefit to which he/she may be entitled under the Act for the corresponding period.

It is only when the Temporary Employee obtains or receives cash benefit under the ESI Scheme that the employer can exercise his right to make a suitable deduction from the wages due to him by way of leave salary.

Payrolling of Contract Staffing entities need to be careful and watchful of the regulations.

With Regards

V.Sounder Rajan
VS Rajan Associates,
Advocates & Notaries,
No.27, Ist Floor, Singapore Plaza
No.164, Linghi Chetty Street,
Chennai 600 001
E-mail :rajanassociates@eth.net
Off : 044-42620864, 044-65874684,
Mobile : 98401 42164.

Gratuity Entitlement for Contract Staff.

Dear Friends

Recently Mr Justice K.Chandru of the Madras High Court -Madurai Bench in the matter of Special Officer-Srirangam Co-operative Urban Bank Ltd has held that every Employee who has worked in an organization for five or more years is entitled for Gratuity irrespective of the following:

superannuation;

retirement;

resignation;

death;

disablement ; or

any other terminology used by the Employer to send the Employee out of service.


The only exception is under Section 4 (6) of the Payment of Gratuity Act which enabled the Employer to forfeit the Gratuity under certain circumstances and by following a specified procedure if the Employee had not been allowed to retire or reached the age of superannuation.


Our understanding of the verdict on its application in the Contract Staffing Industry invocation of Sec 4 (6)of the Payment of Gratuity Act may be totally difficult is because of the Contract Staff being deployed with a Client

Section 4(6)(b) in The Payment Of Gratuity Act, 1972 is extracted below:

(b) the gratuity payable to an employee may be wholly or partially forfeited
(i) if the services of such employee have been terminated for his riotous or disorderly conduct or any other act violence on his part, or
(ii) if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment.

The termination has to be done after conduct of a Domestic Enquiry by appointing an Enquiry Officer.In the Contract Staffing Industry conduct of a Domestic Enquiry is next to impossible.Therefore Section 4(6)(b) in The Payment Of Gratuity Act, 1972 literally becomes inapplicable.

Consequently the entitlement for Gratuity of the Contract Staff cannot be denied on any account.


With Regards

V.Sounder Rajan
VS Rajan Associates,
Advocates & Notaries & Legal Consultants
No.27, Ist Floor, Singapore Plaza,
No.164, Linghi Chetty Street,
Chennai - 600 001.
E-mail : rajanassociates@eth,net,
Off : 044-42620864, 044-65874684,
Mobile : 9840142164-9025792684-9025792634

Dear All

The Contract Staffing Industry may note that under the Payment of Wages Act, 1936 in case of delay in payment of wages or unlawful deductions in Salary of the Contract workers there is a remedy under Section 15 of the Payment of Wages Act, 1936 which is extracted below:

15. Claims arising out of deductions from wages or delay in payment of wages and penalty for malicious or vexatious claims -

(1) The State Government may by notification in the Official Gazette appoint a presiding officer of any Labour Court or Industrial Tribunal constituted under the Industrial Disputes Act 1947 (14 of 1947) or under any corresponding law relating to the investigation and settlement of industrial disputes in force in the State or any Commissioner for Workmen's Compensation or other officer with experience as a Judge of a Civil Court or as a Stipendiary Magistrate to be the authority to hear and decide for any specified area all claims arising out of deductions from the wages or delay in payment of the wages of persons employed or paid in that area including all matters incidental to such claims :

Provided that where the State Government considers it necessary so to do it may appoint more than one authority for any specified area and may by general or special order provide for the distribution or allocation of work to be performed by them under this Act.

(2) Where contrary to the provisions of this Act any deduction has been made from the wages of an employed person or any payment of wages has been delayed such person himself or any legal practitioner or any official of a registered trade union authorised in writing to act on his behalf or any Inspector under this Act or any other person acting with the permission of the authority appointed under sub-section (1) may apply to such authority for a direction under sub-section (3) :

Provided that every such application shall be presented within twelve months from the date on which the deduction from the wages was made or from the date on which the payment of the wages was due to be made as the case may be :

Provided Further that any application may be admitted after the said period of twelve months when the applicant satisfies the authority that he had sufficient cause for not making the application within such period.

(3) When any application under sub-section (2) is entertained the authority shall hear the applicant and the employer or other person responsible for the payment of wages under section 3 or give them an opportunity of being heard and after such further inquiry (if any) as may be necessary may without prejudice to any other penalty to which such employer or other person is liable under this Act direct the refund to the employed person of the amount deducted or the payment of the delayed wages together with the payment of such compensation as the authority may think fit not exceeding ten times the amount deducted in the former case and not exceeding twenty-five rupees in the latter and even if the amount deducted or the delayed wages are paid before the disposal of the application direct the payment of such compensation as the authority may think fit not exceeding twenty-five rupees :

Provided that no direction for the payment of compensation shall be made in the case of delayed wages if the authority is satisfied that the delay was due to -

(a) a bonafide error or bonafide dispute as to the amount payable to the employed person or

(b) the occurrence of an emergency or the existence of exceptional circumstances such that the person responsible for the payment of the wages was unable though exercising reasonable diligence to make prompt payment or

(c) the failure of the employed person to apply for or accept payment.

(4) If the authority hearing an application under this section is satisfied -

(a) that the application was either malicious or vexatious the authority may direct that a penalty not exceeding fifty rupees be paid to the employer or other person responsible for the payment of wages by the person presenting the application; or

(b) that in any case in which compensation is directed to be paid under sub-section (3) the applicant ought not to have been compelled to seek redress under this section the authority may direct that a penalty not exceeding fifty rupees be paid to the State Government by the employer or other person responsible for the payment of wages.

(4A) Where there is any dispute as to the person or persons being the legal representative or representatives of the employer or of the employed person the decision of the authority on such dispute shall be final.

(4B) Any inquiry under this section shall be deemed to be a judicial proceeding within the meaning of sections 193 219 and 228 of the Indian Penal Code (45 of 1860).

(5) Any amount directed to be paid under this section may be recovered -

(a) if the authority is a Magistrate by the authority as if it were a fine imposed by him as Magistrate and

(b) if the authority is not a Magistrate by any Magistrate to whom the authority makes application in this behalf as if it were a fine imposed by such Magistrate.

In our next  Post  we will deal with the provision for Class Action under Section 16 and the Format for the Contract Employee to make a claim..

The point that needs to be emphasized is that in case the Staffing Entity delays the payment of Salary or F & F the aggrieved Employee he/she will normally send a demand or a Legal Notice and the Contract Staffing Company would need to comply with the demand to avoid the Legal proceedings .On failure it could be followed up with an application to the Local Appropriate Authority under the Payment of Wages Act .

Fair practice in the Staffing Industry would require circulation of these forms to the Contract Staff .

With Regards

V.Sounder Rajan
VS Rajan Associates,
Advocates & Notaries & Legal Consultants
No.27, Ist Floor, Singapore Plaza,
No.164, Linghi Chetty Street,
Chennai - 600 001.
E-mail : rajanassociates@eth,net,
Off : 044-42620864, 044-65874684,
Mobile : 9840142164-9025792684-9025792634

Subject: Part-II Non Payment of Salary-Illegal Deduction from Salary of Contract Staff

Dear Friends

In our last News Letter we had discussed Non Payment of Salary-Illegal Deduction from Salary of Contract Staff and in part I we dealt with the legal position on the individual claim by the Contract Staff.Now we deal with the provision for class action under Section 16 of the Payment of Wages Act, 1936 which is extracted below:

16. Single application in respect of claims from unpaid group -

(1) Employed persons are said to belong to the same unpaid group if they are borne on the same establishment and if deductions have been made from their wages in contravention of this Act for the same cause and during the same wage-period or periods or if their wages for the same wage-period or periods have remained unpaid after the day fixed by section 5.

(2) A single application may be presented under section 15 on behalf or in respect of any number of employed persons belonging to the same unpaid group and in such case every person on whose behalf such application is presented may be awarded maximum compensation to the extent specified in sub-section (3) of section 15.

(3) The authority may deal with any number of separate pending applications presented under section 15 in respect of persons belonging to the same unpaid group as a single application presented under sub-section (2) of this section and the provisions of that sub-section shall apply accordingly.
As already informed in case the Staffing Entity delays the payment of Salary or F & F the aggrieved Employee will usually y send a demand or a Legal Notice and the Contract Staffing Company would need to comply with the demand to avoid the Legal proceedings .

Such a Notice should not be taken lightly . A secure set up for addressing such individual /group claims needs to be set up .

The Managing director or the Staffing Head of Business needs to direct the Pay Roll to send compliance report of pending claims.Non compliance will result in the Staffing Company being burdened with Legal proceedings.On failure it would be followed up with an application to the Local Appropriate Authority under the Payment of Wages Act as extracted below:

Form of Individual Application
[See sub-section (2) of section 15 of the Payment of Wages Act]

In the Court of the Authority appointed under the Payment of Wages Act, 1936 (4 of 1936) for ……………….. area.
Application No. ……….. of …….


Between A.B.C. ………………………………….. Applicant (through a legal practitioner/an official of …………………………….. which is a registered Trade Union.)
And X.Y.Z………………………………………………………opposite party:
The applicant states as follows:
1. A.B.C. is a person employed in the/on the factory/railway/industrial establishment entitled and resides at ……………………………………..
The address of the applicant for the service of all notices and processes is:
…………………………………………………………………………………
2. X.Y.Z., the opposite party, is the person responsible for the payment of his wages under section 3 of the Act, and his address for the service of all notices and processes is:…………………………………………………………………………………..
3. (1) The applicant’s wages have not been paid for the following wage-period(s)………………………………….(give dates)
Or A sum of Rs…………….. has been unlawfully deducted from his wages of amount for the wage-period(s) which ended on ……………… (give dates)
(2) [Here give any further claim or explanation].

4. The applicant estimates the value of the relief sought by him at the sum of Rs………………
5. The applicant prays that a direction may be issued under sub-section (3) of section 15 for –
(a) Payment of delayed wages as estimated or such greater or lesser amount as the Authority may find to be due.
Or Refund of the amount illegally deducted.
(b) Compensation amounting to ………………………
The Applicant certifies that the statement of facts contained in this application is to the best of his knowledge and belief accurate.

Signature or thumb impression of the
employed person, or legal practitioner or official
of a registered trade union duly authorized.


There is also a provision for Group action as per the following format :


Form of Group Application
[See sub-section (2) of sections 15 and 16 of Payment of Wages Act]

In the Court of the Authority appointed under the Payment of Wages, Act, 1936 (4 of 1936) for ………………….. area

application No………………… of …………

Between A.B.C…………………………………………………
Applicants
A legal practitioner
(through a legal practitioner/an official of …………………………….. which is a registered union).

And X.Y.Z………………………………………………. Opposite Party.

The applicants state as follows:
1. [The applicants whose names and permanent addresses] appear in the attached schedule are persons employed in the /on the /factory/railway/insustrial establishment entitled and resides at …………………………….
The address of the applicants for service of all notice and processes is:
………………………………………………………………………….
2. X.Y.Z. the opposite party, is the person responsible for the payment of wages under section 3 of the Act, and his address for the service of all notices and processes is:
…………………………………………………………………………….
3. The applicants’ wages have not been paid for the following wage-period(s):
……………………………………………………………………………..
4. The applicants estimate the value of the relief sought by them at the sum of Rs…

5. The applicants pray that a direction may be issued under sub-section (3) of section 15 for:
(a) Payment of the applicants’ delayed wages as estimated……………. or such greater or lesser amount as the Authority may find to be due.
(b) Compensation amounting to…………….
The Applicants certify that the statement of facts contained in this application is, to the best of their knowledge and belief, accurate.

Signature of thumb impression of two of the
Applicants, or legal practitioner, or an official of
A registered trade union duly authorized.

SCHEDULE
__________________________________________________ ______________________
S.No. Name of Applicant Permanent Address
__________________________________________________ ______________________
1 2 3

Circulation of these Forms to the Temporary Staff and making it a part of the Joining Kit is the Key to achieving Fair Practice Standards in the Contract Staffing Industry.

With Regards

V.Sounder Rajan
VS Rajan Associates,
Advocates & Notaries & Legal Consultants
No.27, Ist Floor, Singapore Plaza,
No.164, Linghi Chetty Street,
Chennai - 600 001.
E-mail : rajanassociates@eth,net,
Off : 044-42620864, 044-65874684,
Mobile : 9840142164-9025792684-9025792634

Dear Friends


Sub: EPF dues to get priority in liquidation process – Supreme Court

Hon’ble Supreme Court of India in the matter of EPF Commissioner –vs- Official Liquidator of Esskay Pharmaceuticals Limited comprising of the Bench of Hon’ble Mr.Justice G.S.Singhvi and H.L.Dattu J.J. dated 8.11.2011, have held that in the Liquidation process of a Company, in terms of Section 530(1) of Companies Act, all revenues, taxes, cesses and rates due from the company to the Central or State Government or to a local authority, all wages or salary or any employee, in respect of the services rendered to the company and due for a period not exceeding 4 months all accrued holiday remuneration etc. and all sums due to any employee from provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the employees maintained by the company are payable in priority to all other debts.

Further as per Section 11 (2) of the EPF Act, the amount due from the Employer on account of Employees contribution was declared as First Charge on the assets and became payable on priority to all other debts. But there was a problem with Section 529-A of the Companies Act, insertion provision did not declare workmen’s dues or dues to provident fund as First charge.

The Hon’ble Supreme Court has resolved the issue and summed up its findings as follows:

“43. At the cost of repetition, we would emphasize that in terms of Section 530(1), all revenues, taxes, cesses and rates due from the company to the Central or State Government or to a local authority, all wages or salary or any employee, in respect of the services rendered to the company and due for a period not exceeding 4 months all accrued holiday remuneration etc. and all sums due to any employee from provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the employees maintained by the company are payable in priority to all other debts.

This provision existed when Section 11(2) was inserted in the EPF Act by Act No. 40 of 1973 and any amount due from an employer in respect of the employees’ contribution was declared first charge on the assets of the establishment and became payable in priority to all other debts. However, while inserting Section 529A in the Companies Act by Act No.35 of 1985 Parliament, in its wisdom, did not declare the workmen’s dues (this expression includes various dues including provident fund) as first charge.

The effect of the amendment made in the Companies Act in 1985 is only to expand the scope of the dues of workmen and place them at par with the debts due to secured creditors and there is no reason to interpret this amendment as giving priority to the debts due to secured creditor over the dues of provident fund payable by an employer.

Of course, after the amount due from an employer under the EPF Act is paid, the other dues of the workers will be treated at par with the debts due to secured creditors and payment thereof will be regulated by the provisions contained in Section 529(1) read with Section 529(3), 529A and 530 of the Companies Act.”


By the Judgment of the Apex Court many pending Court matters involving EPF dues would be settled in favour of the Department and consequently the same would flow into the EPF Account of Employees.A good development which will protect the scores of such affected workers.
With Regards

V.Sounder Rajan
VS Rajan Associates,
Advocates & Notaries & Legal Consultants
No.27, Ist Floor, Singapore Plaza,
No.164, Linghi Chetty Street,
Chennai - 600 001.
E-mail : rajanassociates@eth,net,
Off : 044-42620864, 044-65874684,
Mobile : 9840142164-9025792684-9025792634

Dear All

CLRA Emerging Trends



The Summary Record of Discussion of the 44th Session of the Standing Labour Committee held on 17th October, 2011 at New Delhi under the Chairmanship of Shri Mallikarjun Kharge, Union Minister of Labour and Employment, Government of India records the CLRA Emerging trends . The national level tripartite meeting was attended by senior level functionaries of Central Trade Union Organizations, Employers‟ Organizations, State Governments and Central Ministries and Departments.

Shri Mallikarjun Kharge, Union Minister of Labour and Employment on the demand of Trade Unions to amend the Contract Labour Act, 1970 to provide for automatic absorption of contract labour in the event of prohibition of employment of contract labour and opposition by the employers‟ organizations, Shri Kharge said that the ministry has been making efforts to protect the interests of all stakeholders and trying to extend the same benefits to contract workers which are otherwise available to permanent workers.


Views from the Employers side:

In the Meeting Shri R. Venkatanarayanan, Confederation of Indian Industry invited the attention of the delegates to the Global Financial Downturn. He stressed upon the necessity to invest more in order to generate more employment opportunities. He said that the issue of contract labour requires further discussion and law should be strictly followed. He said that regular employees and contract labourers cannot be paid the same due to many considerations such as training, experience etc, and a „flexibility premium‟ is the way out. He mentioned that the rationalization of labour laws should be done and as far as possible third party verification and self-certification by the employers should be applicable. He further stated that employment generation and skill development are linked to each other and CII is working towards setting up of several skill centers for skill development of the disadvantaged rural youth. But he believed that much more needs to be done to enhance the employment situation of the country. Therefore, skill training should to be imparted both to the rural and urban youth covering both employment and self employment.

Shri Michael Dias, Federation of Indian Chambers of Commerce and Industry suggested rationalization of labour laws in the context of unorganized sector. In his view, the issues pertaining to contract labour needs to be addressed in-depth, possibly after receiving the report from V.V.Giri National Labour Institute. In this regard, he fully supported and endorsed that a complete data on contract labour be made available and urged the need for a white paper to be brought out by the Ministry of Labour and Employment at the earliest. He considered the issues of enhancing employability and employment as critical ones which needed serious attention from all stakeholders and should be a part of agenda at the next ILC.


But there were opposite views from:

Shri S. K. Rathore, All India Secretary, Bhartiya Mazdoor Sangh stressed the need for amendment of contract labour laws and emphasized that the explicit purpose of engaging contract labour is to provide less wages and poor service conditions, leading to sheer exploitation. He expressed his concern over permanent jobs being converted into contractual job even in PSU‟s and Government Departments. Therefore, there is a need for immediate amendment of the Contract Labour (Regulation and Abolition) Act in order to prevent all types of exploitation. He also focused on issues pertaining to women working in Anganwadi, ASHA and mid-day meal workers etc. who are facing gender discrimination and working under exploitative conditions. He also highlighted the issue of wide variation in minimum wages from state to state and sector to sector which has resulted in large scale migration. He expressed that the need to fix a National Minimum Wage to combat uneven income disparity.

Shri Srinageshwar, Council of Indian Employers reflected on the similarity in the condition of workers engaged in various sectors and on the issue of Contract Labour. He reiterated that the western models for improving the conditions of contract labour could not be transmitted to India rather there should be focus on direct impact of employment generation. While pointing out at the content of the Impact Study Report, he considered it to be important to engage in a discussion in a tripartite forum and come out with a concrete decision. He also focused on the competitiveness of the industry with simultaneous flexibility that cannot be underestimated either by the government or trade unions. He further stated that the employers train a huge number of trainees in their premises who become a source of huge pool of trained manpower for the industry either locally or outside. This should be recognized and the employer should be incentivized by the government for undertaking these initiatives.

Shri Janardhan Singh Sigriwal, Labour Minister, Govt. of Bihar expressed his concern on the issue of poor working conditions of Contract Laborers. The increasing tendency towards outsourcing of Contract Labour has led to the hiring of more Contract Labour in comparison to regular workers. Moreover, globalization has led to migration of workers outside India who are subjected to all kinds of exploitation by placement agencies. He quoted examples of migrant workers from Bihar who recently returned from Libya and were devoid of any social security. Therefore, he stressed the need for a law to protect the interests of international migrant workers. He also emphasized the need for skill development as skill and knowledge is considered as motivating power for economic and social development. He stressed the need for establishment of more and more industrial training institutes to boost the supply of skilled manpower to meet the projected demand of 50 crore skill manpower by 2022 as per estimates of National Kaushal Vikas Mission.

..To be continued>>>

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